They say that there are 2 sides of each story. The same story can look different to two people with very different perspectives. Few people might view going for travel as a complete waste of time, while some people might see it as a fun, best way to get relaxed and take a break from a hectic lifestyle.
Well, the same logic applies how we spend our hard-earned money. A purchase that seems investment to one person might seem unwanted expense to another.
An investment is an expenditure that helps you in the future while an expense is usually a type of expenditure that doesn’t necessarily offer any value in the future. It is indeed a very important decision to make when one is thinking about buying something as essential as term life insurance. But do you know if the term plan is the right purchase for you?
To know the answer to your question, you first need to know what term insurance is all about?
What is Term Life Insurance?
Term insurance plan is a type of life insurance policy in which the insurance coverage is offered to the beneficiary(s), generally an insured’s family for some specific period of time. If, in case, the policyholder dies during the tenure of the policy, a death benefit is paid out in terms of a lump sum amount to nominees by the insurance company.
In comparison of other types of life insurance policies, there are several benefits of term plans. They are simpler, flexible, and most importantly, economical. Their sole aim is to offer comprehensive financial protection to the insured’s family in an event of his/her untimely death. The financial protection comes in the form of offering for any financial contingencies that might arise in policyholder’s absence like debts and loans.
However, it should be noted that term life insurance is not meant for wealth creation. It doesn’t provide returns at regular intervals nor does it offer any sort of amount upon maturity. Then how term plan is an investment and not an expense? You may ask.
Term Life Insurance is Investment or Expense? Know Here
While it is true that a term plan does not offer any returns on or before the maturity of the policy, it does provide a very important advantage i.e. it covers your life.
If you die prematurely before the end of the policy tenure, it offers a lump sum amount in the form of sum assured to the insured’s family members. So, in a way, by opting for a term life insurance, you’re investing your hard-earned in protecting the future of your loved ones who are financially dependent on you. Therefore, you can live with complete peace of mind by knowing that your family member’s financial requirements will be met even when you are not around.
How Does Term Life Insurance Work?
When you purchase a term insurance plan, you pay some specific amount to the life insurance company at regular intervals that is known as an insurance premium. There are several people who purchase life insurance plans and pay insurance premiums regularly. Over time, the insurer collects these insurance premiums and utilizes the amount to offer financial protection to nominees in an event of your untimely death. Henceforth, it ultimately works to provide financial security to your loved ones in your absence so that they can fulfill all of their financial requirements in a stress-free manner.
How is Term Life Insurance a Worthwhile Investment?
The main motto behind opting for a term insurance policy is that you’re financially protecting your loved ones even after your death.
Life is uncertain and you can’t predict that what is going to happen in the next moment. With an apt term life insurance plan, you can ensure that your loved ones do not confront any sort of financial stress since the sum assured from the term insurance plan would cover all of their financial needs. The insurer does not interfere with how the beneficiaries choose to utilize the sum assured – it is entirely up to your nominees. They can utilize it for loan repayment, household expenditures, children’s school or college tuition fees, etc.
The best thing is that the term life insurance plan is the most affordable and pocket-friendly type of life insurance policies available in the UAE market today. Considering that the term plan is economical, you can also add this policy to your financial portfolio along with other investment options.
However, if the return component is your concern then you can also opt for a term plan with return of premium. This is another type of term plan that works quite similarly to a traditional term life insurance plan. It also offers death benefits if the policyholder dies during the tenure of the policy. But the only difference is that all the insurance premiums paid during the policy tenure will be returned to the insured if, in case, he/she survives the tenure of the policy.
Conclusion
Though a traditional term life insurance policy does not offer returns on or before the maturity of the policy. However, financial protection, peace of mind, and convenience it offers in an event of your untimely death make it a very important investment. Thus, one must invest in the right term plan to safeguard their family’s future financially in his/her absence.
