Term insurance can play an essential part of your financial planning system. It is not only a protection plan but also an income replacement for your family members. Since it can offer a financial pay-out to your loved ones after your demise, they can maintain their standard of living. Although a term policy can be the simplest form of an insurance product, you might be unaware of how to make the right selection at the time of purchase. Therefore, let’s go through the top three key points you should keep in mind while opting for a term plan to make informed decisions during purchase:
The primary objective of term insurance plans can be to offer financial protection to your loved ones. Since it aims to safeguard the future of your loved ones financially, a term policy can provide a sum assured value or life coverage to them in your absence. The cover can act as an income replacement after your demise to ensure the financial well-being of your loved ones. As the nominees, your family can either choose to receive the coverage amount as a monthly income or a lump-sum pay-out.
Before selecting the term coverage amount, you should consider the financial requirements of your family. Evaluate their current expenses, such as utility bills, EMI payments, rents, and so forth as well as their future expenses, such as your child’s education, dream wedding, and so on. After assessing all their financial goals and requirements, choose the coverage amount wisely.
The premium can be an essential element of a term policy. Since you receive financial coverage from your insurer, you should pay the premium regularly. Paying the premium amount on time can allow you to reap the term insurance benefits. However, there can be times when you might be unable to pay the premium amount due to loss of income, critical illness, physical disability, and so on. Under such a scenario, your insurer can provide 30 days called grace period to repay the amount. If you are unable to pay the premium within the grace period, your term policy can lapse.
Many insurance companies can provide you with the flexibility to choose the premium payment mode. Typically, you can select a premium payment frequency between quarterly, monthly, half-yearly, or annually. Before opting for a premium payment mode, use a term insurance premium calculator to determine the premium value. Identifying the premium amount beforehand can help you understand whether you can afford the premium or not.
Tenure of the term policy can be as essential as choosing the right coverage amount. Term coverage can be for a specific duration. Typically, the tenure of the term policy can be 15,20,25,30 years.
If you wish to reap the term insurance benefits, you should buy term insurance at a young age. Purchasing a term policy when you are young can let you offer financial protection to your family for a longer duration. Therefore, buy term insurance after you receive your first pay check.
In a nutshell, term insurance can provide financial protection against untimely death and unfortunate events, such as loss of income, physical disability, critical illness, and so on. Therefore, choose the right term plan based on the parameters mentioned above as well as your financial goals. In addition to this, you can consider other key pointers, such as your age, current health condition, income, and so forth.