Term insurance is form of life coverage that is designed to benefit your family. It charges you a small premium that can be paid in a variety of ways. For the premium, it offers an extremely high sum assured. Moreover, this sum assured is given in one payment when a claim is made. With all of these benefits, a term insurance policy is the most cost-effective way of getting financial security for your family.
It is provides a death benefit, i.e. in case of your death, your family gets the sum assured in the policy. This amount given to the family can be used for various other purposes, including higher education for your children, future medical expenses for your spouse, paying off any outstanding loans, etc.
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Paying Premium
To understand why you need to buy term insurance, you need to understand what term insurance is and how it works. Term insurance is classified into three categories. The differentiating factors in these categories is the way that you pay the premium for them. They include:
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One-Time Premium Payment
Since term insurance has a fixed term and predetermined premium, calculating the total amount you would need to pay as premium over the course of the policy is easy. In this category, you can pay the entire premium at once. This way, you do not have to worry about making premium payments on time every month.
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Partial Premium Payment Plan
A partial premium plan is an amalgamation of regular premium payments and one time-payment. In this plan, you have to pay the entire premium over a few installments. This way, you don’t have to pay the entire amount at once and not be concerned about premium payments for the entire term of policy.
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Regular Premium Payment Plan
As the name suggests, this type of premium payment allows you to distribute the entire premium of the policy over the term of the policy. You need to plan your finances accordingly so that a part of your income will go towards the premium payment per month for your term insurance.
How to Make Sure It Benefits You?
In case of a term insurance, you need to decide on buying the right plan.
The first step in that direction is determining the right sum assured. The sum assured is what your family will have to fall back on in case of your death. Hence, if it is not enough for you family, the entire purpose of buying a term insurance remains unfulfilled. To avoid this situation, take into account your family’s future needs to build enough financial support. Moreover, consider inflation so that the amount that seems huge today doesn’t prove inadequate in the future. Additionally, you should also pay attention to the premium you would have to pay for this coverage. You need to consider your finances and decide how you’ll be able to manage your monthly expenses while paying the premium. Ideally, it would be best if you can pay the entire term’s premium at once. However, if you want to pay annually, make sure that the amount you have to pay per year is manageable. Use a term insurance premium calculator to know more.