Term insurance is a pure form of life insurance designed to offer extensive life coverage to provide individuals with robust financial security for a given term in exchange for regular premiums.
Notably, term life insurance policy is based on factors like an individual's financial needs which may extend from a few years to decades. Such an insurance plan extends financial assistance to the insured's family, their nominee in particular, in the event of the policyholder's untimely death. However, such a benefit is extended only if the death occurs under a situation that is covered under the plan.
Notably, the policy benefits also extend to riders, enabling individuals to enhance their policy coverage. Besides that, term plans also come with a flexible premium payment schedule, a flexible tenure, and payment options that allow individuals to manage their insurance more effectively.
These features make term life insurance more suitable for individuals to build a financial safety net for their future. However, individuals must know more about a plan's scope and benefits to make the most of them and safeguard their future.
Key features of term insurance
In this age of inflation and uncertainty, a term insurance policy serves as a potent financial tool that extends comprehensive coverage at a premium that suits one's financial capabilities and budget. In fact, the key benefits of a term life insurance plan often extend beyond protection, which collectively makes it an indispensable insurance product to include in one's portfolio. However, to make the most of the term plan individuals should understand the complete range and scope of the benefits, including the nominee protection scope to plan the well-being of their family more effectively.
The key benefits of a term insurance plan include -
- Comprehensive financial security
A term insurance plan is known to offer a substantial death benefit to the policy nominee in the event of the untimely demise of the policyholder. This money acts as a reliable safety net that helps the beneficiaries meet their immediate expenses, ongoing debts, and future expenses without relying on external help of withdrawing savings.
- Affordable Insurance Premiums
When compared to traditional life insurance options, term plans come at lower premiums. This feature allows individuals to avail of a comprehensive cover at an affordable premium that suits their budget. However, it should be noted that the insurance premium depends on several variables tailored to individuals' needs and profiles. They may use an online term insurance calculator to estimate the premium amount for a desired coverage and plan their insurance purchase accordingly.
- Acts as a borrowing security
Individuals who have outstanding loans or ongoing debt may seek the best term insurance plan for 2 crore as a financial net that will help their dependents pay off the obligations without straining their budget. It will act as a provision that doesn't allow the insured's dependents to inherit their financial liabilities and allows them to shoulder the burden without exhausting their savings.
- Substitutes income
In cases where the insured is the sole breadwinner of the family, their sudden death not only becomes the cause of emotional but also financial strain for their dependents. In this case, individuals with a term insurance plan can ensure that their dependents are well taken care of in their absence. Typically, the sum assured helps fill the gap in income caused due to the insured's death. In turn, the money helps support their family members’ expenses and allows them to gradually bounce back on their feet.
- Safeguards lifestyle
Term insurance plan allows the beneficiaries to maintain their current lifestyle even in the absence of the breadwinner of the family. This allows them to maintain their current living standard and quality of life without straining their limited budget.
- Flexibility to customize
Individuals have the flexibility to tailor their term insurance plans to their needs. This flexibility allows them to choose a suitable coverage, select a sum assured, and pick one or more riders to their base plan. In turn, it allows them to plan their insurance coverage to suit their needs and requirements without compromising their budget.
How much term plan cover does one need?
The success of a term plan in protecting one's financial future depends on several factors, including cover amount. That said, here's how individuals can ascertain the suitable term cover -
First, decide the suitable sum assured for your needs. To ensure this, individuals need to figure out which coverage would be suitable for their immediate and future needs, especially to maintain their current living standards. They must ensure that the coverage would be useful when the insured is no longer with their family to support their needs.
The best way to determine the suitable sum assured is to follow the basic thumb rule that says - individuals must seek coverage that is at least 15-20 times their existing income.
There is another way to compute a suitable term insurance coverage that will help them tide over their financial standing. They can evaluate the Human Life Value which is actually a numerical process that helps estimate the current value of one's future income. This value helps ascertain the degree to which policybuyer's family's income would be affected in the event of their sudden death.
When is the best time to buy a term plan?
The answer to this question is very straightforward i.e., individuals should get a term insurance policy at an early age. By choosing to get a term plan at a young age, individuals can benefit in these ways -
- Lower insurance premiums: Individuals who are young in age are deemed less risky than older adults. Due to their low-risk profile, younger adults are likely to enjoy more affordable premiums.
- Long-term savings: When individuals purchase a term insurance plan early in life they can mobilize small amounts to build a substantial cover amount without burdening their budget. This also helps to gain extended financial protection from a young age.
- Health benefits: Term insurance plans allow individuals to add rider benefits to the base plan to increase their coverage. Typically, term insurance buyers can add riders like critical illness cover to customize their plan and add a health cover to the policy. They can also add other riders such as accidental death benefits and premium waiver benefits to customize their insurance based on their needs.
These features of term insurance policy make it a smart insurance protection plan to protect one's future and safeguard their needs. However, it is important that compare these policies and check the terms accompanying them to understand their scope.
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