Term insurance is the purest type of life insurance, providing financial protection to your family members for a fixed period. If the policyholder passes away, the insurance company pays death benefit to the nominee/beneficiary. Term insurance plan mainly focuses on financial protection without any kind of savings component. Because of this, it is an affordable option and offers high life cover, to secure the financial future of your family.
What is term insurance?
Simply put, term insurance is a life insurance plan that provides financial protection to your family for a specific period. If you pass away during the policy term, your beneficiaries receive a death benefit, ensuring their financial security. This type of insurance is known for offering high life coverage at relatively low premium rates.
Term Insurance Meaning:
At its core, term insurance meaning revolves around providing a safety net. It's a contract that guarantees a payout to your designated nominee in the event of your untimely death during the policy's duration. This benefit can be crucial for settling outstanding debts and maintaining your family's financial stability.
Term Insurance Definition:
When exploring term insurance definition, it is important to note that term plans are among the most affordable life insurance options, offering substantial coverage at lower premiums. These plans are crucial in long-term financial planning, ensuring a family's financial well-being.
Term insurance provides peace of mind, knowing your loved ones will be financially protected, regardless of the future.
Why Do You Need Term Insurance Plan?
As we have discussed what is term insurance plan, it is important to understand why term insurance is a must buy for everyone.
· Family’s financial security: If you are the sole breadwinner of your family, buying a term plan would take care of your family's financial needs in case of your absence. The insurer will pay out the life cover to your nominee in case of your untimely death, which can help them take care of their financial needs.
· Protect your Assets: If you have taken a loan like a personal loan, education loan, or home loan, the repaying of loans can stress your family in your absence. The money from your term insurance plan covers your loans, ensuring your family doesn't have to deal with the financial responsibility.
· Lifestyle-related risks: As you age, the risk of a lifestyle-related illness increases. Certain term insurance plans include critical illness protection, which safeguards your family in unexpected situations and provides financial security during your lifetime. To explain the term insurance meaning, this plan ensures you're financially protected if you face severe health conditions like cancer or heart attacks.
How Much Term Insurance Life Cover Do I Need?
If you are confused about how much term insurance life cover you need, you can get the answer to your question by using a Human Life Value calculator. HLV is an easy-to-understand numeric process of calculating the life cover amount that you need. The simple thumb rule that can be used to calculate HLV is to have a term insurance cover that should be at least 15 to 20 times your annual income. This amount should be sufficient to meet future requirements and manage the rates of inflation.
For example, if a 30 years old male has an annual income of Rs. 5 Lakhs, the right life cover for him would be 1.25 Crores.
