I prided myself on my financial knowhow. I believed in saving for the future, was disciplined in my investments, had a varied financial portfolio and did thorough research before investing in any product. Fixed deposits, mutual funds or gold, I had every type of investment in my financial portfolio. However, I missed one important product – term insurance. I believed that a term insurance plan was not essential to my portfolio and so skipped having one. I had my reasons for not buying a term plan. Here’s what I thought –

Term Insurance - How I Thought It Was Not The Essential Part Of My Financial Planning

  • I am too young to invest in a term insurance plan

I was merely 35 years old. I, therefore, didn’t have a high risk of death. Since a term insurance plan covers the risk of premature death, I felt that the plan was not useful for me. I believed that I would require a term insurance plan in older ages, i.e. after I cross 40 years of age. How wrong I was!

  • A term insurance plan is a waste of money as it had no maturity benefit

Most term insurance plans I knew of paid no benefits if the plan matured. This was, according to me, a drawback of the plan. Since I wouldn’t be getting any benefits if I survive the plan tenure, I wasn’t so keen on buying the plan.

  • Term insurance plans did not provide good returns

I was always running after returns. Wealth maximization was my goal and each investment in my financial plan was aimed to provide maximum returns. Since a term insurance plan only covered pre-mature death risk, it provided no returns. This was another factor which made me think that term plan was not essential in my financial portfolio.

All these reasons prevented me from investing in a term insurance plan. It was not after I witnessed my friend’s family’s crisis that I was duly educated. My friend met with an accident and lost his life. His family was in a financial crisis as my friend was the only bread-winner. However, my friend was wise enough to invest in a term insurance plan. His plan paid a lump sum amount to his family, which aided them financially.

My friend was also young and financially savvy. However, he understood the importance of a term insurance plan while I didn’t.  His family’s crisis and the solution showed me the way. I realized –

  • A term insurance plan is suitable for all ages

While my death risk was low due to young age, I faced the risk of accidental death. My friend was a victim of a road accident, a contingency which I did not plan for. Since the risk of accidental death hangs on all ages, a term plan was necessary, even if I was young and healthy.

  • Term plans also had maturity benefits

Yes, as I researched, I found that there were some term insurance plans which promised a return of premiums on maturity. These plans not only provided the all-important life cover, they also returned the premiums (sometimes with interest) if I survived the plan tenure.

  • Providing returns is not a prerogative of term insurance plans

Term plans are designed to extend risk cover. They enable us to buy a high Sum Assured at very affordable premiums. In case of premature death, the benefit the plan pays (the Sum Assured) is multiple times more than the total premiums paid. So, a term insurance plan is not an investment, it is a contingency plan.

My notions were laid to rest when I experienced the case of my friend’s family. I understood the importance of a term insurance plan in my financial portfolio. I immediately went online, compared the available plans and bought a term insurance plan suiting my requirements. Buying the plan gave me peace of mind. I knew that my family would be financially protected even in my absence. Which other investment of mine promised this financial security? None!

For those of you who are still mulling things over, take my advice. A term insurance plan is essential in your financial planning process. You make a financial plan to provide for your and family’s future and a term plan ensures that the future remains secured. So, stop delaying, get over your notions and invest in a term insurance plan today.