Financial planning is not limited to investment and savings. You need to have a plan for times you won’t be around. Life is uncertain, and you cannot control some things. That’s why getting term life insurance is important as it forms an important component of your financial kit. If you are looking to get budget-friendly life insurance, term insurance is a type you can go for.
Term life insurance, also called pure life insurance, is the simplest form of life insurance. It guarantees payment of an assured sum in case a contingency occurs during the policy term. The cash benefit can be availed of by the insured person’s family or the nominee in case of an unfortunate event.
The most significant benefit of purchasing term insurance is the sizeable cover offered against a relatively affordable premium rate. A term life premium, which can be easily estimated using a term plan calculator, is based on the person’s age, health condition, and life expectancy.
Let’s understand why you must buy term insurance if you haven’t already.
Why Should You Buy a Term Insurance?
Buying a term life insurance plan comes with the financial security you can provide to your family in a distressful financial situation. Apart from this ultimate benefit, there are some more advantages that you must know about:
You Get High Returns at Affordable Premium:
The cover in the case of term life insurance is vast, and the premium rates are also relatively cheaper if you take the policy at a younger age.
Flexibility to Suit Your Premium Payment Mode:
You get flexibility at multiple levels when you opt for a term plan. Concerning premium payment, you can opt for a one-time deposit or a payment at regular intervals for a specified period. Similarly, at the time of payout, you have the option of a staggered or lump-sum disbursal of the cover amount.
Add-ons for Accidental Death Benefit or Critical Illness Coverage:
When you opt for add-ons/riders, you can avail of additional benefits such as a critical illness rider or an accidental death benefit rider. Other riders may also be available. These can be added by paying an extra premium. The rate for which can be estimated using a term plan calculator.
How Does a Term Life Insurance Work?
To begin with, it’s imperative to understand that a life insurance policy is a legal contract between you and the insurance provider. You, as a policyholder, can purchase a term plan for yourself or another family member.
Basics of Term Policy:
The policy comes into force when you agree to pay a pre-determined premium to the insurance provider. The premium guarantees a fixed death benefit (cover), which offers financial security to the beneficiary of the person whose life has been insured.
Disclosing Right Information:
You need to be absolutely honest and accurate while filling out personal information in your proposal form. You will need to give details on your medical history, age, lifestyle habits, present health condition, annual income, profession type, and others.
There are policies where medical history might not be required, but the premium amount may be steeper in those cases. You can get an estimate on the premium and cover using a term plan calculator.
Understand Your Needs:
The coverage is as important a consideration as the premium. The death benefit should be able to meet the current and future requirements of your dependents. Ideally, the cover should be 8-10 times your annual salary and outstanding loans.
The policy duration also needs to be worked out. Estimate the duration during which your dependents will need financial support. It can be the time your children may need to graduate or until you retire.
When deciding on term life insurance, you must determine if you want to make a one-time payment of the entire premium or pay it at regular intervals for a fixed time. You also can opt for either a lump sum or a staggered payout. You can choose a combination of the two as well. This decision can be based on the financial knowledge your family has.
Add-ons, better known as riders, can also be added for extra payout benefits such as death due to accident, critical illness cover, and others. These can be added to your current term insurance against a negligible premium.
Agreeing to a Premium and Assigning a Beneficiary:
Once the insurance provider understands your expectation, you will get a premium quotation. Your policy activates as soon as you start paying your premium.
You will also need to name a nominee for your policy who be eligible to receive monetary benefits from your term life insurance in your absence.
A term life insurance is a must-have for all individuals, especially those who are the breadwinners of their families. It offers not only financial security in uncertain times but also provides other tons of benefits. However, there’s also an urgent need to understand that these policies must be bought with utmost care. Term insurance is not like any other product you can buy without doing your research. It’s important to be a smart customer when buying term life insurance.