Depending on your own financial situation and the amount of time you will need coverage, life insurance may or may not be a wise investment for you. While a whole life insurance policy can provide you with lifelong coverage, term life insurance may make sense if you only need coverage for a specific amount of time.
What to Know Before Purchasing a Term Plan: Is It a Good Idea or a Bad Idea?
Term insurance covers were initially created with a relatively straightforward structure, i.e. they just accept annual premium payments and provide coverage up to 65 years after the policyholder's death. Dozens of options are available today, including limited pay plans, expanding cover plans, phased payment plans, and return of premium plans.
Continue reading this guide to know if term insurance is good or bad and make an informed decision accordingly.
What Are the Things to Know Before Buying a Term Insurance Policy?
1. Select Adequate CoverageWhen purchasing a term insurance plan, one of our basic mistakes is not selecting enough coverage amount. The most crucial thing, however, is choosing the appropriate level of coverage. Consider your age, income, career, medical history, the number of dependents you have, and your basic monthly expenditures, then decide on a plan that can account for all the variables mentioned above.
2. Choose the Ideal Term Insurance Coverage PeriodThe next crucial factor is deciding on the term of the insurance coverage. Choosing a term insurance plan at a young age is generally advised if you require greater policy coverage at a cheap payment instalment. Early policy acquisition gives you the longest possible insurance term, which assists you and your loved ones in creating a considerably secure financial plan.
3. Do Not Hold Back Any InformationYou should never withhold any crucial information from an insurance provider if you want to reap the maximum benefits from your term insurance plan and ensure that your family members do not encounter any difficulties while claiming the policy amount after your passing.
4. Select an Insurance Company that Best Suits Your NeedsAnother crucial aspect you should consider before buying a term insurance plan is selecting the right insurance provider. It is crucial to look at factors including the insurance company’s experience, client testimonials, claim settlement percentage, and financial stability.
5. If Necessary, Add Relevant Riders
A term insurance plan's optional perk that gives you more coverage is the ability to pick suitable riders. These riders offer extra benefits and basic life insurance coverage advantages. The riders listed below can be simply selected based on your needs:
- Rider for Accidental Death Benefit: If the policyholder passes away accidentally, this add-on coverage provides additional cash to the beneficiary or nominee.
- Riders for Critical Illness Plans: If the policyholder is found to have a certain sickness, a critical illness plan rider provides a lump sum to the beneficiaries without any limitations or sublimit.
- Rider for an Income Benefit Plan: The family of the deceased policyholder will get an extra income each year for five to ten years if this rider benefit is selected. This rider and the principal sum assured make it particularly useful.
Who Should Opt for a Term Plan?
One should opt for a term insurance plan if they:
- Has Dependants or Liabilities: The main purpose of life insurance is to provide your dependents with financial security while you are gone. The severity of the financial burden and the family's ability to bear this load should be the deciding factors in any insurance decision. The objective is also to avoid leaving your kin with debts in the event of your passing.
- Does not have Sizable Assets: You can forego purchasing life insurance if you have accrued significant assets and little, if any, liabilities. Be careful to carry out this computation, though. After all, loans are repaid, and assets and acquired wealth will be sufficient to replace the only breadwinner's salary.
Is Term Insurance Good or Bad?
When an insured person unexpectedly passes away, a term plan provides insurance coverage through financial support to the policy's nominee. A term insurance plan includes numerous benefits in addition to providing financial security for a person and their loved ones, including affordable premium costs, added rider benefits, and more. Term insurance policies are a wise financial choice during hard times.
People may always buy a term plan that meets their criteria and needs, thanks to the wide range of term plans offered in the modern market. They must pay for the selected plan to determine the precise term plan premium. You can utilise a term insurance calculator provided by most insurance providers.
FAQs About Term Insurance Plan
While term insurance is frequently the least expensive kind, purchasing protection has drawbacks. The policy has no surrender value, no cancellation benefit, and, in case you have to renew, the premium is determined by your current age and health, which could result in significantly higher premiums.
No, after the term of a life insurance policy has expired, you will not receive your money back. When the policy expires, your coverage is over.
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- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.