Family can be an integral foundation of society. While your family can cherish your presence, they might suffer emotionally as well as financially in your absence. Although you might be unable to control the unpredictability of life, you can protect your loved ones financially against the eventualities of life after your demise. Since a family can be an essential part of your life, you should buy a term plan to safeguard their requirements when you are not around to provide for them.
Before you purchase a term plan, let’s try to understand what is term insurance in detail to make informed decisions in the future:
A term plan can be the purest form of insurance, which has the primary aim of the financial protection of your family in the long run. Therefore, a term plan can offer a payout called the death benefit in your absence. The death benefit can be provided to your nominees to ensure they continue to live their current lifestyle after your demise. Additionally, the death benefit can be received by your family either monthly or annually.
Although a term plan is a sub-subject of life insurance, many of you might be unaware of its features and benefits. According to a report, only 5% of the population purchases a term plan due to lack of awareness and knowledge. Besides, term plans might have also undergone specific changes after its introduction in the market. Therefore, let’s go through the top three things you should know before you purchase term insurance this financial year:
- Understand the types of term insurance
Initially, insurance companies had launched a basic plan, which was a regular term plan. However, many insurers have introduced a smart term insurance plan with additional benefits for you.
Let’s understand the difference between these two types of term insurance given below:
- A regular term plan can provide your family members with only a death benefit. If you survive a regular term policy, you might not receive any monetary benefit.
- A smart term plan can offer comprehensive coverage as well as new-age features based on your dynamic financial requirements. Under smart term plan, your insurer can return your whole premium amount on maturity. Moreover, it can provide you with different variants to suit your needs and preferences.
Before selecting the right term plan for you and your family, you should conduct research on both regular as well as smart term plans. As a buyer, you should choose between these two types of term plans based on your financial goals and the needs of your family.
- Know the premium payment term
The premium can be an inevitable component of every insurance policy. A premium is usually paid in return for the coverage. When you purchase a term plan, you should pay the premiums regularly to receive the term insurance benefits. Therefore, use a term insurance calculator to know the premium amount before you buy a final term policy. If you are unable to pay the premium due to loss of income or any physical disability, your insurer can provide you with a grace period of 30 days to repay the accrued premium. However, if you fail to repay the premium during the on-going grace period, your term policy can lapse.
Under term insurance, you can have the flexibility to pay the premium. As a policyholder, you can pay the premium quarterly, monthly, half-yearly, and yearly. Apart from the regular premium payment mode, you can choose either a single premium payment option or a limited premium option. While a single premium option can allow you to pay a lump-sum amount every year, you can stop the premium payment after a specific time under a limited premium mode.
- Consider the term coverage
The primary objective of a term plan can be to provide your family with financial support in your absence. In simple terms, a term policy can act as an income replacement after your demise. Therefore, you should select a term coverage, which can help your loved ones to sustain financially without you. Before you decide a term coverage amount, identify your current and future expenses as well as your past liabilities, if any.
As you cross specific milestones of your life, your coverage needs can increase. For instance, when you get married, you might wish to cover your spouse and children under your term policy. Due to the increasing coverage needs, you should choose a smart term plan, which can allow you to manage the growing needs at every life stage.
As highlighted above, the rising unpredictability of life can make an insurance policy a basic necessity of our life. Since the unexpected twists and turns can leave your family in a financial turmoil, you should select an effective term coverage for their security. In the end, your family’s safety should not be compromised at any cost, whether you are alive or not to look after them.