When getting term life insurance, it is imperative to evaluate what you want to accomplish with the policy. A recent survey confirms that most people have reasons such as tax-saving and death benefits for investing in term life insurance. Term life insurance is undoubtedly the best possible way to save tax while also securing the future of your family. It is so as the insurer takes care of your family in your absence and provides financial support to them in their days of hardship.
Having term life insurance is essential because it acts as a bond of trust between the insurer and the insured. At the same time, life insurance is an essential financial investment and it is advised to be mindful of some things while getting term life insurance. To help you in this process, we have some important things to keep in mind while buying a term life insurance plan.
Calculating the adequate amount of sum insured remains the foremost task while getting a term life policy. A basic rule of thumb is that the death benefit on your policy needs to be at least 15-20 times the amount of your annual salary. So if your annual income is 5 lakh, your policy needs to be of at least 75 lakh to 1 crore Be sure to ask your insurer about the assets and obligations which they will consider before deciding on an amount. Every individual’s needs differ from one another. It is, therefore, not wise to be guided completely by your insurer if the reasons they give do not seem convincing as per your needs. Lastly, you must calculate the sum assured based on what income you wish to provide for your beneficiaries in the event of your demise.
After you make up your mind about the sum assured, the next step is to decide for how long you need the insurance. If you want to ensure putting your children through college and a comfortable lifestyle thereafter for your family, a term life plan until you have earning capacity is a wise option. For example, if you plan to work till the age of 65, get a plan that covers you until the age of 65 years. Don’t forget to discuss your present situation and future plans with your insurer in detail to get the best assistance for getting adequate coverage. Additionally, if you are planning on leaving something for your heirs as a legacy, you could consider investing in whole term life insurance plans that provide coverage for 99+ years.
With changing times, insurers today are offering diverse variations in the payout plan. These variations intend to benefit the remaining beneficiaries by providing them with different options to receive the total sum assured. Besides the regular lump sum payout plan, beneficiaries of such plans can opt for a staggered payout plan and customise it further depending on their specific needs and requirements. The variations have made it much more convenient for interested prospects to understand the term plan payout. A staggered payout plan is best for dependants who cannot take the required financial decisions. It allows the beneficiary to receive some portion of the total sum assured as a lump sum and the remaining amount in as monthly payments over a pre-decided period, usually 15-20 years.
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