Your parents brought you into this world, shaped your character and values, and supported you throughout your life. They still continue to do so. But, now, it is your turn to take care of them - ensuring they are content and secure in their twilight years. How can you do that?
With the right life insurance plan! You can ensure their needs are met and that they remain financially independent no matter what life stage they are in.
In this article, we will discuss the top life insurance policies available in the market to protect your parents.
Before we begin, let’s understand what life insurance is all about.
A life insurance plan is like a financial safety net that can secure your loved ones at times of uncertainty. It is a contract between you and the insurance company wherein the insurer agrees to provide you with risk coverage in exchange for a specific fee called the “premium”. Investing in a life insurance plan is a wise decision as it not only financially protects your loved ones in your absence but also helps you accrue long-term savings and fulfil financial goals such as children’s education/wedding, retirement planning, etc.
Top Life Insurance Plans for Parents
There are numerous life insurance plans available in the market. So, before purchasing a plan, it is crucial to evaluate the pros and cons of each one thoroughly. It will help you choose the one that fits your parents’ needs and requirements.
Here are the most popular life insurance plans for parents -
1. Term Insurance
Your parents are the biggest support system of your life and if they are dependent on your income, you don’t want them to struggle financially in case something happens to you. To avoid such a situation, you can consider purchasing term insurance to financially secure their life. If you pass away during the policy period, it will offer a fixed sum of money called a ‘death benefit’ to them. This money will help your parents settle debts/liabilities, pay monthly bills, take care of day-to-day expenses, etc. It will help them meet all their financial goals without compromising their lifestyle.
For example, Rishab is a 35-year-old businessman living with his retired father, who is financially dependent on him. So, he purchases a term insurance policy with a sum assured of Rs 1 Crore for a policy duration of 25 years. He chooses his father as the nominee of the policy.
- If Rishab passes away during the policy term,
The insurer will pay his father the death benefit of Rs. 1 crore. He can use this money to cover household expenses and other financial obligations.
- If Rishab survives the policy term,
He won’t receive any benefits from the policy.
2. Whole Life Insurance
Whole life insurance offers financial coverage until the age of 99-100 years. It is a way to leave behind a legacy for your loved ones which will help them live a financially independent life - in case of your unfortunate demise.
So, if your parents are financially reliant on you for their financial needs for a longer period of time or perhaps for the rest of your life (and beyond), you can choose a whole life insurance plan. It will give you peace of mind, knowing that they will be taken care of no matter what.
For example, Suraj is a 35-year-old unmarried man living with his parents who rely on his income. He wants to secure his parents' future financially, should anything happen to him.. So he purchases a whole life insurance policy with a sum assured of Rs. 70 lakhs. He appoints his father as the nominee.
- If Suraj passes away while the policy is still active,
His father will receive a death benefit of Rs. 70 lakhs from the insurance company which will help him fulfil all his financial goals, take care of his spouse, and live a financially stress-free life.
- If Suraj survives the policy term (up to 99-100 years),
He will receive a maturity benefit of Rs. 70 lakhs after which the policy will terminate.
3. Retirement Plan
A retirement plan aims to cater to the financial needs and requirements of your parents during the second inning of their life. It will help them fulfil their financial goals like travelling the world, buying property, starting a new business, etc. as well as their day-to-day expenses like medical bills, groceries, utilities, etc.
There are mainly two types of retirement plans offered by insurance companies -
? Pension Accumulation Plan
In a pension accumulation plan, you can systematically invest your savings to accumulate funds for retirement needs.
There are 2 types of pension accumulation plans -
- Linked Pension Accumulation Plan
Under this plan, the premium payments you make get invested in the stock market and accumulate over time. Once the policy attains maturity, it offers a lump sum of money that can be used to fulfil your parents’ needs and requirements post-retirement.
- Non-Linked Pension Accumulation Plan
You have to regularly pay your premiums for a specific period of time. These get accumulated into a savings fund, which the insurer pays when the policy attains maturity. Your parents can use this money to fulfil their financial needs post-retirement.
? Annuity Plan
If you are looking for a steady stream of income to cover the needs of your parents post-retirement, then an annuity plan is a good choice. The premium payments that you make under this plan get accumulated as a fund, which is then converted into an annuity (a steady stream of income). Once your parents step into retirement, this plan pays them the annuity periodically.
For example, Gaurav is living with his 45-year-old single mother who works as a teacher. She wishes to retire at the age of 60 years. Gaurav wants to secure her retirement life so he purchases an annuity plan for her in 2023. Suppose he makes an investment of Rs. 1 lakh annually (excluding taxes) for 15 years. Under the plan, the payouts will be made for 20 years and they will begin one year after the premium payment period gets over, i.e., in 2038.
Let’s assume that the annuity rate is 7%.
Annuity = Total Premiums Paid (excluding taxes) x Annuity Rate
= (1,00,000 X 15 years) X 7%
= 15,00,000 X 7%
= Rs. 1,05,000
This means Gaurav’s mother will receive Rs. 1,05,000 every year as an annuity for a duration of 20 years from 2038.
Your parents deserve to be thanked and appreciated for all that they have done for you. Life insurance ensures that your parents will have the financial security they need - no matter what life throws their way. This will give you peace of mind, knowing that you are doing everything in your power to protect them.