There are many life insurance policies offered by insurers. Some of them are term insurance, whole life, endowment policy, etc. Life insurance policies offer financial protection to the policyholder’s family. If the policyholder meets with an accident, then the insurer offers a death benefit to the person’s family. However, there are different policies that the insurers offer. Deciding which one to buy can be hard.
Some life insurance policies are-
- Term Life Insurance
Term life insurance covers the policyholder for a period. A person can decide on the term of the policy. If the policyholder passes away during the term, then the insurer offers the death benefit to their family. A Term plan is one of the most important insurance policies a person needs to get for their family.
- Endowment Policy
Endowment policies offer a sum assured to the policyholder after the term of the policy. If the policyholder dies during the term, then the sum assured will be offered to the family.
- Whole Life Policy
Whole life policies are plans with a higher duration. A policyholder can pay premiums for a lifetime. The benefit will be offered to the policyholder’s family.
There are different factors that impact an insurance policy such as-
If the policyholder is young, then the premiums are low. Age has a lot of impact on the premiums of a policy.
- Sum Assured
The premiums will be higher if the sum assured is high.
The term plays a big role in the purchase of a policy. If the policyholder gets a plan with a longer duration, then they will be covered for that time. However, it also increases the premium. A policyholder may have a healthy life now but an unforeseen event can be devastating for their family. Insurance policies offer protection in such situations.
Deciding Life Insurance Policy Term–
Policyholders need to know the duration they want to protect their dependents. The dependents will not rely on them for life. They will be financially independent and start their own family.
A person wants to buy a term insurance plan. He is 30 years of age. He has a spouse and a one-year-old child. His spouse and child are financially dependent on him. He wants to buy a term plan that covers him for 40 years. Such a term insurance policy can be expensive. He wants to protect his family for a longer duration even if he meets with an untimely demise.
However, 40 years is too long a term. Term insurance is important when there are people who are financially dependent on the policyholder. After 40 years, the child may be financially independent. A policyholder needs to know the duration for which they want to support their family.
In place of buying one term insurance with a longer duration, a person can purchase different policies. While a term plan can financially protect a family after an unforeseen event, an endowment plan can increase the financial corpus of a policyholder.
There are many factors that play a role in deciding the term of a policy such as a person’s dependents, financial corpus, budget, etc. A policyholder needs to plan in a way that they protect their family and decide which policy will offer the most financial security.