Term Insurance: Your Ultimate Guide to Securing Family Finances

Life is uncertain and unpredictable, but that doesn’t mean you can’t prepare for the worst. Life insurance policies were designed to help you tackle unprecedented circumstances such that your loved ones are well taken care of in the event of your demise. One of the most popular ways to protect them is with a term insurance policy.

What is term insurance?

Term insurance is a form of life insurance policy that you can purchase for a very affordable premium. In view of the changing times that influence so much unpredictability insurance providers designed term insurance to make it an inexpensive way to secure the future of your loved ones.

Term insurance comes in many types to help repay debts, navigate the rate of inflation, etc. The beauty of term insurance is the affordability and the ranging tenures. You can purchase term insurance plans for 10 to 100 years based on your preferences. Typical term insurance plans offer a high sum assured as a death benefit but rarely offer maturity benefit unless you opt for it. You can choose the type of plan that best fits your financial requirements.

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The important terminologies of term insurance

The terminologies associated with term insurance can be a little confusing. So, let us break them down and understand what these jargons mean:

• Sum assured – The amount of financial protection for which you ensure the future of your beneficiaries.
• Policy tenure – The total number of years for which the policy will be valid.
• Premium – The instalments you need to pay at regular intervals to ensure the benefits of the policy.
• Premium duration – The total number of years during which you wish to make premium payments.
• Premium frequency – The regular intervals at which you would like to pay your premium, i.e., monthly or annually.
• Death benefit – The sum assured received by your family after filing the claim in the event of your demise.
• Maturity benefit – The total premium returned if you survive the policy tenure.
• Add-ons – Additional benefits to increase your overall coverage.

Understanding these terminologies of term insurance helps you make an informed decision about the type of policy that would benefit you and your loved ones most.

Types of term insurance

Term insurance policies are a subdivision of life insurance and they are sub-categorised into different types to benefit you in different ways. Here are the most popular types of term insurance available in the market:

1. Single premium term insurance – You can purchase these types of term insurance by paying a single lump sum premium.
2. Increasing term insurance – The sum assured of your term insurance increases every year, thus making the value more suitable in the future with the accountability of inflation.
3. Decreasing term insurance – The sum assured of your policy reduces annually and the difference is used to repay outstanding liabilities.
4. Levelled term insurance – The sum assured of your plan does not alter. That the terms you specified when purchasing the term insurance hold true throughout the policy tenure.
5. Term insurance with return of premium – Term insurance does not pay maturity benefits except when you opt for term insurance with return of premium.
6. Convertible term insurance – Term insurance is available for as low as 10 years to as high as 100 years, you can purchase a policy and then convert it to a whole life insurance plan.

Each of these types of term insurance serves a different purpose. Based on your current financial situation as well as possible requirements of future needs of your loved ones, you can choose the right type of term insurance.

How to choose the minimum sum assured in term insurance?

Choosing the minimum sum assured in term insurance plays a vital role in how your loved ones will be cared for in the future. The minimum sum assured in term insurance must suffice to deal with possible financial obligations in the future and help your beneficiaries pursue their goals. Here are a few things to consider when choosing the minimum sum assured in term insurance:

1. The impact of the changing economy affects the rate of inflation and, thereby, the value of the death benefit.
2. Outstanding liabilities such as debts, loans, mortgages, etc.
3. The number of dependents and their probable future goals.
4. The premium incurred by the minimum sum assured in term insurance would affect your current financials.
5. Tax benefits on the premium which is determined by the minimum sum assured in term insurance.

Term insurance is an incredible way to secure the future of your loved ones. You can choose the minimum sum assured and term insurance to ensure that your beneficiaries can plan for their future and tackle financial setbacks in the light of losing someone they love. By selecting the right type of term insurance, you can rest assured that your beneficiaries will have fewer financial problems.