Know how term life insurance works?
Term life insurance has become an integral part of today’s time. It’s the simplest form of life insurance with high life cover at low premiums. A term insurance policy is specifically designed to assure that in your absence, your family is happy, secured and away from all financial woes. The sum insured in the policy is the death benefit amount which the beneficiary gets after the demise of the policyholder. There is no designated usage of the death benefit amount; however, it completely depends on the beneficiaries to decide how they want to use it. The amount can be used to cover the loss of regular income, financial liabilities or in case of any debts of the policyholder. But how actually the term insurance works? Let’s understand this.
Term Insurance is a pure protection plan to safeguard your loved ones in your absence by giving them financial independence to live their lives like before. This kind of life insurance does not give any maturity benefit, rather it offers high death benefit at a nominal premium price.
When you buy a life term insurance policy, you agree to pay a monthly premium to the insurance company for a designated term or duration. In exchange, the insurance company assures to pay a set amount to the beneficiary, if the policyholder dies during the policy term.
Affordability is the major factor that works for the term plans. The premiums that you pay are less than the other life insurances and in return you get a high life cover. If you are a non-smoker, your premium price will be less than the person who smokes. Also, your term life insurance gets more affordable if you buy it online, as you don’t have to pay the agent charges.
The science behind calculating the life insurance rates depends on the life expectancy. That is why as you age, life insurance usually costs more. In case you live longer than your policy term and still want to have a life insurance then you must buy another life insurance policy. However, in such case, the policy premium might be on the higher side as at that time you will be much older, and the insurance company will consider your health conditions. Hence, it is advised that when you buy life insurance, choose a suitable term duration.
If you see that a certain term plan is not enough, then you would need to buy another term policy at an extra cost. Also, it is necessary to remember that the term policies usually extend over decades; therefore, while buying a policy you need to make sure that you can afford the premiums for the entire term of the policy. If in case the policy lapses due to the non-payment of the premium, then you are likely to pay a higher amount for a new policy.
Why Term Insurance is essential?
Life is unpredictable and it is always better to be prepared with financial backup to support your family. Also, owing to today’s lifestyle which is filled with EMIs, various lifestyle expenses, education and medical cost, the survival of family members without the earning member becomes very difficult. And it is not easy to keep such large amount through savings and other investment schemes. Hence, term insurance offers financial security and safeguard your loved ones from difficult scenarios.
Benefits of Term Life Insurance
- Mode of premium payment: There are various ways available to pay term insurance premium such as monthly, quarterly, semi-annually and annually. You can choose your preferred mode as per your financial comfort.
- Riders: There are different kinds of riders available which include critical illness cover, accidental death benefit cover amongst several others. You can include various riders in your term insurance plan based on your requirements.
- Different payout options: The insurance payouts are offered in lump-sum amounts at the end of the insurance term. In case of term plans, there are various payout options like staggered payouts as well as a lump-sum amount, monthly payout and partial payouts.
- Tax benefit: Term Insurance also helps in getting tax benefit under section 80 C of the income tax.
Term Life Insurance is indeed a necessity for a secure future. However, it becomes equally important to be aware of its various aspects to make a sound decision of buying the best affordable term life insurance based on your need and requirements.