Keywords: what is term insurance, term policy, term insurance benefits
Every individual wants that when they buy life insurance, the life cover suffices to take care of their family in their absence. However, buying a sufficient cover can be expensive and one might face difficulty in paying hefty premiums. This has led to the popularity of term insurance plans.
What is term insurance?
Term insurance is a type of life insurance that offers coverage for a fixed period. The tenure is selected by the policyholder when they buy the term plan. Compared to other types of life insurance, the premiums of term insurance are usually significantly lower. It allows policyholders to get high life coverage for affordable premiums. When individuals are buying term insurance, several even opt for splitting their term plan.
What does splitting term insurance mean?
The term splitting means dividing something into parts. Splitting term insurance means that the policyholder has purchased more than one term plan for their life coverage. It is a popular practice since term plans offer coverage only for a specific time. Once you understand what term insurance is and what splitting it means, it is important to understand whether you need to split your term insurance.
Should you consider splitting your term insurance?
You need to consider various factors before considering whether you should split your term insurance. It depends upon your current financial situation, the financial plan for your future years, the needs of your dependents, and your liabilities. When you are planning to split your term insurance, you need to ensure that you can afford to pay the premiums for the additional term plan you purchase with ease. Here are some scenarios where policyholders prefer splitting their term insurance:
The current plan offers a low sum assured
Affordable premiums are one of the biggest term insurance benefits. It allows individuals to buy plans without burning a hole in their pockets. However, when the income of a policyholder increases, they may find the sum assured of their current term plan to be low.
In such scenarios, splitting your term insurance is a great idea where you can simply purchase a needed policy with the coverage you required. Splitting bridges the gap between the sum assured you have and the sum assured that you need. With lifestyle and quality of life increasing, splitting is a great way to ensure that your loved ones have sufficient wealth in your absence.
The current term plan is about to end
A simple reason to consider splitting your term insurance is when your existing plan is about to end. A term policy offers coverage only for a specific period and when that period is about to end, it makes sense to buy a new plan. Splitting in such cases ensures that you always have a life cover to protect your loved ones.
The current plan offers no income benefits
In case of your sudden demise, your dependents will have to cope with the emotional, mental, and even financial loss. While the emotional loss cannot be compensated, the financial gap is taken care of with the life cover. If your existing life insurance does not offer any income benefits, you can simply split your term plan by buying a new one that does. Select additional term insurance that benefits your loved ones by offering payouts as monthly income.
Leave legacy behind
When you think about your family and your dependents, you want to leave sufficient wealth after you are gone. It is not only about meeting their needs, but also about leaving a legacy behind. When you split your term policy, you can choose sufficient tenure and coverage to ensure that when you are gone, you leave a legacy for your family.
Above are some logical reasons where splitting your term insurance makes sense. However, before splitting, it is important that you assess your finances as buying additional term insurance will require you to pay additional premiums. You want to consider splitting when you know you can easily afford to pay the premiums for your existing and new term plans.