Term insurance is a popular type of life insurance policy that individuals buy to secure themselves from the uncertainties of life. The distinct feature of term insurance, which makes it popular compared to other life insurance plans, is the significantly low premium. Since the premium is low, you can get sufficient coverage at an affordable premium. Sufficient coverage ensures that in your absence, your loved ones do not face any financial hardships.
The coverage that you select for your term insurance is one of the most crucial decisions that directly impact you and your family. There is a possibility that the sum assured that you had selected while buying the term insurance proves to be insufficient over the years. This can be because of an increase in your responsibilities, inflation, and even changes in priorities in life. If you are buying a term insurance plan at a young age, consider a life stage benefit option.
What is a life stage benefit in term insurance?
The life stage benefit of term insurance operates under the principle that “one size does not fit all.” The option has ensured that the cover that you choose when you buy your term plan does not cover you through all life stages. For example, when you bought the insurance, you did not have any dependents, and over the years you have started a family, and now you do. Since you have a family to take care of, the initial cover might not be enough to take care of your dependents in your absence. A term insurance policy with a life stage benefit ensures that your coverage is flexible based on different stages of life. You can also buy a term plan with a return of premium, where, when the tenure of your policy ends, you get back all the premiums you had paid throughout the policy duration.
The primary purpose of a term insurance policy is to protect your loved ones financially in your absence. A term plan with a life stage benefit allows you to do exactly that. The life stage benefit ensures that in your absence, your nominee receives sufficient coverage to take care of your dependents. When you are buying a term plan, you can use a term insurance premium calculator to get a better estimate of the coverage you need.
Why should your term insurance coverage be modified according to different stages of life?
A term insurance policy can be used to secure both long-term and short-term financial needs. Usually, thinking over the long haul helps to choose sufficient financial coverage. Over the years, for most individuals, their responsibilities and liabilities grow. The sum assured that you had selected years ago may not be sufficient. Even though you take a rough estimate and use a term insurance premium calculator, you cannot precisely know the coverage you will require over the years. You will only get an estimate of the coverage and the estimate can go wrong sometimes.
Choosing term life insurance with a life stage benefit ensures that you have sufficient coverage throughout different stages of life. It ensures that in case of your sudden demise, your nominee has sufficient coverage to take care of your family and your liabilities. Without a sufficient sum assured, your family might find it difficult to pay off any debt and live a good quality life. For example, when you bought your life insurance, you did not have any liabilities. However, over the years, you buy your own house and have a home loan now. Your sum assured must be changed to cover the amount of your home loan. It ensures that your loved ones can keep your house in your absence and pay off the loan easily.
You cannot buy a new term life insurance plan every time your financial needs are modified. Term insurance with a life stage benefit allows you to get the modification in your existing term insurance plan. When you opt for a life stage benefit option to your term plan, you must read the fine print and be aware of the premiums modification, if any.