Term insurance is an important part of any family’s financial plan. It helps protect the family’s future by repaying loans and offering a financial cushion for the policyholder’s family.
Simply put, a term insurance plan is a type of life insurance policy that provides coverage for a specific period of time. However, that is not all there is to know about term insurance. Before buying term insurance, it is important that you understand the various nuances of it.
Term Insurance and dependents
Let us take an example to understand what is term insurance and how does it help the policyholder’s dependents.
Ajay Sharma is an employee of a law firm and is 32 years old. However, he has no dependents. Since the primary function of term insurance is to protect your family in case of your accidental death, buying term insurance has become confusing for Ajay. More precisely, he ponders if he needs to buy term insurance.
A term plan is an insurance policy designed to protect the financial future of the family in the event of any unfortunate accident. A term plan does not offer any maturity benefit. However, a term insurance policy is an important product to include in your financial portfolio. Here are some reasons:
- Helps deal with life’s changes
Simply put, your life will not be the same as it is now. You will have different experiences and different responsibilities going forward in life. This holds true for your dependents as well. At some point in the future, you may want to start a family or even get married. Having a family can be essential to maintain a good standard of living. In addition, it eventually becomes your responsibility to care for your ageing parents. Hence, one way or another, even if you do not have dependents right now, you will have people that count on you for their living expenses. But life is very uncertain, and you cannot guarantee that you will be there to fulfil your responsibilities.
If you decide to purchase a term insurance policy at the time you face these responsibilities, it will significantly increase the insurance premium. Therefore, it is important to purchase term insurance as soon as possible. The sooner you buy a term plan, the lower the premium value you could enjoy.
- Helps with liabilities
Even if you do not plan to get married, you still need to think about your parents. Think about what would happen to them if they were financially responsible for the loans you took out. This is exactly what could happen in the case of your untimely passing away. In such a case, you certainly do not want your parents to struggle to pay your arrears. Also, you do not want your parents to lose the house you bought or the car you gave them as a gift. Therefore, it is only logical to have a certain backup that could help take care of all liabilities. A term insurance helps with this. The payment from term insurance is enough to cover all your liabilities after your death. It relieves stress off your parents during difficult times.
Many people ignore the term insurance policy as they consider it to be another expense. Lack of adequate insurance coverage can lead to serious financial consequences. A term insurance policy is a great way to protect yourself and your family, regardless of your current situation. This is a care plan designed to meet the needs of your family. You should use a term insurance calculator and purchase a plan, whether you have a family or not.