Have you ever thought about what will happen to your family if you suddenly pass away? Obviously, nobody enjoys such woeful thoughts and discussions but you seriously need to think about it. The only thing you can predict about life is its unpredictability. And considering this, you need a back-up plan to provide protection to your family in such a fateful event.
When you’re the primary income-earner in the family, your well-being ultimately impacts the well-being of your family. This is why you need to invest in the right life insurance policy to provide financial protection to your loved ones. Most people don’t consider buying a life insurance policy until they have children. But as they begin to shoulder more and more responsibilities, it becomes unavoidable to invest in a life insurance plan. So, if you also want to make sure that the future of your loved ones is safe, consider purchasing Term Insurance Policy. Now you may ask what exactly it is. Read further to know everything about TERM INSURANCE and how it acts as a cushion for your family’s financial security against such uncertainties.
What is Term Insurance?
As you know, the right life insurance plan will act as the income replacement for your family members in case something happens to you. There are various different kinds of life insurance policies in the market with different names and attributes associated with them such as term insurance, universal, and whole life.
Term insurance is a pure life insurance product which provides coverage for a definite period of time, and if the insured expires during the term of the policy then a lump sum death benefit is payable to the nominee. This type of policy provides protection for a specific period of time and once the term is over you can choose to renew it. Suppose you have a term life insurance policy for twenty years. You will pay a small amount – the premium to the company issuing the policy and if you were to die before the end of that term and your premiums are paid up, the beneficiary of your policy will receive the value of your policy. But if the insured survives throughout the term of the policy, no benefit is provided, except in case of the premium return policies.
Now you may ask what makes term plans better than other policies and how to choose the right term policy. So, let’s take a look at the most frequently asked questions to understand the term insurance policy better.
What is the Cost of a Term Insurance Policy?
As compared to permanent life insurance, Term Insurance policy is less expensive. In fact, the premiums for Term Insurance policies are the lowest among all the types of life insurance policies. This is because usually there is no maturity benefit or investment component in these policies and the entire premium goes for covering the risk. There are many different ‘terms’ to choose from and the cost depends on the term you select. Typically, there are 10, 15, 20, 30, 65 terms and the longer the term you choose, the more expensive the premium.
What is the Right Duration of a Term Plan?
Most people find it difficult to determine which term plan is right for them. Whether you are the sole breadwinner of your household or are supported by your spouse or parents, the longer the term of the policy, the better it is for your family. However, it makes sense to first determine your family needs. If your purpose is to financially protect your children through their childhood, calculate the number of years it will take before they become financially independent. If you need protection for the next fifteen to eighteen years, buy a twenty-year term policy.
How much Coverage should I get?
Next important question is the amount of coverage you need. To determine this, consider all the expenses you’re hoping to cover. Don’t make a mistake by opting for insufficient coverage. Most financial advisors recommend having a cover that is at least 10 times what your income in a year is. Based on your medical conditions, lifestyle choices, and family history, a reliable insurance company will recommend the right term policy for your family. However, make sure you don’t hide any important information because the insurance company may deny the policy claims if they find any misrepresented information.