You’ve worked hard all your life to ensure financial security for your family. What if something unexpected happens to you? Who will look after your family’s financial needs in your absence? While you can’t anticipate what the future holds, a few precautions or financial measures taken now can help them protect their tomorrow. One such step you can take now is to buy a term insurance policy. The earlier you buy, the better it will be however, while most people have surface-level knowledge of term insurance policies that provide lump sum death benefits after the unfortunate demise of the policyholder, not most people know its other features that we will discuss in this bottle.
Large insurance covers at a reasonable premium: One of the most significant features of term insurance is that premiums are reasonable if compared with other types of life insurance plans. Even the best term insurance plans that come with higher sum assured have reasonable premiums. For example, A 30-year-old can acquire a term life insurance cover of ₹1 crore for a monthly premium of only ₹800. One can use a premium calculator, which is free to use online, to know your premium amount in advance. If you are a non-smoker, your premium would be further lower if compared with individuals who smoke. Considering the fact that keeping your family financially protected is your goal, the low cost of term insurance does not hurt your pocket in the long run.
Comes with premium payment flexibility: One of the overlooked features of term insurance is the fact that policyholders can pay until retirement or until the end of the policy term. This means that a 30-year-old can opt to pay the premium until retirement, or until the age of 65 for a 50-year term life insurance cover. Choosing this option allows the policyholder to enjoy retirement without worrying about premium payments.
Flexible pay-out options: Policyholders can select how they want to receive the sum assured, in addition to the premium payment method. This is a vital aspect because it will affect your family’s financial security while you are not present. Policyholders can select the option of making sure their beneficiaries receive a monthly income to cover their daily expenditures rather than getting the whole sum assured all at once. The two common choices which the policyholder can select:
- Fixed Monthly Income Plan: The family is paid a specific amount each month for a set period of time. For example, if the assured death benefit is ₹1 crore, the family will receive ₹40,000 monthly for 10 years.
- Increasing Monthly Income Plan: This plan increases monthly income by 10% annually while accounting for inflation. For term insurance worth ₹1 crore, a family receiving ₹40,000 monthly in the first year will receive ₹44,000 monthly the following year, with a 10% annual rise.
Allows the policyholder to customize the policy with riders: Riders are premium-based add-ons that are there to further strengthen the basic term plan. The riders or add-on benefits supplement the policy coverage by providing additional coverage to the insured.
With lifestyle diseases on the rise, a critical illness rider is strongly suggested. Upon the diagnosis of critical illness, the rider will pay the insured so that s/he can take care of medical expenses.
Another typical rider is the accidental death benefit, which pays the nominees an amount in addition to the base coverage. If the insured dies in an accident, the payout on the term insurance policy increases. For example, if the insured has a term policy with a sum assured of Rs 50 lakh and an accidental rider of Rs 15 lakh, the policy will pay Rs 65 lakhs to the nominee in the event of the policyholder’s death due to an accident.
It is highly suggested for individuals who need to travel regularly for business.
If the policyholder becomes critically ill or incapacitated, s/he will not required to pay any further premiums if they have bought a premium waiver rider.
Can increase insurance coverage at major life stages: As you grow, so do your financial duties and liabilities. As a result, your life insurance coverage also needs an upgrade. Typically, you will need to purchase a new term life insurance policy to increase your term life coverage when you cross significant milestones. However, certain life insurance companies have the built-in feature of term insurance where the coverage will be increased during key life events such as marriage, having children, or purchasing a property. The advantage of this upgrade option is that it allows you to increase your overall life insurance coverage without having to go through medicals or papers again.
Important Aspects to Know Beforehand
Be Careful When Choosing Your Plan: The fundamental goal of buying term life insurance is to safeguard you and your family financially in the event of an emergency. As a result, when purchasing a term insurance plan, be sure that the insurer you choose has a reputation with a solid financial foundation and a consistent track record of claim settlement ratio. In the insurance industry, the claim settlement ratio represents the total number of claims settled by the insurer over the fiscal year. The greater the number, the better it is.
Secondly, Choose a term plan based on your needs: Financial responsibilities change during life. Individuals must consider elderly parents, spouses, children, or other dependents at all stages of their lives. Furthermore, milestones like purchasing a home or responsibilities like a company debt cannot be overlooked. Not including these in your life insurance can put your family in debt. To avoid this, you should upgrade your
term plan at least once every five years. This ensures that, in addition to an income supplement, your other liabilities and goals are fulfilled during your absence.
So we are saying,
Term life insurance has become a need in today’s environment, where our lifestyles are causing us to fall sick than ever before and medical costs appear to be skyrocketing. In light of this, breadwinners must consider their families, who rely on them for financial support. Given the combined impact of these two factors, it is critical to have a reliable financial backup plan in place to ensure that our loved ones do not suffer during our absence. The aforementioned features of a term insurance plan will give you a comprehensive image of what term life insurance can do for you and your family.