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Term Insurance 640 views January 31, 2019
Life insurance companies have always stressed how buying term insurance can benefit millennials greatly. The concept of term insurance is gradually gaining hold as millennials realize the need to allocate a part of their income each month to ensure a financial cover to their loved ones in the event of sudden unfortunate events like death.
Monetary goals of today’s generation are starkly different from what their forefathers had envisaged. The stress on saving money to meet future exigencies has gradually been replaced with a greater appetite for risk-taking, thus, resulting in millennials being more inclined to spend the excess income they earn. Moreover, the increased proclivity to spend recklessly has resulted in adverse financial circumstances for many. Investments in startups have prompted them to pay for huge loans or reel under heavy debts, thus, rendering them monetarily more fragile.
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Apart, most millennials do not realize the value of investing early which includes paying lower premiums and remaining invested for prolonged periods. Add to this the uncertainty of life that may leave their families vulnerable to an economically uncertain future. As a greater risk appetite triggers increased susceptibility to financial issues in the long run, it is important that millennials realize the importance of buying term insurance early.
While creating an investment portfolio, many people consider risk-bearing monetary instruments the returns of which have a direct bearing on the market movements. While the returns from them may be good, none of them can guarantee a fixed amount of corpus that would take care of the future needs of one’s loved ones in the event of unfortunate events including death, accidents or critical illnesses. Paying for a term insurance policy plan ensures the necessary amount of death benefits in return for regular premium payments, the corpus of death benefits decided after taking into consideration essential factors like quantum of assets and liabilities, the extent of daily expenses and possible expenditure in future like the amount needed for higher education. Moreover, compared with most other financial instruments, the quantum of risk covered is much more in term life insurance.
Term insurance is the purest form of life insurance that promises a certain fixed amount of death benefits determined while filling in the details necessary in the application proposal form. Pursuant to the nomination details submitted in the proposal form, the insurer hands over the amount of sum assured, also called the life cover, to the dependent(s) of the policyholder. In most instances, policyholders choose their loved ones or someone from their family as their sole nominee so that the death benefits received in a lump sum or regular payout are handled wisely.
People commonly ask as to why they must pay for a term insurance plan. Ignorance of the concept of term insurance has resulted in many people either misunderstanding its significance or buying them only to save on taxes. The most important benefits of buying a term policy are:-
Assured Life Cover
One can never be sure about when life might take a sudden turn for the worse. Lifestyle diseases coupled with unpropitious environmental conditions have contributed to the growing fragility and uncertainty of life. Term insurance works to cover the growing risk gnawing at one’s life. The amount of life cover is decided to depend upon what the customer’s life is worth.
Unfortunate incidents like accidents or diagnosis of chronic disorders can mar the peace and sanity of one’s life. Added to it, high medical costs incurred on treatment coupled with the money spent on hospitalization can push one’s loved ones or family under tremendous financial pressure. Choosing an appropriate term policy with rider benefits, in return for nominal addition to premiums, takes away the resulting stress due to such untoward incidents as the insurer pays off the amount corresponding to the number of rider benefits decided while buying the policy.
The High Amount of Sum Assured
Though insurance companies propose their customers to use the online term insurance calculator, the simplest way to calculate the amount of sum assured is to choose an amount that is equal to 15-20 times your annual premium. Customers may also opt for an inflation-adjusted term insurance plan in which the amount of sum assured is increased at regular intervals by 5-10 percent til the amount reaches a specific limit.
Premium Payment Flexibility
Term insurance plans are devoid of any savings or investment component, which means that one can choose the frequency of payments to be made towards premiums. In addition, with more insurance companies making their presence felt on the web and insurance web aggregators listing the features and benefits of the insurance products that they sell, customers now have the option to choose the term insurance plan that best suits their needs and buy accordingly.
Requires Minimal Payment
Term insurance is not only the cheapest insurance plan available in the market but also costs much lesser than other monetary instruments or investment tools. The amounts of premiums that go towards any term insurance plan are much lower than what spends on having dinner in a swanky restaurant.
It is beneficial to buy term insurance early. The premiums are low as people are less prone to suffering from critical illnesses or diagnosed with lifestyle problems stemming from indulging in uncontrolled habits, thus, prompting insurance companies to accept the insurance proposal. Every millennial must consider buying a term insurance plan to help loved-one’s tide over economic hardships in the event of sudden demise or other unfortunate events.
A term insurance plan, unlike any other investment tool, is bought to protect and preserve. Also, the plans have no investment components and the coverage is given out to the nominee(s) as death benefits. Buying term insurance early ensures lower premium amounts that remain fixed over the entire policy period while the coverage amount ensures that the loved ones of the policyholder avail a financially secure future.
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