The Right Time to Buy The Right Term Insurance
Term insurance is a kind of life insurance in which a considerable amount of financial reimbursement is provided to the nominees of the policyholder in the event of the untimely demise of the insured. This financial support provided to the dependents of the policyholder is often enough to meet the basic needs of the members of the family in the absence of the main income earner. Term insurance has a range of benefits and must be a part of everyone’s insurance portfolio.
What are the Types of Term Insurance Plans?
Term insurance has become one of the most popular insurance options for a large segment of society. In the last few years, the insurance industry has seen insurance providers introducing a variety of term insurance policies to meet the diversified needs of the customers. It is important to give a thorough thought into the type of plan before you buy term insurance. The term insurance can be classified into different types, they are:
Level Term Insurance
This type of term plan is the most commonly availed plan. The premiums that are payable and the sum assured remain fixed for the entire term of the policy. So the premium fixed by you and your insurance provider when the plan started will remain constant throughout the tenure. The younger you are when you opt for a level term plan, the lower will be the premium costs.
Increasing Term Insurance
In an increasing term plan, the death benefits increase periodically, mostly on a yearly basis, depending on the terms of the policy. The premium charged on the policy does not increase. Some insurance providers cap the maximum amount of sum assured. However, if the sum assured on the plan reaches the maximum level set by the provider, the plan will still remain active. These plans are designed particularly to offset the effects of inflation and other changing circumstances. The cost of this type of term plan is generally higher than level term insurance.
Decreasing Term Insurance
In this type of term plan, the assured amount payable decreases on a yearly basis until the policy pays out the death benefit or the tenure of the plan ends. The premiums for such a plan remain constant. Such policies are generally availed by someone who wants coverage for a specific debt which reduces over time. Usually, the policy ends when the sum assured drops to zero. The premium charged on such a plan is usually lower than other term insurance plans.
Term Insurance with Return of Premium
Under term insurance with Return of Premium or a TROP, the insurance provider will return all the premium payments you have made over the tenure of the policy at the end of the term. However, this is only applicable if you survive the term of the policy.
Convertible Term Insurance
Convertible term insurance allows the policyholder to convert the term plan to an endowment plan. Some providers offer policies that have a built-in conversion option whereas some policies offer it as an add-on. After this conversion, you are charged an additional premium.
Term Insurance with Riders
Some insurance providers offer you additional riders on top of the basic policy offering. These riders enhance the scope of coverage offered by your policy at additional charges. Some riders available are the accidental death benefit rider, the accidental disability benefit rider, the premium waiver rider, among the others.
When is the Right Time to Buy Term Insurance?
For most of us, the term insurance plan ensures that the nominees do not fall on hard times and are able to meet the financial liabilities in case the breadwinner of the family is not around anymore. You can easily buy term plan online and offline at any time, however, it has a different meaning at different ages because of the changing financial goals and lifestyle needs.
Generally speaking, the best time to buy term insurance would be when you are young and in the best of health. Ideally, you should aim to buy term insurance when you start earning a stable income. This is because the premium charges are low when you step in early. The reason behind this is simple – the elder you get, the higher are the chances of mortality.
However, if you are wondering – is term insurance for young people only? Then the answer to your question is no, even though the premiums rise with your age, but so do your responsibilities. There are different milestones that one crosses financially as they grow, it could be buying a new house, or a child’s marriage, among others. Hence, the most important thing of all is that you keep yourself sufficiently insured. Thus, when you buy term insurance, you should be certain that you are going for the option that suits your needs the best.