5 Key Reasons Why Term Insurance is Beneficial than Other Investments
Just imagine you are in your 30s and you earn a limited monthly income but you have your spouse and child whom you need to give financial support. You are the sole breadwinner of your family and worried about what will be the financial future of your dependents in the unfortunate event of your untimely death. The best way to reduce this cause of stress is to opt for a life insurance policy without any doubt.
Well, there is a wide range of life insurance providers in the UAE that offer you a host of options. Right from term insurance plans and money back plans to endowment plans and unit-linked plans, you have an array of life insurance options to choose from.
Now the main concern arises, what plan you should opt for that can reduce your stress? Any Idea? If no then don’t worry. We are here to assist you to make the right decision.
For people who have a limited source of income, it is best to opt for a term insurance plan. Not only these plans are cost-effective but also they offer a high coverage at an affordable premium cost. In order to know why you should opt for a term plan over other life insurance plans and other investments, you will first need to understand what term insurance policy is all about.
What is Term Insurance?
Term insurance plan is basically a type of life insurance plan that is available at an affordable premium. It offers peace of mind by ensuring that your family’s financial needs will be taken care of in an event of your untimely demise.
As an insured, you pay a fixed sum amount of money of premiums at regular intervals for a certain period of time. In return, the life insurance company agrees to pay the sum assured as a death benefit to the policyholder’s beneficiary(s) post his/her demise during the specified policy term. Meaning that, if the policyholder outlives the tenure of the insurance policy, then the term plan will not provide any maturity benefit or you can say a cash benefit which is why the term plan is cost-effective as compared to other life insurance policies.
However, some of the leading life insurance companies in the UAE has now started offering new types of term insurance plans where the policyholder would be eligible to get a percentage of his/her premium as a maturity benefit and these kinds of term plan known as “Term plan with return of premium”.
Reasons to Choose Term Insurance over Other Investments
There are plenty of reasons as to why the term life insurance plan is reckoned as one of the best investments and affordable life insurance policies. Some of the key reasons are discussed below:
Life Cover & Financial Protection
The first and foremost benefit of term insurance plan is the financial protection or security that it offers to the nominee(s) or the policyholder’s family in an event of the untimely death of the policyholder. In this way, it reduces the stress of the policyholder by ensuring that his/her family member’s financial health will be taken care of post the demise of the policyholder.
However, it is recommended that the insurance coverage should keep enhancing based on at which stage of life you are. For instance, it is best to opt for a higher cover post a child comes along.
Term life insurance plan is for a certain period of time, choosing an adequate term insurance plan might be a difficult yet confusing task. As a rule of thumb, an ideal term life insurance policies are those that are dependent on your health as well as retirement age. If you are already in your 30s and likely to retire at the age of 60, then you should definitely buy a term insurance plan with a tenure of 30 years in order to get the most of it.
One of the key reasons why a term life insurance plan is beneficial than other investments is the advantage of affordable premiums. The premiums that are payable under a term plan is cost-effective as compared to other life insurance policies since there is no investment component associated with it.
Low Brokerage Costs
When you buy a life insurance policy, you are responsible to pay a brokerage cost that is generally a part of the premium. Well, the brokerage cost could be as high as even 30 to 40 percent of your 1st premium payout and reduces thereafter. On the other hand, the cost of brokerage under a term insurance plan generally in the range of just 5 to 6 percent that is comparatively lower than other life insurance policies. This is also one of the key reasons why the term plan is considered as an ideal choice especially for people looking to opt for a cost-effective life insurance policy. Furthermore, if you choose to buy a term insurance plan online then you will not need to pay any brokerage cost. Thus, you can save more on your term insurance premium by opting for this term plan online.
Term life insurance policies provide you the flexibility on another level. You can choose to buy this plan offline or online as per your convenience. In addition to this, you have the option to pay premiums for your term insurance on an annual, semi-annual, or monthly basis. Apart from the regular premium payment option, some of the insurers offer a single pay premium payment option. For individuals who are making the premium payment, such immense flexibilities provide the utmost convenience as well as the ability to pay premiums which are in keeping with their budget.
Also, it enables you to enhance your life coverage as you reach different stages of your life. From getting married to increasing a family, every stage of life has its different requirements. During such times, having a term insurance plan is a blessing since many term insurance plans are convertible as well as renewable. You can opt for another term plan sometimes even without a medical exam at the end of your 1st term plan. This later enables you to transform you term life insurance plan into an endowment plan for the alike sum assured with a linked increase in premium, should this make sense during the policy tenure.
Last but not least you are also given the flexibility to modify your existing term insurance plan. Term insurance plans come with optional covers or riders that increase the benefits of your existing term plan on the addition of nominal charges. Some of the key riders or cover that come with term plan include critical illness cover, disability rider, waiver of premium, accidental death rider, income benefit ruder, partial or permanent disability rider, etc. All of these riders have their own set of benefits that add more value to your basic term insurance plan. Also, note that a single rider is good but a combo of multiple riders can turn your basic term plan into an all-rounder one. After all, you are opting for your loved one’s financial health so make the decision wisely while buying riders for your term plan.
To Sum Up
Without any doubt, life insurance policy is one of the most important parts of your financial plan. However, not all individuals can easily afford to pay high premiums of some of the life insurance plans but the term plan is the different one when compared to other life insurance policies. A term plan offers high coverage at affordable premiums. Factoring all the aforementioned reasons above, purchasing a term insurance plan is highly beneficial than other investments.