Q. At what stage in life should one buy a term plan? I am 23 and have just started earning. I am healthy, unmarried, and do not have any liability.
The earlier the better! This goes well for several aspects of our lives, and also when it comes to buying term plans! While term plans are available for purchase at any stage, it is advisable to acquire them earlier due to the potential advantage of lower premiums towards higher cover, when you are younger.
At 23, you are unmarried and have minimal liabilities. It is the start of a journey with numerous life milestones ahead. You are likely to thrive professionally, may choose to get married, own a home and have responsibilities towards your parents or other similar commitments. It's crucial to map your life goals and calculate the appropriate term plan coverage based on your liabilities, and future financial needs. There are numerous calculators available online, along with sound advice from agents, insurers’ call centres that can further guide you on the premium payment term, sum assured, etc. and help you get started towards buying a term plan.
Q: What are the benefits of a regular premium, limited premium and a single premium plan? How should I decide whether to go for a regular premium or a single premium plan?
Life insurance is one of the most customisable financial tools available to help customers plan towards achieving their life goals. It offers products of all kinds to suit the needs of any customer, with any type of life goal. One amongst them is their premium type. Depending on your financial situation, you may choose a policy for which you’d like to pay regularly or only once or opt for limited premium.
Let me explain what each of these mean, which can then help you decide on what suits you best:
· Regular premium allows you to make payments at set intervals throughout a specified time frame. These intervals can be monthly, quarterly, or annually. If you are seeking affordability, you can opt for regular payment and continue to pay your premiums throughout the payment term. This is one of the best ways to a disciplined approach to investing for a long-term financial goal.
· On the other hand, you have the flexibility to opt for limited premium payment option, such as 5 or 10 years. When you opt for a single premium plan, you make a one-time payment and enjoy coverage for the entire policy term, eliminating the need for regular premium payments. These two options are advantageous for individuals who receive sporadic income, such as freelancers or actors who do not have fixed salary payouts or income streams. It's also beneficial for those who receive substantial payout, such as a bonus and want to allocate these funds for a specific life goal. With a single premium plan, they make the payment only once, while still benefiting from life insurance coverage.
The choice between regular, limited, or single premium depends on your life goals and profession. To determine the best fit for your circumstances, seeking advice from insurance agents or experts through helpline numbers or call centers of insurance companies can be highly beneficial.
Amit Jaiswal is Chief - Direct Officer, Bajaj Allianz Life.