Here's why you Should Buy a Term Insurance Plan if you have Outstanding Debts
Traditional term insurance plans were devised to provide financial cushioning to the beneficiary in case of any unfortunate event that might lead to the demise of the policyholder. Term insurance plans are risk protection tools that safeguard your loved ones during phases of instability.
Most of us desire and work hard to get all possible luxuries in life like a car, comfortable homes, luxury clothing and so on. In order to fulfill the desire of luxuries people very often opt for different kinds of loans that add a financial burden on the pocket of the debtor.
A loan might get you all the luxuries you and your loved ones look up to; however, the real responsibility begins after you’ve opted for a loan. You can work hard and repay the outstanding debts, but have you ever wondered what happens after you’re not here to clear the outstanding debts. If you are somebody who takes loans to fulfill your desires it is extremely vital to add something extra to your financial portfolio that would take care of the outstanding debts in your absence.
To make sure that your EMIs are paid timely it is crucial to have a backup plan in place that would take care of all your financial obligations in your absence. A term plan is an ideal solution to counter this issue. A term plan is an insurance that not only provides a death benefit in case of the demise of the policyholder but also takes care of outstanding debts in such a scenario. This article will help you to understand various important features of term insurance plans that are quite useful and enhance the overall functionality and utility of a term plan in the UAE.
What is Term Insurance?
Term insurance is a product from the broad category of life insurance that provides financial coverage for a pre-decided period i.e. term and hence these insurance tools are termed as term insurance plans. Term plans are the most basic form of insurance in the UAE that does not provide coverage if the policyholder manages to survive the policy period.
Term plans are pure risk management tools that have no savings and investment component associated with them. Furthermore, due to the limited coverage, these plans are less expensive in comparison to other life insurance products. Investors can get a high cover in low premiums which make term insurance plans suitable for all classes of insurance seekers in the UAE.
Buying term insurance plans come with the option of receiving lump-sum amount once or periodic income in the form of staggered payouts disbursed over a period of 10 to 15 years. Staggered payouts provide regular income to the insured’s family and ensure that they do not struggle for their day to day needs.
How does Term Insurance Help to Clear Outstanding Debts
Based on the kind of outstanding debts insurance seekers can select the type of payouts that suits their requirements and needs. Payout options in case of term plans usually include the following-
- Lump-sum or a onetime payment
- Monthly income
- Increasing monthly income
- Lump-sum along with regular income
The right approach to safeguard your family on the uncertain trail of life is to initially opt for term insurance plans and selecting the correct mode of pay-out is the second step.
In Case of Home Loan
Securing your home loan with a term plan is equally important as paying the EMIs timely. If the amount of loan is high you should opt for lump-sum payout so that your family can repay the outstanding amount in your absence. Furthermore, investors should add a critical illness rider as it acts as a back-up if any critical illness strikes.
In the case of an Education Loan
Education loan amounts are usually smaller than home loans, therefore insurance seekers can opt for monthly pay-out which will support your family and loved ones financially.
Mortgage Insurance Plans
A mortgage insurance plan is a dedicated home loan protection product that protects your home in case of loss against missing payments of due EMIs in the event of the borrower’s demise. Additionally, add on riders like accidental coverage can be added in the plan to maximize the protection quotient of the plan.
Personal loans are unsecured and come with a small repayment period, therefore investors should thoroughly analyze and assess various parameters and decide the mode of payout. In addition to the basic coverage, borrowers should add critical illness to counter emergency situations
Car or Bike Loan
Bike loans are smaller in comparison to car loans so the ideal approach to cover the debts would be opting for the integration of monthly payouts along with a lump sum amount that will help the borrower’s family to repay the outstanding loan amount.
People fond of bikes and bike riding should add to personal accident coverage as a rider to cover their medical expenses in case of an accident leading to temporary or permanent disability.
Term insurance is the ideal insurance product that helps to mitigate the risk factor on the trail of life. Furthermore, along with buying the term plan with the right coverage, it is equally important to select the right mode of pay-out to ensure that your family does not struggle with outstanding debts. Debtors should buy term insurance to provide a safe and secure future for their loved ones in their absence.