A term life insurance policy plays an unquestionable role in the security of your family. You might be leading a financially comfortable life with your family but if you ever have to, unfortunately, leave them behind, term life insurance and its coverage will protect your family from financial hardships.
But what’s equally important is choosing a beneficiary that you trust to make life easier for your whole family. Through this article, let’s understand what a beneficiary is and what all to consider when choosing a beneficiary. Before that, let’s first see what term insurance is.
What is term insurance?
Term insurance is nothing but a life insurance policy. Compared to traditional life insurance policies, term insurance has a higher sum with a lower premium. This is because there is no investment involved in purchasing a term plan. Unlike with traditional life policies, a term plan lapses if the policyholder survives the term, no money will be refunded.
Now that you understand term insurance, let’s see what a beneficiary is
What is a beneficiary?
A beneficiary or nominee is a person who will get the sum insured of the term plan if the policyholder passes away. This person has the legal right to utilize the money according to their discretion.
Most often, the beneficiary will be a family member who is trusted to take care of your family in your absence. This makes choosing the right person very important. Below are a few pointers that will help you with this tough job.
- Make sure you trust your beneficiary – A person who is responsible to take care of your family should be someone you trust a lot. That is why it is ideal if the person is an immediate member of the family. That way your beneficiary knows how your family works and they can do what is best for your family. This also makes sure claiming the life insurance, if there is ever a need, is easier and your money won’t go outside of your family.
- Choose a beneficiary according to your purpose – – You might have your own reason for buying a life cover. You might have recently taken out a huge loan and want to protect your family from that debt if something unfortunate happens to you or you don’t want to leave your business partner stranded if something ill-fated happens to you – your beneficiary choice should reflect the purpose.
Also, if you are married with kids and want to protect your family in case of an unfortunate occurrence, you could choose your spouse to be the beneficiary. But if you are looking to protect your parents, you could add them as your beneficiary.
- Choose someone who knows how to handle money – Your insured sum from term insurance could be a very huge amount. But that money is meant to porrect and provide for your family, sometimes for years. Hence, choosing someone who knows how to handle money becomes very important. If your beneficiary is not experienced with handling a huge sum of money, they could lose it parking the money in the wrong investment. It is also ideal if you talk to the nominee about how you would want the money to be spent when you are taking an insurance policy itself.
- Discuss with your family– The news about who the beneficiary is should not come as a surprise to anyone in your family and that person should be someone your whole family approves of. This is why it is wise to discuss with your family while choosing a beneficiary itself. Your family should also know what is term insurance and the process of claiming it. Conversations involving subjects like this could become difficult for you and your family but for your family’s safety and protection, this is a compromise you should make.
How to add beneficiaries to your term plan?
You can add the beneficiary of the term plan while buying the plan itself. You can buy a term plan from a broker website and the whole process is paperless and hassle-free these days.
Before you buy, make sure you use tools like a term insurance calculator that will help you choose the right sum.