If you are an earning individual with a family, you may be looking for ways to secure your family’s finances. In doing so, you surely must have come across term insurance. It is the perfect way to make sure in the case of an unfortunate event, your family is financially safe. The policy offers a lumpsum payout of the pre-determined cover to your family in the case of your death.
Your family surely has financial needs. These needs need to be met in case of your untimely demise. The only difference is that now you are there to fulfill those needs yourself. But, in the unfortunate instance of your death, there may be nobody to provide them with everything they need. This is where a term insurance plan helps. It makes sure that your family does not face the trouble of having less money in your absence. But it can only do this if you buy the right policy, the right way. Doing that, in turn requires a great deal of research and consideration of various factors. These factors include –
Specifics of coverage
The most vital part of term insurance is the coverage. Hence, it deserves special consideration when looking into buying a policy. While term insurance coverage is usually much higher than other types of life insurance plans, you can also go for a higher one. But, how much coverage will the insurance provider be willing to offer you is a different story. Before telling the cover, they are willing to offer you, you need to provide specific information. These factors can affect your coverage. They include your age, financial requirements. current lifestyle expenses, any loans you may have taken, etc.
After ensuring that you have the right cover amount, you need to ensure that you can have the coverage for a long period of time. This means making sure that you can have as much of a tenure on the policy as is required. The right policy term for you depends on a multitude of factors. Firstly, it depends on your age. If you are younger, you should get the highest tenure possible. On the other hand, if you are older, you should go for a lower tenure. Considering most people secure their loved ones till their working years, you should choose a term plan that provides coverage till retirement, when you are financially secure.
For example, if you are buying term insurance in your 20s, the recommended tenure is 40 years. If you fall into the 30s, the recommended tenure would be around 30 years. In the case of your 40s, you should go for a tenure of 20 years. Similarly, if you are in your 50s, it is advised to take a term policy with a tenure between 10 and 15 years.
Payout is the main reason that anyone buys a term insurance policy. It is the act of disbursing money to the nominee after their claim gets approved. However, there are multiple options when it comes to how the payout is disbursed. The mode you select for payout affects your premium as well. You can either go for a lumpsum payout or opt for a regular monthly income payout. While the first option gives you the entire cover amount at once, the second option pays you in installments. You should choose the payout option as per your requirement and feasibility as the premium also varies depending upon the payout option you choose. Hence, discuss with your family on how they want to receive the money. If they want to have a regular income after your death, they should choose the option of regular income monthly payout. Otherwise, they can receive all the money at once.