If satisfying your life goals is your number one priority, then planning your finances appropriately is the right way to go. But then, when we talk about financial planning, many individuals seem to think that it is all about investing judiciously in the right investment options.
As a matter of fact, in addition to wealth creation, financial planning also involves accounting for contingencies and unexpected emergencies. And one of the preferred ways to do that is through a term insurance plan. And that’s precisely why it is crucial to include a term life insurance policy in your financial plan.
If you’re wondering about the importance of term insurance in financial planning, this article may just be able to help you out. But before we explore the various reasons why having a term insurance plan is important, let’s just quickly take a look at what it is.
What is term insurance?
Also known as a term life insurance policy, term insurance is a type of a life insurance plan where an individual enters into a contract with an insurance service provider, who agrees to provide a life cover to the individual for a specific period of time, known as the policy term.
If the individual happens to die within the policy term, the insurer would then be obligated to pay a predetermined sum of money to the deceased individual’s nominees. This predetermined sum of money that’s paid out is known as the death benefit. Now, in exchange for this life cover, the individual has to make periodic payments, known as premiums, to the insurer throughout the policy term.
Here’s where term insurance differs from other types of life insurance plans. A term insurance plan doesn’t come with any maturity benefits whatsoever. This means that if the individual happens to survive till the end of the policy term, the premiums paid under the term insurance plan will not be returned and no payouts will be made to either the individual or their nominees.