Planning for retirement starts on day zero. You need to plan your finances in a way that allows you to take meaningful breaks and take some risks while ensuring that you do not go broke. Retirement is the milestone, but the journey till retirement makes a difference.
This is when you purchase a term insurance plan, and it acts as a safety net. At the end of the day, most of what you earn and what you will earn is to protect the financial interests of your family after your unfortunate demise. This is why a term insurance plan is essential. A term insurance is an insurance policy that allows you to get insured for a huge sum against a premium. The plan provides your family with an assured sum in case of your absence.
Now that you are convinced that you need to get a term insurance plan, where do you begin?
Term insurance forms a part of your portfolio. The other parts include your investments in equities, mutual funds, gold, pension plans, debt products, and fixed deposits. All of this can be structured in a way that provides you with the necessary income that you need to lead your retirement life in peace.
The various components of a term insurance plan that you should know about before you purchase:
How do you determine your policy amount?
A policy amount is the sum assured that you would want to protect the financial interests of your family in your absence. Essentially, it has to be planned in a way that allows your family to lead a comfortable lifestyle in case of your absence. It becomes important in cases when you are the sole breadwinner for your family.
The general rule of thumb for determining the sum assured for your term insurance policy is 10 to 12 times your annual income, e.g., If your income is 18 Lakhs per annum, your coverage could be somewhere in the range of 1.8 Cr to 2.16 Cr.
How do you plan your term insurance plan?
Apart from all these tips, reducing and eliminating debt is the ultimate way to plan a better retirement. It should also include planning for activities to do when retired.