What shall be the suitable Policy Term of your Life Insurance?
What is a life insurance policy?
Why is it popular in India?
How does it function?
Why is term life insurance policy in demand?
These are quite common questions about the concept of life insurance.
A life insurance policy is a contract between the insurance company and the policyholder wherein the insured is liable to pay a fixed premium amount. In return, the insurance company provides a fixed coverage amount to the designated beneficiary upon the policyholder’s demise.
Importance of Term Life Insurance:
Life Insurance policy is one of India’s most popular policies because of the large number of single breadwinners in the country. The high number of dependents increase the sole earner’s responsibility, which makes him/her think about the importance of Term Life Insurance. God forbid, in case of an unfortunate mishap, how will the family survive? In such a scenario, life insurance policies work as a financial guard to your loved ones. It gives them the freedom to continue their lifestyle even in your absence without thinking about the financials.
There are plenty of life insurance policies available in the market. Still, a term life insurance policy is one of the most affordable plans, which offers you similar death benefit as any other life insurance policy but at the lowest premiums. The affordability of term insurance makes it more popular among the people of India.
As its name suggests, it only works for a pre-decided term and posts that all the conditions and benefits get null and void. However, many people get confused thinking about the importance of opting for the right policy term for their term life insurance policy and how they can do it. Although several factors impact the policy term and coverage amount; however, there are three significant factors that one should keep in mind before finalising the policy’s duration – age, number of dependants, and liabilities. So, let’s discuss the
Three crucial considerations while buying Term Life insurance policy:
Age: Age plays a vital role in determining the policy term. Generally, insurance policies provide coverage until the age of 70, but it can go up to 80 years and even beyond in a few policies. And the premium amount will automatically increase with a more extended term of your life insurance policy. Therefore, if you are below the age of 40, then you must opt for the longest available term so that you can live freely without worrying about your family managing their expenses in your absence. But in case you are above the age of 40, you must go for a lower term of your insurance policy, the reason being till the time your policy term will expire, your dependents will no longer be dependent on you. Instead of paying the insurance policy’s premium, you can invest it somewhere else to earn a better return on investment.
Number of Dependents: The number and type of dependents are also crucial while choosing a life insurance policy. If you have a high number of dependents and most of them are incapable of earning in future, then you must adopt the highest term. But in case you have fewer dependents, that too your children who are studying and soon will be self-dependent, then you can opt for a policy term till your children complete their education and marriage. This will save your hard-earned money, and you can enjoy the days of your retirement with ease.
Liabilities: You must keep your present as well as future obligations into consideration while planning the term of the life insurance policy. You should ensure that the policy term shouldn’t expire in between any on-going liability, such that in case of any mishap, your family may not go out of funds because of debts. If you have fewer responsibilities, then you can opt for a shorter term and vice versa. In the case of various liabilities, you must choose a sufficient term to finish all the debts. These liabilities could be your children’s education, their marriage, home loan, car loan or any other credit card loan, etc.
Deciding on a term could play a crucial role in your buying decision of a term insurance plan because policy term impacts the premium amount as well as coverage amount. Hence, it is always advised to consult with an expert on the policy term before making a buying decision of term life insurance policy. Else you can also keep in mind the pointers mentioned above. You can visit www.bimakaro.in and register yourself to receive a call from our insurance experts for better clarity.
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