Importance of Term Insurance for First-Time Investors

When you’re young and just beginning your investment journey, term insurance might not seem a priority. After all, you’re likely healthy, earning well, and focused on building wealth. However, term insurance is crucial to any financial plan, especially for first-time investors.

It provides a financial safety net for your family in case of an untimely demise. The premiums are low when you’re younger, and the coverage is high. More importantly, it gives peace of mind that your loved ones will be protected financially, even if you’re not around.

How Term Insurance is the Foundation of Financial Planning?

Term insurance is a pure life cover product. It offers a large sum assured at relatively low premiums. You don’t get any maturity benefit, but in the unfortunate event of your death during the policy term, your family receives the full amount tax-free.

This simple structure makes term insurance an ideal starting point in financial planning.

1. Financial Security for Dependents

If you have family members depending on your income — parents, spouse, or siblings — term insurance ensures they aren’t left struggling financially. It can cover:

• Daily living expenses
• Outstanding loans
• Education expenses of children
• Marriage costs

Your untimely absence could derail your family’s financial future without this coverage.

2. Affordable and High Coverage

Term plans are cost-effective, especially when bought young. For example, a 25-year-old non-smoker can get a ₹1 crore cover for as little as ₹500–600 per month. Delaying this purchase only increases the premium and may lead to exclusions due to health conditions.

3. Builds Financial Discipline

Buying term insurance early sets the foundation for responsible financial behaviour. It reminds you that wealth-building isn’t only about returns — it’s also about protection. This awareness helps you plan better for other goals like saving, investing, and retirement planning.

4. Tax Benefits

Under Section 80C of the Income Tax Act, premiums paid for term insurance qualify for deductions up to ₹1.5 lakh annually. Also, the death benefit received by the nominee is fully exempt under Section 10(10D).

How a Guaranteed Returns Plan Can Work Alongside Term Insurance

While term insurance protects your family from financial loss, it does not build wealth. That’s where a Guaranteed Returns Plan comes into play. This plan offers life insurance cover and guarantees maturity benefits at the end of the policy term. It’s ideal for those who want a secure investment with predictable outcomes.

1. What Is a Guaranteed Returns Plan?

A Guaranteed Returns Plan is a life insurance product that combines insurance with a savings component. It gives a fixed return on maturity, regardless of market conditions. You pay a premium for a fixed period, and at the end, you receive a lump sum or regular income.

For example, if you choose a 15-year plan, you might pay premiums for the first 10 years and receive guaranteed returns from the 11th year onwards — either as a lump sum or monthly income.

2. Balancing Risk and Security

First-time investors often hesitate to put all their money in market-linked products due to the fear of loss. A Guaranteed Returns Plan helps mitigate that fear by offering:

• Assured returns
• Life cover during the term
• Tax-free maturity benefits under Section 10(10D)

It complements the high protection of term insurance by adding a layer of assured savings, especially for long-term goals like a child’s education, retirement, or home buying.

3. Ideal for Conservative Investors

This plan suits your profile if you prefer capital protection over high returns. It offers better returns than traditional savings accounts or fixed deposits while being safe and predictable.

4. Additional Riders for Enhanced Benefits

Most insurers allow you to add riders like accidental death cover, critical illness cover, and waiver of premium to both term plans and guaranteed return policies. These enhance overall protection without the need for separate policies.

The temptation to start with high-return investments like mutual funds or stocks is understandable for first-time investors. However, these efforts can collapse under unforeseen events without a solid protection plan. Term insurance should be the cornerstone of your financial strategy. It offers essential coverage at minimal cost and ensures that your family’s dreams aren’t compromised in your absence.