Term life insurance policies have become popular as financial protection plans due to their affordable pricing and other benefits. If you wish to have a clear idea about the term plan meaning, then read on.
A term policy is a type of life insurance plan that ensures the monetary stability of your loved ones if you are not there to provide for them due to an untoward incident. A term plan offers a significant life cover to the nominees upon making a successful policy claim. The reason for its low premium is the absence of a maturity benefit if you outlive the policy period.
If you want to surrender the term plan at any point during the policy period, the insurance provider pays you a surrender value after deducting certain charges. Some people feel that it is wise to surrender the policy when they do not have any financial liability, especially after retirement. However, it is not a smart idea.
Here, we explain why you must continue your term life insurance plan even when you do not have any debts. A term plan:
1. Keeps your family safe
The purpose of a life insurance policy is to provide financial aid to the policyholder’s nominees if an unforeseeable event results in his or her death. If you are the only earning member of your family, buying a term plan should be a priority to ensure that your dependents do not have to compromise on their standard of living under any condition. The sum assured from the term plan will work as an income replacement for your loved ones when you are not there.
You can opt for a sum assured that is about 20 times your yearly income. This will ensure that you leave enough funds for your family members so that they can lead their lives comfortably. You can use a term plan calculator to quickly determine the cost for a specific sum assured.
2. Protects your assets
Getting a home loan or car loan is the easiest way to buy new assets and make your life more comfortable. However, opting for a loan can be risky, as failing to repay it leads to a loss of assets. Now, imagine your dependents having to repay the home loan in your absence. Such a situation will put them under stress, and they may end up losing the house if they cannot repay the debt. Certainly, you want to shield them from this obligation, and a term plan can prove useful in this scenario. Your family members can use the lump sum paid by the insurer to take care of the dues.
3. Can cover life-threatening illnesses
Today’s modern lifestyle has many drawbacks, one of which is the higher risk of contracting serious illnesses. A critical ailment can lead to high healthcare expenses and may have an unfortunate outcome. You need to think about how your loved ones will manage their lives if something unfavorable happens to you due to a critical illness. This is where a term plan can help them by paying a life cover that can take care of their monetary needs.
Additionally, you can opt for a critical illness rider along with your existing term plan. The cover from the rider will provide for the treatment expenses, significantly lowering your liabilities. With a term plan calculator, you can determine how much it will cost you to include the rider in your policy.
4. Ensures that you live tension-free
When you have children and other dependents to look after, it can lead to a lot of mental stress. You might be constantly worrying about their well-being and education. You may wonder how to ensure their economic security in your absence. Purchasing the appropriate term plan will free you from that worry. When you invest in a life cover, you are relieved from the pressure of securing the future of your family members. Moreover, living stress-free will increase your lifespan.
Now that you know why it is not advisable to surrender your term insurance in India, it is time to purchase the right policy. You can compare different term insurance plans online and select the most suitable one.