In order to understand how a term life insurance policy can be beneficial to us, we first need to understand, what it actually is? In simple terms, an insurance policy that insures you for a fixed term or a fixed period of time is called a term life insurance policy. Here, the term is your life and the insurer insures you with a financial backing against loss of life. Such an arrangement is necessary for people who are responsible for the financial needs of others and need to ensure that they keep them provided even when they are not around. Hence if you take up a term insurance policy and unfortunately there is loss of life, the sum insured would be paid to your family or beneficiary. This way you can ensure that you take care of their financial needs even after you are not with them. A typical term insurance is cheaper in comparison to other insurance products and hence do not even put much of a strain on your pockets.
Term insurance is a little different from any other life insurance product. Most life insurance products cover you financially for life as well as promise you a fixed sum of money at the end of the agreed period. In case of a term insurance you get the financial coverage, but no money is earned at the end of the insurance term. The benefit of a term insurance here is the fact that a term insurance is the cheapest form of life insurance. The choice here is between an insurance that gives you a better coverage at a lesser cost and a policy that costs you a lot more but ensures a fixed sum of money after a fixed period.
Term Insurance comes beneficial for people who don’t look at insurance as an investment, but as a security provider. Even when it doesn’t earn you anything at the end of the policy’s maturity, it provides security to your family and loved ones. Moreover, the fact, that it is the cheapest form of insurance; it doesn’t strain your pocket much and leaves with more scope to invest into other financial products. With some intelligent planning, one can have a good mix of investments in term insurance and other money earning products like ULIPS, mutual funds etc. The benefit of such a combination of financial products is that one has a good income from investments during his/her lifetime and in case of loss of life, the family and dependents get the secured amount from the insurance company.
However, one needs to be extremely careful in investing in any policy. A thorough research on all plans available is mandatory. Some points to consider before opting for a policy includes:
1. Reputation of the Insurance Company – one should go only for a reputed and government recognized company to be sure of getting the claims settled legally
2. Clams Settlement Ratio – Also ensure that the Company has a good track record to settling claims. Companies that take too long to settle claims or reject too many claims should be avoided.
The best policy to go for is always the one that gives you the maximum benefits for the least amount of premium. Go for a good balance between low premiums and required coverage amount.