When it comes to investing in a term plan, most people feel clueless regarding where to start and how to go about it. The fact that there are so many different term insurance policies available in the market does not make it any easier to decide. Keeping that in mind, given below are the eight questions to ask yourself before investing in a term plan.
1. Why Do You Need Term Insurance?
Your need for a term insurance plan depends on whether you have financial dependents or not. Though this is the prime reason to have term insurance, people also use it as a tool for estate planning, retirement planning, etc.
2. What Or Who Do You Need To Protect Using The Insurance?
A term plan can be used to protect the financial dependents in case of the insured’s unexpected death. It can also be utilized to leave a substantial amount to your chosen charity or to protect your company.
3. How Much Is Enough In Insurance Coverage?
The main reason people buy term insurance policies is to replace their income and pay debts, in case of their sudden death. So, the right way to calculate insurance coverage is by taking all your future financial needs into account.
4. How Much Insurance Premium Is Affordable To You?
Your term plan needs to fit your budget comfortably. You don’t want to land up in a position where your budget has to be stretched for paying the premiums. Don’t go for higher coverage if you feel that you won’t be able to pay the premiums.
5. Do You Need Coverage for a Lifetime Coverage or a Specific Period?
Lifetime coverage is useful when you have someone to take care of after you pass away or if you want to leave an inheritance to your dear ones. On the other hand, coverage for a specific period helps save for retirement or pay a mortgage or personal loan.
6. Is Death Benefit Important To You?
Investing in a term insurance plan is not all about death benefits. Some of the term policies also offer a host of living benefits. If you want policies that only provide a death benefit, level-premium term insurance policies are your best bet.
7. Do You Want Your Term Plan To Build Up Cash Value?
If you want to build up cash value under a term policy, you can return premium insurance coverage. It does not help build cash value like a permanent policy but pays back all the premiums upon the expiration of term coverage.
8. What Riders Are Important To You?
Consider the riders that you feel can offer you the best protection in times of need. For instance, if you have a history of cardiac problems in the family, a critical illness rider might help.
Finding the answers to all the questions mentioned above will make it easier for you to select the right term plan. So, don’t delay any further, and start considering your answers now.