When it comes to affordable life insurance plans, the term policy tops the list. It is a pure life cover that offers the benefit only in case of the policyholder’s absence. A term plan does not come with any maturity benefit or investment option. It is not a plan that you buy to create a sizable fortune. The policy ensures that your loved ones will be financially secure, even if you cannot be there for them.
If you are considering buying a term life cover, here are a few things to keep in mind to ensure that you are choosing the best policy:
1. Is it the right policy for you?
Like any life insurance cover, a term plan is a risk management instrument for the insurance provider. This means they first determine the risk associated with selling you the policy. They set the premium value depending on that. As the policy only pays a death benefit, the insurer makes sure that you have comparatively sound health. They will ask you to go through specific medical tests to determine that. If you are healthy and young, the premium will be low. However, older policyholders often have to pay a higher price for the same benefits. This is why you must consider the associated charges of a policy before buying it to realize if it is for you.
2. Should you select a staggered or lump sum payout?
A term life insurance comes with two different payout options, which are staggered and lump sum. The latter is the most common form of payout for a term plan. In this case, the insurance company pays a lump sum to the policyholder’s nominee as the death benefit. A few current policies also offer a staggered payment facility. If you choose the staggered payout option, the insurer will pay the benefit to your nominees as a monthly payment, either as a fixed amount or periodically increased pay. This can be a good option if you are not confident that your loved ones will be able to manage a large amount. You can opt for the payout type accordingly.
3. Which is a more suitable payment alternative – single premium or regular premium?
One of the term insurance benefits is that it allows you to choose between different payment options. In the single premium alternative, you can pay a lump sum while purchasing the policy. This way, you do not have to remember paying the premium on time regularly, eliminating any possibility of policy lapse. The regular premium option enables you to pay a smaller amount at frequent intervals throughout the policy’s period. You can pick the alternative depending on your budget and payment preference.
4. What should be the ideal life cover?
The purpose of purchasing a term policy is to ensure that your loved ones do not have to suffer due to a lack of funds if you cannot be there for them. To ensure that, the policy cover must be large enough to take care of the household needs for years after the nominees pay your debts. Experts suggest that you must opt for a life cover that is at least ten times your yearly income.
5. What should be your policy’s duration?
The tenure of your term plan is a vital aspect to consider. As it does not offer any maturity benefit, the period must be long enough so you can have the term plan cover until your retirement. This way, you will protect the financial security of your children when they are still young.
Once you check all these aspects of the available term life insurance policies, it will become easier to find the one that meets your requirements.