Life’s unpredictability could end up jeopardising your family’s stability. The untimely passing of the household’s primary income source can trigger financial freefall, compounding the already unbearable emotional duress. In the absence of sufficient coverage, your dependents could end up draining their savings to cover their expenses. Selecting the proper term insurance alleviates this risk. This article will determine whether buying a cheap term insurance policy is worth it!
Is it Good to Buy Cheap Term Insurance in India?
Buying a term life insurance policy is a prudent financial decision; whether it is cheap or expensive is a separate matter. Let us cover the scenarios in which you would not be wise to get a cheap term insurance plan, as well as when it makes sense.
Why You Should Go for Cheap Term Insurance?
You should go in for a cheap insurance policy in the following cases.
1. Limited Budget
A cheap term insurance policy suits you if you operate within tight budgets. While comprehensive term policies offer more features and coverage amount, the overall premium for these plans can be quite high, making them unaffordable for some people. However, it is important to balance affordability and adequate coverage so that you are not left with regrets in future. Find the cheapest term insurance plans that meet your budget.
2. Young Age
Younger people tend to have good health. They also face limited financial liabilities and experience lower risks. It is favourable for young people to opt for a cheap term insurance plan and upgrade their policy later on as their requirements evolve.
3. Short Term Coverage
The period between your switch jobs can be testing. This waiting period, the shorter the good, can test you and your family financially. You could capitalise on cheap short-term insurance plans to bridge through such times without overspending. Compare the top insurers’ existing term insurance policies using a term plan calculator.
5. Supplementing Existing Coverage
Suppose you are already a part of term insurance coverage as an employee of a reputed organisation or as a family member and want to supplement it. In that case, a cheap term insurance policy can be your best bet to get added coverage to cover future risks.
Why You Shouldn’t Go for Cheap Term Insurance?
Let us now explore the scenarios in which investing in a cheap term insurance policy would not be financially prudent.
1. No Dependents
The main aim of life insurance is to extend financial protection to your family and dependents in your absence. In case you do not have dependents or the capacity of your family to bear the financial burden is strong enough, there is no requirement for you to go in for a cheap term insurance policy.
The whole idea is just to protect the financial liability that will pass on from you to your family members upon your demise. This is specifically true for young people who are unmarried and for people who choose to remain unmarried.
2. No Liabilities
When you take a loan, you are legally entitled to make repayments. The wordings of your loan contract make it mandatory to repay the principal and pay interest on the principal.
While short-term loans such as personal loans would not strain your family members after your demise, imagine dying without repaying a home loan! The whole burden of the loan could be transferred to your loved ones. It is better to get a financial security net in such cases. However, you should go for something other than a cheap term insurance plan if you have debt obligations.
3. Thriving Business
If you already have a thriving family business, the chances are high that you have substantial assets. In such cases, your business’s income-generating capacity would be enough to safeguard your family after your demise. It is better to avoid looking for cheap term insurance in such cases. You already have assets lined up to accomplish your family’s milestones.
4. Tax Savings
The premium you pay for your term insurance policy is qualified to avail tax benefits under Section 80C of the Income Tax Act of 1961. While all this is true, there are other financial products (like housing loans, Public Provident Funds (PPF), and Equity Linked Savings Schemes (ELSS) that also provide tax benefits under Section 80C. It’s advisable to avoid purchasing inexpensive insurance plans solely at the end of the financial year for tax benefits; instead, a more thoughtful approach to selecting insurance products is essential.
Conclusion
Cheap term insurance can be a good option for many people with a tight budget, especially those who are young or require short-term coverage. However, if you have no dependents or financial liabilities, you wouldn’t really need cheap term insurance. After all, focusing on finding a plan that offers adequate coverage and financial security for your loved ones is essential. Ultimately, a wise investment strikes a balance between affordability and complete protection. Consult a financial advisor to explore your options if you’re unsure about your needs.