TIP and SIP together can help you secure your future, here's what they are
A TIP makes the financial plan death-proof and allows you to do SIPs to earn returns.
Varun who is 34 years of age working in an IT company with a well rewarding package. Varun is married and has a 4 year old son. He owns a dream house and drives his dream car which he has bought with the help of a Bank loan. Apart from the EMI he pays he also invests regularly in Mutual funds through Monthly SIPs. He has managed to create a decent corpus as he has been investing in SIP for 4 years now, Rahul Mohata, COO, 121policy.com narrates the story.
Things were going well, but Varun died in an unfortunate Motor Accident, leaving behind a bereaved family. Since he had been saving in SIP for some time, the family looked to survive with the same, however within a few days, Banks knocked on their doors for their EMI’s which has been due and sought repayment, Mohata added.
The family had two options :
- Pay from their Mutual Funds Corpus and clear the dues. The funds were just enough to meet the liabilities.
- Surrender the Home and the Car to the lenders.
We all make investment plans. Investing in mutual funds, monthly savings, putting money in fixed deposits, just to secure present and use the savings at the time of emergency.
Death is uncertain and nobody can avoid it. But, what in case of early death? Is your family financially prepared for it? Here comes Term Insurance Plan (TIP).
You must have heard and read about Systematic Investment Plan (SIP) where you invest a small amount every month for a long term and earn return at the time of maturity. Now, if you are thinking about the link between SIP and TIP, then here it is. A TIP makes the financial plan death-proof and allows you to do SIPs to earn returns.
What is TIP?
Term insurance can be defined as a type of insurance that is availed for a certain period of time or a fixed term (number of years). The basic differentiating feature of term insurance is that unlike other types of life insurance policies, a term insurance policy is less expensive since it does not have any cash value.
The policy comes useful if the policyholder dies within the timeframe during which the term insurance policy is in force. Term insurance policies are offered by almost all major insurance providers and these come for various terms like 10 years, 20 years, 30 years etc.
Bank Bazaar explained that the most significant point about term insurance policies is that most of these policies have a built-in feature to get converted to permanent life insurance policies irrespective of the state of health of the term insurance policyholder.
According to The Tortoise, a 30-year old needs to pay Rs.700-900 a month to get a Rs 1 crre term insurance cover. By purchasing a TIP, you are buying the surety of your family receiving Rs 1 crore if you die tomorrow. In case you survive, you will have regularly invested money in SIP and also reached that Rs 1 crore savings.
Why you should take SIP and TIP together?
Mohata said, "SIP are wise savings to enjoy and plan the future, wherein TIP is planning for adverse situations which are unforeseen. TIP allows to cover the liabilities one might have in normal course of life, it also helps to create a corpus which can help take care of the future expenses of the family like education and marriage of children etc."
With SIP you can enjoy the future and with TIP you can secure your future.
Disclaimer: This story is for informational purposes only and should not be taken as an investment advice.