Your Handbook to Understand How a Term Policy Works
It’s admirable how much effort you put into providing the best life for your family. To get to where you are in life now, you had to be tenacious and resilient. And it goes without saying that you want your life and the lives of your family to continue in this manner for the foreseeable future. But any of us could experience difficult times at any time and without warning. For this reason, it is crucial to be prepared for the worst.
A term policy is considered to be the finest form of life insurance. A term policy offers life cover over a predefined time frame. In case the policyholder expires, the cash benefit is transferred to the nominee of the term policy. Therefore, to avail the benefits of a term policy, you should first get acquainted with how it works. Let’s have a look at it.
Eligibility Criteria for Term Policy
Minimum eligibility requirements apply to the purchase of a term policy. The majority of term insurance contracts are accessible to those between the ages of 18 and 65, with a maximum maturity age of 85 years. The insured sum can range from Rs. 20 lahks to up to Rs. 1 crore and even beyond, and the policy duration can range from 5 years to 50 years.
How Does a Term Policy Work?
It is an agreement. A term policy is a legal agreement between the insured and the insurer. It provides a life insurance policy for the insurer and a death payout for the recipient. In the event that the insured passes away, the insurer must pay the beneficiary. The insured must pay the monthly premiums in order to receive these benefits. You can save taxes and enjoy tax benefits as well.
It has a process of application. You must provide certain information when applying for and buying a term policy. This procedure is crucial since it evaluates the risk to your health and employment. There are dangers associated with one’s employment, just as age-related health risks rise with it. For instance, given the risks associated with smoking, the amount of life insurance for a smoker and a non-smoker would differ. Similar to this, those who work in hazardous occupations like mills or as scuba divers face greater health risks as a result of their jobs. These affect your life insurance.
Choose a tenure. The amount of life insurance you would receive would vary depending on the duration of the term insurance policy that you chose. It is recommended to consider purchasing term coverage early in life. It will assist you in obtaining more coverage and more affordable premium rates. A term insurance premium calculator can be used to determine the premiums that must be paid for various tenures. You can use a term insurance premium calculator for no charge to help you get the best deals on your term policy.
Death benefit. You must buy a term policy that offers sufficient life cover to assist your family in the future when you are no longer around. Therefore, you must make calculated decisions for the same. When choosing a life insurance sum, you should consider your future expenses, such as the cost of your children’s education or marriage as well as the repayment of any debts.
Naming the nominees. When you talk about nominees, you might think it has to only be your immediate family or blood relatives. However, it is under your jurisdiction to decide who will be the beneficiary of your term policy. It could be your spouse, your parents, your siblings, or a friend. You can choose more than one nominee. It can also be any NGO or charity of your liking.
Do You Need a Term Policy?
A term policy serves as a safety net to safeguard your family’s financial future. In your absence, it guarantees the financial security of the individuals you are responsible for. Term insurance policies have affordable premiums that vary based on the level of coverage you select. There are several causes for which you might require a term policy.
Death Benefit: A term policy offers a life cover or a death benefit wherein the nominee of the policy is entitled to receive the insured sum when the policyholder passes away. This way your family can run the house and continue with their lives without having to compromise on their lifestyle.
Protects Assets: Your home must have been built with funds obtained through your sweat and blood; the same would be true for other possessions like a car or property. You may have gotten a loan for it. Purchasing a term policy can protect you from losing it all and help your family pay off the obligations in the event of your passing.
Term insurance serves the objective of making regular contributions to establishing a stable future for your family as well as leaving behind money to ensure that they are never put through hardship. It is safe to conclude that a term policy is the smartest approach to protect your loved ones financially after your passing.
Suggested Read: How to Buy the Best Endowment Policy in India