Death is as inevitable as change. And the unfortunate demise of a family member may result in further monetary complications for that family. You never know when an uncertain death can occur out of the blues and leave your family in a crucial condition, both financially and mentally. Economic security is, thus, a prerequisite criterion for one and all. This is where the significance of life insurance policies lands into this frame.
A term plan, being the most affordable and purest form of life insurance plan, provides financial protection to the nominee or the policy holder’s family (after his death). Although it’s the simplest form of life insurance coverage, people may have multiple questions before purchasing it. Not to forget, it’s also important for them to understand its benefits and get familiar with its features. This post shall make things clearer by answering all the important FAQs related to term policies.
FAQ1: Why Do You Require a Term Insurance Plan?
Just like the other forms of insurance policies, a term insurance plan is a contract between a buyer and an insurance company. The company gathers premiums for each policy buyer. When the policyholder expires within the period of the policy, a predetermined amount of money is given to the family member/nominee.
For a family’s sole breadwinner, this policy is quintessential. If you have liability like a car or home loan (or even other debts), this policy becomes very useful. A term policy ensures the family members remain independent on financial fronts, thus acting as the safe net to live a regular lifestyle.
FAQ2: How Much Term Insurance Will You Purchase?
Most term policy buyers get confused with the amount of insurance to buy prior to purchasing it. But honestly speaking, it’s better to be on a safer side by choosing to go for around ten times the annual income. The cover should be so large that it can account for current as well as future liabilities besides other financial goals.
Suppose you have taken around 60 lakhs car loan to buy a luxurious vehicle. In such cases, you have to ensure that the life cover is large to cover that liability. Also, do take inflation into account, and don’t forget to calculate the future goals as well.
FAQ3: What Types of Death Does This Insurance Plan Cover?
The truth is that all death types get covered under this insurance policy. The term insurance coverage includes both natural and accidental deaths. In fact, this type of insurance policy also covers coverage for death resulting from severe illness. Changes can occur if and when the policy specifies any type of death that cannot get included in the program.
One quick note: Even if the policy buyer dies outside the nation (in another country), then also the benefits are applicable.
FAQ4: What Do You Mean by Riders?
Riders are the optional benefits added for the benefits of the policyholders. The most prominent riders are Waiver of Premium and Accident Cover. The beneficiaries (the policy buyers) can top up the insurance with these popular riders on payments of premium.
The cover rider concerning the accidental death offers additional coverage in case of disability or death due to the accident. On the contrary, the waiver of premium rider offers a premium to people having genuine working or earning inabilities in case of critical illness or disability.
FAQ5: How to Decide the Tenure of a Policy?
Deciding the tenure of a particular policy entirely depends on how early the policyholder buys it. The earlier the term insurance policy gets bought, the longer the policy gets covered. One thumb rule that you should consider is to purchase the policy for a maximum tenure. Remember to drop it when and if it is no longer necessary.
There are multiple mistakes that people usually make when it comes to selecting the term policy. And one of them is this. When it is no longer useful, it is just meant to double a loan in the absence of the policyholder. Tailoring the policy should get done in regard to how many years you left to pay the premiums. Another prudent consideration is to make sure that the policy is covered through the working life.
FAQ6: What If the Policy Holder Does Not Die?
If the policyholder of the term coverage stays alive, the insurance plan only gets terminated. Survival benefits can be available if any. On the basis of provisions offered by the insurance company, one can renew it too.
A term policy is like life protection that helps your family members stay financially healthy even in your absence. Thus, it is sensible to survey a bit before choosing the best and most cost-effective coverage.
Featured Image Caption:- Term Insurance Plan FAQ
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