Term insurance is the most basic form of life insurance under which the policyholder’s life is insured over a fixed period. It is pure risk protection. If you die within the term of the policy, the nominee or beneficiary would be paid out the sum assured under the policy. Term policies are not endowment plans, meaning, if you survive the term of the policy, there are no survival benefits paid out. The policyholder must pay premiums periodically to keep the policy active. Annual premium paid towards term insurance policy is a small portion of your income.
If you are the breadwinner of the family, then it is extremely important to avail a term life policy. If the breadwinner of the family is no more, then the future of his/her dependants is in jeopardy. The pain of losing a loved one is immense and affects you emotionally and financially. You might not be around to support your loved ones emotionally, but you can support them financially, if you had availed a term life policy. Proceeds of the term policy serve as a substitute for your income when you are not around.
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SEE ALSO: Best Term Insurance Plans In India
1. Lower or Higher Premium:This depends on the sum assured and add-ons. Understand your requirements and estimate the sum assured by considering your liabilities and family lifestyle. Just don’t avail the cheapest policy, your term policy must be sufficient to cover outstanding loans and take care of children’s school/college tuition fees. Avail only those riders that are relevant to your needs. More the number of riders availed, higher would be the premiums.
2. Add-Ons for Term Insurance: These are the extra features offered in exchange for higher premiums. These add-ons alone payout a sizeable sum of money in addition to the basic sum assured of the term policy. Following are the add-ons available under term policies:
3.Time Period: Your term policy must cover you at least till retirement, which is 60 years in India, or till the time outstanding loans are cleared. Longer terms come with higher premiums.
4. Human Life Value: You can check the Human Life Calculator by logging on to https://indianmoney.com/calculators/human-life-value-calculator. Human life value is calculated by considering age, current income and outstanding loans and liabilities.
5. Online Or Offline Purchase: You can avail term policies both offline and online. It is advisable that you avail term policy online, as insurers save on the commission paid to the insurance agents. This benefit is transferred to you through lower premiums. You get to compare various insurers and policies before making a decision.
6. Claim Settlement Ratio: This is a very important parameter that you must look into. Claim settlement ratio depicts the number of claims settled against the number of claims filed. Higher the claim settlement ratio, better the insurer. You are paying premiums and availing a term policy to secure the future of your loved ones. The entire purpose of availing a term policy by paying periodic premiums would not be served, if the claim is not honored. Hence, you must avail term policy from that insurer who has a higher claim settlement ratio.
7. Health History: You must disclose pre-existing diseases to the insurer at the time of application. You might still be insured, but at a higher premium. Term insurance at a higher premium is still advisable. If the insurer finds that death is due to a pre-existing disease, then there are high chances of your claim being rejected. Most insurers insist on certain medical tests before insuring you.
8. Driving Record: If you commute to your office by a two wheeler, then it is critical that you avail a term policy as the chance of dying in an accident is high. The number of road accidents has risen steeply over the last decade, considering this; it’s wise to avail a term policy to protect the future of your loved ones.
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