The premiums for term insurance policies are expected to rise with the cost of reinsurance going up, and this may be the right time to buy one or top up an existing one. Term insurance is the cheapest and simplest form of insurance, whose premium remains the same for the term of the policy. The beneficiary gets the claim amount in case of the policyholder’s death. However, no money is returned in case the policyholder survives the policy term.
Here are five essential things you must know about term insurance.
Who Needs To Take Term Insurance?
If you have financial dependants, you must buy a term insurance cover as it can provide protection to your family in case you meet with an unfortunate incident.
It makes sense for all family members with an income to have a term insurance cover. The overall cover should cover the entire family’s expenses. So even if your spouse has a cover or you earn less than your spouse, you must take term insurance to cover the expenses that are taken care of by your salary.
If you are a homemaker, you may ensure that the earning members of the family have adequate insurance cover expenses in case there is loss of income.
How Much Cover Do You Need To Take?
While the popular thumb rule is to have at least 10 times your annual income, you must consider all your expenses and liabilities before deciding on the insurance amount.
Remember that if you don’t have adequate insurance cover, your family may be left to struggle with debt or daily expenses in your absence. Also, if the cover amount is not sufficient, the amount may get exhausted in a few months or years, by which time your family may not be in a position to become financially independent.
The amount may also depend on your age and the age of your dependants such as children. If your children may be in a position to start working within a few years and you have no loans, you may not need a large cover. However, if your children are small, you may need a large amount to cover them financially for the many years they may take before they start working.
Which is the best term insurance product for you?
There are different types of term insurance products available in the market these days. While the purest form of term insurance does not return any money if the policyholder survives the term, there are some versions that offer return of premium or come with additional riders. You may choose the policy that suits your needs. Read more about term insurance policy with riders here.
