Buying Term Life Insurance

Buying term life insurance is no more a stupid idea. Many young working individuals have realized the importance of buying term life insurance early in their life. As term life insurance is sold online to ensure low premium for the buyer, the buyer has to understand the product in the light of his needs. That expects him to be a responsible buyer. Here are three numbers you must get right while buying term life insurance:

Sum assured - Many a time the buyer ends up buying a random number as sum assured– RM50,000 or RM100,000 as it sounds good for his ear. But this may not be the best way to ascertain the sum assured you should buy. You should be buying a sum assured equal to at least 10 times your annual income. For example, if you are earning RM50,000 per year, you should be buying a term life insurance worth RM 500,000 on the conservative basis. The number should also provide for liabilities such as loans outstanding, if any. In case of an eventuality the family should get the desired sum assured and all the loans outstanding too should be paid.

Due to scarcity of resources, sometimes individuals buy inadequate sum assured. If you are one of them, do not lose heart. Some insurers allow you to buy additional sum assured at the milestone events such as marriage, child birth. Do increase the sum assured to ensure that you have adequate sum assured.

If you get the sum assured right, then the next question most insurance buyers face is for how long they should insure themselves.

Term of the policy - You should ideally cover yourself till your retirement age. As long as you are earning and there are individuals financially dependent on you, a term life insurance cover is a must. So if your retirement age is 60 and you are 30 year old, you should ideally be insured for 30 years. Term of the policy is also referred to as cover ceasing age by some insurance companies.

Premium paying term - Many confuse the premium paying term and the policy term. These two are different. To begin with there are two ways you can pay your premium. First is single premium term life insurance policy in which you pay for the cover in one go. Second option is regular premium term life insurance policy in which you agree to pay the premium at regular interval – annually, quarterly or monthly.

If you opt for regular premium then most insurers allow you to select the premium paying term. The premium paying term will be less than equal to the policy term. For example, if your policy term is 30 years, you may choose to opt for a premium paying term of 30 years or less. If you are in professions where the earning span is limited or most of the earnings are front-loaded, you can opt for a smaller premium paying term as compared to the policy term.