The wake of the Coronavirus (COVID-19) pandemic has made people realize the importance of securing the life of their loved ones. The widespread of COVID-19 has made life uncertain and unpredictable.
You never know what is in store for you in the future. Therefore, it is advisable to invest in a financial instrument, which can provide monetary security to your family members in case of your untimely and unfortunate absence.
Investing in life insurance plans is one of the best ways to ensure that your family remains financially independent even when you are not there to look after them. Many people are not sure whether to invest in term life insurance or traditional life insurance plans.
Here are some factors that can help you decide which policy can be an ideal option as per your requirements:
The death benefit is one of the major factors that differentiate a term plan and a traditional life insurance policy. In a term insurance plan, the policyholder’s nominee will receive the death benefit if the insured dies within the policy’s duration. Term insurance is a pure protection plan and does not offer any savings or investment component. Conversely, traditional life insurance plans offer death as well as maturity benefits. If the policyholder outlives the tenure of the policy, the insurer will hand over the maturity benefits along with loyalty additions and bonuses, if any to him or her. In term insurance, the death benefit value is substantially more when compared to traditional plans.
Term insurance plans offer the lowest possible premiums in comparison to any other life insurance policies available in the market today. Here, the insurer offers life coverage for a specific tenure. Moreover, a term plan does not have an investment element attached to it. You can invest in a term policy if you are purely looking for life coverage and do not want to pay a costly premium. The premium of the online term plan is cheaper than the offline mode, as you are directly dealing with the insurance company. Thus, the agent’s commission gets eliminated over here. You can use the term insurance calculator to ascertain which insurer is offering the best rate. On the other hand, the premium of a traditional life insurance plan is on the higher side. If you wish to build a corpus along with a life cover, you can opt for a traditional life insurance policy.
Surrendering of policy
It is quite easy to exit from a term insurance plan as compared to a traditional life insurance policy. If you stop paying the premium, the term policy will automatically discontinue. However, traditional life insurance plans offer maturity benefits. Therefore, discontinuing the policy becomes difficult, as the insurer will only pay the maturity benefit if you honor the period of the policy.
While considering the sum assured of the policy, it is advisable to follow the thumb rule, which indicates that this value should be at least ten times your yearly income. Doing this is necessary to ensure that your family members can meet all the household expenses and long-term financial aspirations even if you are no longer around. A term plan provides a much higher sum assured as compared to any other traditional life insurance plan. One of the reasons behind this is that term insurance only offers life cover for a specific tenure and it does not have any savings option.
As a term plan offers a large sum assured at a cheap premium, it has an edge over other traditional life insurance plans. Therefore, it becomes essential to search for an online term plan that can meet your family’s financial needs. You can seek the help of a term insurance plan calculator to find the most suitable policy and invest in it.