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HomeFinanceChoosing the right term plan is key: Life Insurance

Choosing the right term plan is key: Life Insurance

As liabilities increase over time, increasing sum assured plans are advantageous.

Although many people buy life insurance to save money on taxes, they should look into term plans to ensure the family’s financial security. In addition to the standard term plan, there are also return-of-premium plans, convertible term plans, plans with an increasing sum assured, staggered payout plans, and others.

After evaluating the family’s financial needs, growing liabilities, cash flow to pay the premium, and the policy period, one must purchase such a term insurance policy.

Choose a policy based on your needs.
While return of premium plans, in which insurers pay a set amount at the end of the policy term if the insured survives, are popular, experts recommend looking into plans with a higher sum assured. After certain life milestones, these plans allow the sum assured to rise without altering the premium.

These plans are beneficial in the long run because liabilities rise as family needs grow, particularly in the 35- to 50-year-old age range. However, these plans are more expensive than standard term plans.

In a similar vein, insurers offer decreasing sum assured term plans to protect against falling liabilities brought on by the repayment of loans. With these plans, the insured’s age is reflected in a decrease in the sum assured. People who have taken out a mortgage are best served by policies of this kind.

Things to keep in mind when buying life insurance after 40
If you want term plans that are flexible, convertible term plans are an option. After a predetermined time period, the insured can convert the plan into an endowment plan or a whole life insurance plan. You are not required to undergo a new medical examination or pay additional fees for this.
Since policyholders frequently fail to adequately consider the requirements of a life insurance policy for long-term protection, such policies contribute to an increase in persistency.

Sum assured Purchasing
Insurance protects one’s family over time. The amount of coverage that an individual selects when purchasing a policy is known as the sum assured. Since the benefits are due in the event of the policyholder’s death, the sum assured of all life insurance policies must be sufficient to cover the policyholder’s surviving family members. If the person is younger than 45, the life insurance premium should be 15 times his annual income. It should be approximately ten times his annual income if he is over 45.

A comprehensive term plan, according to Probus Insurance Broker director Rakesh Goyal, will more than cover the policyholders’ insurance needs. As a term cover, the policyholder should take at least 10 to 15 times their annual income. They can also increase the sum assured over time if the salary goes up, so it’s better to go with a long-term plan because it can be useful for estate planning, he says.

Choose riders to enhance your protection.
Life insurers offer specific riders, such as a benefit for accidental death, a rider for critical illness, and a waiver of premiums, in addition to term plans. A term plan with basic sickness benefits pays a singular amount measure of cash to the policyholder on being determined to have significant diseases like malignant growth, stroke, coronary episode or various organ disappointment.

When a policyholder dies as a result of an accident or mishap, the nominee receives a lump sum payment as part of the accidental death benefit. The most sought-after rider is the waiver of premiums.

Some of the term plans that are available include a return of premium plan, an increasing sum assured plan, convertible term plans, and staggered payout plans. Life insurance that is 10 to 15 times the annual income is ideal. You can add riders to increase your protection. The most popular rider is one that eliminates premiums.


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