You have probably heard about a term life insurance plan but aren’t too sure whether to opt for one. In that case, you are at the right place. We will help you with the basic understanding of a term plan. And 5 important things you ought to know before buying one.
A term life insurance plan is a bare-bones and minimalistic plan, which makes it easy enough for anyone to understand. By paying a relatively affordable premium, a policyholder can secure a term plan. If the policyholder happens to meet with unfortunate death within the policy tenure, the insurance company will pay the entire sum assured to the nominee of the plan.
Since term insurance plans do not have any element of savings, it is the best way to opt for a high sum assured at the least cost. However, if the life insured survives for the entire tenure, there would be no payout.
Here are the 5 most important points that one should be aware of before buying a term life insurance plan.
A term plan ensures that your loved ones are not under any sort of financial burden in the case of an untimely death. However, you must opt for policy coverage that provides that financial cushion.
You can start by clubbing your liabilities such as home loans, car loans, personal loans, credit card dues, etc. together.
You can add approximate expenses of any future events that ought to take place in the next 10 odd years. Education or marriage of children is a good example of the same.
You need to estimate the monthly expenses of your family and factor in inflation to the same.
Putting together these will help you arrive at a more robust number for the sum assured.
Up next, you would need to determine the tenure or term of the policy. You can either opt for the approach, where the term should be till the year where your liquid assets (stocks, mutual funds, provident funds, etc.) exceed the sum assured opted for in the above step.
Or you can opt for a term till your retirement or cover the years that you have most of your responsibilities on your shoulder.
Alternately, you need to opt for the term plan as long as you have financial responsibilities.
Just like other insurance plans, you can opt for an add-on along with a term plan. By paying a small premium, you can enhance your policy’s coverage. However, it is not mandatory and depending on your need you can choose one.
Since the term plans are for a longer duration, it is essential that you choose the right insurance company. You can look at factors such as Claim Settlement Ratio, Financial backing, Market Reputation, Solvency Ratio, etc. to determine that.
Term plans allow their policyholders to either opt for lump-sum payouts or monthly income payout. You can choose the right option, depending on your requirements.
A term insurance plan along with a medical insurance plan will ensure that your future finances are rock solid. A medical insurance plan will take care of any healthcare-related expenses and a term plan will offer a financial cushion in the event of an untimely death.
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