The term insurance plan is considered as the most economical way to get your life insured, but many people don’t put a term insurance plan in their option of life insurance because there is no return upon survival. While term insurance plans come with many flexibility like deciding the term of the contract, regular pay or single pay options, convertibility, etc. Term insurance plans can’t be bought as a retirement plan because it doesn’t provide maturity benefit, but it acts as a perfect tool providing financial security for your family at a minimum price. So one should know when he needs a term insurance plan.
So, through this article we will understand what are the different situations and requirements, when you can buy term insurance policy.
Number of Dependents
One of the main deciding factors in cover for life insurance is the number of dependents. If you have more number of dependents, then you need more coverage. You might be the single earning member of a family which constitutes wife, 2 kids and old aged parents. In such case, you need to leave an appropriate amount of money for each family member, which will fulfill the financial need of your wife to handle the family, education and marriage of your children and health care requirements of your parents who are growing old. More cover will result in higher premiums, but term insurance policy allows you to get high amount of cover with low premiums. So if you have more number of dependents and you need large cover, then going for a term insurance policy allows you to fulfill your requirements at an economical price.
Education of Kids
Cost of education is increasing day by day. Not only in private education, but government run institutions are also becoming very costly. Not getting proper education because of financial concerns can snatch many opportunities of life. You don’t want your kids to leave college or school because of financial concerns in case of your absence. A term insurance policy can act as a cover for your kid’s education. For example, your son is in the first year of his college and to complete the master’s degree, he will need 5 years more. In such case, you can take a term insurance policy for 5 years, which will secure your son’s educational requirements even if you pass away.
Loan and Debts
Loan and debts are one of the biggest responsibilities of life. Failing to pay your loan and debts can result into the worst financial nightmare. Many people have the fear that in case of their absence, the burden of loans and debts will be transferred to their loved ones. You never want to put the burden of loan and debts on your loved ones who are already suffering with emotional and financial dilemma, because of your demise. A term insurance policy acts as a perfect tool for minimizing risk against loan and debts. For example, if you have taken a home loan for 15 years, then you can go for a term insurance policy of 15 years, which will make sure that in case of unfortunate event, your family will be able to pay the loan for the amount received from a term insurance policy in the form of death benefit.
Substitute for Your Income
Due to the death of the only earning member in the family, the loved ones suffer huge emotional stress and the loss of income adds up to their burden. Leaving behind a substitute for your income can be the biggest relief for your family and that can be done through a term insurance plan. If you want a substitute of your income in case of your absence, then choosing a term insurance policy is the best decision. A term insurance policy comes with an option of receiving the sum assured as monthly income for the loved ones. Your dependents might not know how to use a huge amount of money (in the form of sum assured) or whether to invest it. Choosing to get your sum assured as monthly income eliminates this dilemma of your family.
You get following three options to receive your sum assured :-
- Fixed monthly pay out allows you to receive the sum assured as monthly income for a specific period of time.
- Part amount as lump sum and rest as monthly payout allows you to receive a portion of sum assured at once and rest as monthly income.
- Monthly payout which increases with certain rate.
A Term plan is the best economical, financial asset which can safeguard your loved ones against odd financial crunch in your absence. Analyze your needs and then decide the sum assured or life cover you want under a term insurance policy. It is better to be safe than sorry!