What Exactly Is Term Insurance?
People who buy Term Insurance are covered for a certain amount of time. This is part of Life Insurance. It doesn’t matter if something wrong happens to him or he dies during this time. If his Term Life Insurance policy is still active, the death benefits will go to his parents, wife, and anyone else he chooses. To be the only one making money in your family is the best thing to do. Let’s take a look at a real-life case.
Middle-class family man: Manish is from a family that lives in the middle class. He lives with his parents, his wife, and two small children. This is how it works: And he, the breadwinner of the family and everyone else. He doesn’t want to die, but he can’t stop it. If he dies, what will happen to his family? Of course, they will have difficulty living with debt and no money freedom.
With a Term Insurance Plan, he can get back his next 10 to 20 years of income. His family won’t have to go through so much. So, term life insurance is essential for everyone who makes money for the family.
What is the Process of Term Insurance?
There are many things to think about when someone buys term insurance, such as how old they are, how much money they need to cover their expenses if they die, and how well their body works.
Some insurance companies also look at the policy holder’s driving record, medical reports, smoking or chewing status, drinking, and other habits that can shorten his life, such as drinking alcohol and smoking cigarettes or chewing gum.
Some other companies also look into the person’s job, hobbies, and family history.
A person who dies during the policy’s term will get the total amount of money from the insurance company.
Many people think that the government wants people to buy Life Insurance, but it could also be that this money is used to pay for hospitals, health care, and loans for people who have insurance after they die.
The policy runs out most of the time before the person dies, so there is no payout.
Only 2% of policyholders die during the policy term, and the rest of them die when the policy runs out. In this way, the company makes a lot of money.
The person who owns a Term Insurance policy can keep it after it runs out. The premium will be calculated again based on his age.
Other than the death benefits, term life insurance has no value. There is no money to be made here, like with different types of life insurance.
Who Needs Term Insurance?
Let’s think about two people.
The first person lives with his parents, wife, and two small children. The second person lives alone. He is a good family man who makes a fair amount of money. He is the only breadwinner in his family. I don’t know what kind of loans he has. He might have a home loan, an auto loan, or a personal loan.
While the other is a man who makes a lot of money, doesn’t have parents, and isn’t married.
So, this is up to you. Who should buy Term Insurance, then?
First of all, the family man.
- A person who makes money for his family must have term life insurance.
- A person who doesn’t have enough money to invest.
- A person has debt, like a home loan, a car loan, or even a personal loan.
- A person has a lot of responsibilities, like taking care of their kids’ education and getting married.
When To Buy Term Insurance?
The best time to buy term life insurance is when you are between 20 and 30. This is because term insurance premiums are based on your age and health to figure out how likely you will die.
Our health is good at this age. So we have the lowest risk factors and the lowest insurance premiums, too, so we have the best deal.
One of the best things about buying insurance when you’re a young person is that you won’t have to pay more money even in the last month of your policy. I’ll pay the same amount in 45 as I do in 25.
Inflation is also a big help. That means that the value of money is going down at least 5% every year.
You will pay the same amount every year, but you will get less money every two years. For the next 5–10 years, your premiums will be so easy to pay that you won’t even think about how much they cost.
Your Term Life Insurance Coverage Amount
The amount of term insurance you should have should be at least ten times your annual income.
It should be 15 to 20 times your annual income to be ideal.
If I make $500,000 a year, I should have at least $50,000 worth of term insurance. The ideal number should be 1 million.
Term Insurance Coverage Types
1. Return Of Premium
This is a type of term insurance in which you get back the money you paid in premiums when the policy is over. Here, you’ll have to pay more for the term life insurance than you would with a regular one.
2. Pure Term Insurance
In this case, you won’t get your money back when your policy is over. This only pays out when someone dies.
Pure Term Insurance vs. Return Of Premium
Which one is best for you? That’s your fault. No, that isn’t on the list.
If you buy a Return of Premium Term Life Insurance, you’ll have to pay more for the insurance. Even though pure term insurance costs less, you might have to pay twice as much.
Suppose you buy a return of premium policy and your annual premium is Rupee 10,000. After one year, this 10,000 will only be worth 9500 because the value of this 10,000 will have dropped due to rising prices.
It will lose 5% of its value every year. So, this is a waste of money.
Pure Term Insurance is the best choice if you want to buy insurance.
Still, 23% of people choose to get their money back.
If you are a smart person, you should buy the second pure and invest the extra money you would have paid for Premium term life insurance.
If you invest in gold or stocks, you can get more than 10% back. Even the Return of Premium policy can give you more money back than the gold.
I have pure term insurance, and I’m getting back 13% of the money I saved by not having insurance. That is better than that.
People who work hard can waste their time if they don’t want to improve.
Also, you can check the prices of the big companies on the PolicyBazaar for free.