A term plan is the simplest type of life coverage available. While the large number of benefits it offers makes it seem a little daunting, it is very easy to understand. You pay a premium every year and in exchange for the payment, you and your family are assured of a fixed sum of money in the case of your sudden death. Known as the sum assured, this sum of money is determined when you buy the policy. Once a claim is filed by your nominees, the money is disbursed to them after processing the claim.
However, the thing about term insurance is that it can be tricky to have. You need to buy it just right to make the most out of it. While choosing a term plan, you have to analyze all your needs, preferences, and other factors that affect term insurance premium. An important factor to look into is age.
Age and buying term insurance
Different age brackets mark reaching a certain stage in life. Each stage you reach, the set of challenges you face will be very different. The biggest challenge you face is changing financial requirements. Hence, when you think about when the right age to buy term insurance is, you need to think about your current financial requirements and what they will be in the future. This helps you decide when and how much coverage you should buy. The key is to make sure that you can pay for the coverage and still have enough money to lead a good life today.
There is no one right age to buy term insurance. But it is recommended that you buy it at as much of a young age as possible. Here are the different stages of life you could buy term insurance at:
- Young and unmarried
If you are in your early 20s, you are likely to be young and unmarried. At this stage, you have maybe just started earning. At this age, if you are the sole earner of the family, you have to make sure that your parents are financially secured. Hence, that’s what the focus of your coverage should be. Your parents are either already retired or are getting close to it. Hence, sooner or later, they will be your dependents. Hence, you should take their current and future lifestyle into account while selecting the amount of coverage. At this stage, you are likely to have non-earning younger siblings as well. You should consider them in your coverage selection as well.
- Married without a child
Marriage is a huge step forward in life. This milestone of life means that your responsibilities become far greater. Firstly, you have a new person to account for when you decide your term insurance coverage and an important one. Your spouse may or may not be dependent on you for financial support but she will be liable for the accountability of any financial decisions you make. For example, assume that you borrowed some money from the bank and you die you could complete the repayment. The burden of repayments falls on your spouse. This leaves him/her in a difficult position. Hence, you should buy a term plan considering all your spouse’s financial requirements as well. You can always try finding out the premium by using a term insurance premium calculator.
A term plan would help your spouse financially in many ways after you untimely demise. Firstly, the death benefit of the policy offers a huge sum of money that can be used any way the beneficiary wants. However, if you were the earning member of the family, your spouse would need regular income in your absence as well. Term insurance gives you an option to create a regular source of income. The payout your family is supposed to receive can be turned into a regular income payout. this means the nominee of the policy receives the claim amount in instalments. This way, they have a steady cash flow for their day-to-day expenses.
