When you have responsibilities towards your family, you also think of ways to secure their future. You want to ensure that, in case you lose your life, your family has sufficient finances to rely on. Term insurance is a popular type of life insurance that individuals buy to secure the life of their loved ones.
In simple terms, a term plan is a life insurance cover that offers a life cover for a fixed tenure. Within the tenure, if the policyholder loses their life, the nominee will receive a guaranteed sum assured. The sum assured ensures that, in the policyholder’s absence, their loved ones do not experience any financial distress.
When your pay increases and eventually your liabilities decrease, you might wonder if you need term insurance or not? With no liabilities, it would seem unnecessary to pay hefty premiums. You might wonder that instead of paying premiums, you can simply invest the money elsewhere. However, before you decide immediately, there are some things that you should consider, like the ones mentioned below:
Assess your finances before surrendering your term plan
If you have dependents, you should think about your responsibilities towards them before surrendering your term plan. Even though you may not have any debt, you have family members who depend on you. If you are planning to surrender your term insurance, you should first ensure that you have sufficient assets to meet the needs of your dependents. Make sure that your assets are sufficient not only to meet their everyday needs, but also any long-term goals that they may have. Also, take inflation into account when you create a financial pool for your dependents.
With term insurance, you can be relieved that your nominee will receive a fixed sum assured in your absence. One of the biggest benefits of the plan is that you can get an enormous sum assured at an affordable premium. It allows you to create sufficient financial coverage for your dependents in your absence. You can use a term plan calculator to get an estimate of the premiums you need to pay for the life cover you need. But, before you surrender your term plan, it is essential that your dependents have become financially independent. If you do not have enough assets, and your dependents are not capable enough yet, surrendering your policy may not be a wise option.
Consider your health coverage
While the primary meaning of a term plan is a type of life insurance, it has more to offer than a life cover. With your term insurance plans, if you choose optional riders, you can secure several aspects of your life, including your health. Term insurance plans offer critical illness riders that provide coverage to the policyholder in the case they are diagnosed with any critical illness. The coverage is quite vital, as the treatments for a critical illness such as cancer are quite expensive. Critical illnesses have several treatments and require additional care, as well. Without coverage, these illnesses will dig a hole in your pocket and may even exhaust all your savings. You can use a term plan calculator to get an estimate of the incremental premium you have to pay for the additional coverage that you choose using riders.
Paying off debts
While you want to surrender your term insurance since you do not have any liabilities, it is important to consider the liabilities of your loved ones. If your loved ones have any loans or liabilities, you may want to re-think surrendering your policy, since they might need the coverage. Also, there is always a possibility that you might take a loan or debt in the future for your emergencies, or to fulfil a financial goal. Buying a life coverage later would prove to be more expensive. Having life insurance is like having an income replacement for your family in your absence. While in the present you may feel that you do not need a life cover, things may look different in the future.
Above are some factors that you should consider before you surrender your term insurance. It is important that you take your and your family’s future needs into consideration before surrendering your plan.
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