Basics of Term Insurance

Basics of Term Insurance

As we begin our first job, we tend to save up the money in our bank accounts instead of planning smart. However, as we grow older, we learn about various investment options that help with more than just wealth creation. Similarly, you must have also heard people explain the importance of insurance especially if you have a family. So, today let’s learn some basics of term insurance to help understand why you should opt for it. 

What Is Term Insurance?

Term insurance is a policy that financially safeguards your dependents in your absence in exchange for paying your premiums regularly. In the event of an unfortunate incident, the insurance provider shall pay out the death benefit to your family. This corpus can be used to secure the future of your loved ones and ensure a financially independent life. But term plans are pure risk covers and thus, if you were to outlive the tenure, you wouldn’t get any benefits. 

The purpose of a term insurance policy is to protect your dependents from the risk of death. Apart from this, you can also maximise your coverage to include other perils by purchasing riders. Such additional covers come at a cost-effective price and have to be purchase separately. Thus, you can easily ensure your loved ones are secure from any untoward situations.

Features and Benefits

  • Affordable premiums
  • High sum assured
  • Increased coverage
  • Flexible premium payment frequency
  • Financial security
  • Peace of mind

How Does Term Insurance Work?

At the time of purchasing the policy, you select a sum assured amount that shall be paid out to your beneficiary to secure their finances. You can either pick an amount 10 to 15 times your current income or estimate the amount by considering various expenses and debts. In the event of the policyholder’s demise, this sum assured is given to the family if the death claim meets the terms and conditions of the policy. On successful claim settlement, the lump sum corpus will be paid out at once or on a regular basis as per the policyholder’s selection. But if the policyholder survives the term insurance policy tenure, then there are no survival benefits available under the plan.

Who Should Opt for Term Insurance?

Term insurance policies are suitable for every individual, but the following categories of people should definitely consider purchasing one:

  • Individual with dependents

If you have dependents such as your parents, spouse, or young children, then term plans are for you. In case of any untoward incident, you wouldn’t want your loved ones struggling financially. Even with your life savings, many other expenses need to be taken care of. The affordable premium rates and high sum assured enables you to ensure your family is self-sufficient.

  • Individual with debts

Have you taken a mortgage or a home loan? In your absence, the responsibility of paying it off would fall onto the shoulders of your dependents. To avoid such a situation, you can pick a high sum assured amount that matches your loan amount. Therefore, your family won’t have to deal with a financial burden with the help of term insurance.

  • Individual who wants to leave behind a legacy

Knowing your family has more than enough can be quite peaceful. With term insurance benefits, you can leave behind a lump sum amount that can be used as per your family’s wishes. It could be to purchase real estate, invest the money or for the higher education of your children. 

When Should You Opt for Term Insurance?

Usually, it is recommended to purchase term insurance early in life rather than later. This is because when you are young, you can avail a lower premium rate. Due to your age, the insurance provider considers you to be healthy and hence, term plans come at a much lower cost. If you compare the cost of insurance for a middle-aged person and an individual in their early 20s, the former shall have a much higher quote. Also, because the premium quote is cost-effective, you can easily choose a higher sum assured amount keeping your future in mind. 

With this, you must have understood some basics of term insurance plans in India. So, now is the time to compare and pick the right term plan for you! It is advised to purchase a policy online for a hassle-free journey and for an affordable premium rate.

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