By: SEO Mavens
The economy is a primary factor that affects your day-to-day life. Financial planning is crucial to overcome the challenges of the fickle economic cycle. Having an aimed payout in case of an unforeseen event helps take care of your loved ones. That is why you need to identify the premier term life insurance for you.
Types of Term Life Insurance Policies
The needs of people are constantly changing. That is why term plans come in many forms. Here are the premier term life insurance policies available in India:
1. Single Premium Term Plan
This simple plan allows you to make a lump sum payment towards your premium to attain a sufficient term life insurance plan for the welfare of your family.
2. Increasing Term Plan
If you want to beat the rate of inflation in the future, this may be the premier term life insurance policy for you. The sum assured increases every year during the policy tenure. Your premium may remain the same or change based on your agreement. In any case, the longer you live, the more the sum assured that your family receives as a death benefit in the event of your unfortunate demise.
3. Decreasing Term Plan
Unlike the increasing term plan, the decreasing term insurance policy helps repay your loans and reduce your liabilities during the course of your life.
Every year, the total sum assured is reduced by a predefined percentage. The reduced sum is allocated to pay back lenders, be it towards a mortgage, loans, car or home installments, education loans, etc. Ergo, every year, you reduce your liabilities considerably.
In the event of your premature demise, your beneficiaries will receive the remaining sum assured but the burden of debts and loans will be a lot less. It will make it easier for them to cope with their financial planning in your absence.
4. Level Term Plan
It is the premier term life insurance plan for those who prefer steadiness in the face of economic upheaval. You choose a specified sum assured for your policy and the tenure of the life insurance plan as well as the premium payments. In the event of your untimely death, the insurance provider pays the sum assured as aimed.
To simplify these concepts, let’s say you purchase 1 crore term insurance for 25 years.
For a single premium plan, you will need to pay the entire premium in one shot, like a prepaid mobile plan.
With increasing term plans, the 1 crore term insurance will increase in value. It could become INR 1.5 crores based on your preferred increments.
With a decreasing plan, the 1 crore term insurance could drop to INR 50 lacs, but you would have used the remaining INR 50 lacs to pay back your liabilities.
With level-term plans, your beneficiaries will receive the entire 1 crore sum assured in the event of your death within the policy period.
Checklist to Choose the Ideal Term Life insurance
Selecting the premier term life insurance policy for you and your family requires planning. Every policy has its benefits and serves well to prepare for emergencies. But much like clothes, one plan does not fit all. You need to know what works for your situation specifically, so here is a checklist to follow when picking the premier term life insurance for you:
- Start by evaluating your finances. The income vs expenditure factor will help you determine exactly how much sum assured will be helpful for your loved ones. While INR 1 crore term insurance seems like a go-to move as a safe bet, consider if it is enough. Your family’s lifestyle may require more than 1 crore term insurance coverage.
- Choose your policy tenure carefully. If the policy tenure is too short, you will need riders. After all, the goal is to live a long and healthy life. So, you can choose a term insurance plan with sufficient benchmarks.
- Consider how long you would like to pay the premium. The tenure of the premium is different from the policy tenure. You can pay premiums frequently for a short period of time and lock down the term insurance plan.
- Think about how frequently you want to pay the premium. If you don’t have a stable income source, a single premium plan might work better once you accumulate a lump sum amount for payment upfront. Similarly, if you have a stable job and you are confident that you can pay premiums regularly for as long as you can, it is best to keep the frequency high such as every month. That way, if there is a financial crunch or a problem with your income, your term insurance policy is not affected.
- Consider what sort of riders you may need. If you feel confident that you may survive the tenure of your policy, you can opt for Return of Premium Riders. That way, in case of premature demise, your family will receive the death benefit. However, if you survive the policy tenure, you will receive the maturity benefit in a lump sum amount.
- Evaluate the types of plans and choose the one that best suits your needs. You can consider the following factors:
- If you have unstable income sources, a single premium plan is better.
- If you have a stable income source, an increasing term plan or level term plan has its benefits.
- If your family’s lifestyle calls for factoring in the rate of inflation, the increasing term plan may be your solution.
- If you have massive debts, the decreasing term plan can be a lifesaver for you and your loved ones.
The premier term life insurance is the one that suits your needs. You need to evaluate your own financial conditions and possible situations that may arise for your family when they lose you. That is why you carefully choose the sum assured, tenure, payment frequency, and type of term insurance.
Conclusion
It is easy to feel overwhelmed by the choices of term insurance plans. Just because 1 crore term insurance seems enough in the current scenario doesn’t mean it is the ultimate solution. Sometimes, 1 crore term insurance is a massive payout that your loved ones can use to stabilize their financial well-being. However, if their tastes are expensive, and so is their lifestyle, you may benefit more from a 1 crore term insurance policy that is increasing or decreasing with time.
So, take some time and select the premier term life insurance type, sum assured, and benefits as per your needs and those of your loved ones.
Published by: Khy Talara
