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Achieve Maximum Financial Protection With Term Insurance

Term insurance is the simplest way of protecting your family’s financial situation in your absence

Saturday July 25, 2020 11:40 PM, ummid.com News Network

Term Insurance Benefits

Youth gives you a feeling of freedom and happiness. You only think about an active lifestyle and short-term goals. However, your financial obligations will increase with age. Thus, you need to plan for the long-term to protect your family against any uncertainty.

One of the most important components of financial planning is to safeguard your family from risks. Life is uncertain, and you can never predict when an unfortunate mishap may take you away from them. In such a scenario, you do not want to leave them in an unstable financial position.

Term insurance is an affordable way to shield them against an unforeseen event. Most of these insurance plans suit your personal needs. A term policy is a pure life cover and pays the policy benefits to your beneficiaries if something untoward happens during the tenure.

The premium on term plans is significantly lower than other kinds of life insurance policies. This is because the entire amount is used to cover the mortality charges. There is no investment component in these policies. Additionally, unlike traditional life policies, term plans do not offer any maturity benefits, which is another reason for lower premiums. To know more, you may use an online premium calculator to determine the approximate cost of investing in a term plan.

Term insurance is the simplest way of protecting your family’s financial situation in your absence. However, to maximize the benefits of these plans, you must follow these steps:

1. Determine your financial requirements

Most insurers offer different types of term life insurance policies, and you need to choose a suitable plan. Firstly, you must analyze your needs to understand what would be the ideal sum assured to help your loved ones meet their financial requirements.

Sum assured is the amount paid by the insurer to your beneficiaries in case of an unfortunate event occurring during the policy duration. While deciding on this amount, you need to consider:

• Number of dependents
• Current lifestyle and future increase due to inflation
• Outstanding liabilities, such as home loan, credit card debt, and other encumbrances
• Future financial goals like children’s education, wedding, and spouse’s retirement objectives

Term policies are flexible. Once you identify your needs, you may opt for the necessary sum assured.

2. Opt for the right payout option

Financial goals are not constant and change over the years. To choose the payout option, you must consider the future monetary requirements of your loved ones in case of your absence. This ensures they have the necessary funds to meet various life goals.

Insurers offer a lump sum option where the entire sum assured is paid on the occurrence of the mishap. Another alternative is a periodic payment, which can help your family members meet their regular expenses. Also, you can combine the two facilities wherein a certain amount is paid as a lump sum and balance as a fixed periodic installment.

3. Choose the necessary riders

You can enhance the coverage of your basic term plan with riders for an additional premium. Common riders include waiver of premium, accidental death, critical illness, and disability benefits.

Evaluate your requirements and add the riders for more protection.

4. Avail of additional benefits

As already mentioned, term plans only cover the policyholder’s death and do not have an investment element for wealth creation. Your beneficiaries receive the financial coverage only in your absence. However, if you want to avail of maturity benefits, you may opt for a term policy with a return of premium.

Under this option, the insurer refunds the entire premium paid during the duration of the policy if you outlive the period.

To maximize the term insurance benefits, you should buy it when you are young to get the benefit of a cost-effective premium. Additionally, you will be eligible for Section 80C tax deductions for a longer period, which will effectively save a significant amount over the years.

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