Finally decided to avail a term life insurance plan? Are you in a rush to buy it? Wait. Are you aware of the things to check before buying a term insurance plan? If not better read this.
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Availing term life insurance is wise. But, which term life insurance plan is right for you? Selection of the best term insurance plan should not be based on tax benefits or low term insurance premiums or just because the insurance agent asks you to avail the plan. While it is good to take advice, put your own efforts to know which plan suits financial goals. Check the insurer’s claim settlement ratio. Check if they offer customization to make the most out of the term plan. Don’t hesitate to avail a term insurance plan with a high sum assured if you have a home loan or car loan to repay. We have compiled a checklist which will help you choose the best term insurance plan:
You must have stumbled on insurance companies advertising their term insurance plans which go something like this, ‘Buy Rs 1 Crore term insurance plan at just Rs 30 a day’. This is only a marketing gimmick. Term insurance premiums depend on age, smoking habits, sum assured and so on. Therefore, your premiums will be different too. There are many online aggregators which have term insurance premium calculators. Get an idea of the approximate premiums before availing a term life insurance plan.
While purchasing a term life insurance policy, you might be given an option to choose between single and regular premiums. Which one should you choose? You should go for regular premiums. Why? You might earn a lot of money and can afford to pay a one-time premium, but it doesn’t make sense.
Single premium policies are costlier than regular premium plans when you consider inflation and time value of money. If you opt for regular premiums, you can invest some money in other investment avenues and take advantage of the rupee cost averaging benefits. You get more benefits with regular premium plans compared to single premium plans. A regular premium term insurance policy offers long-term benefits in terms of tax saving, risk and affordability. If you enjoy a windfall gain, you might opt for a single premium plan, but check if the product is in line with long-term financial goals.
Yes, riders are a great add-on for term insurance plans. They enhance your basic term insurance policy. Riders offered are accidental death benefit rider, permanent and partial disability rider, critical illness rider, and so on. Avail riders specific to your needs. It doesn’t make sense to avail all riders. If you travel a lot, it makes sense to avail an accidental death benefit rider, as the risk of meeting with an accident is high.
If your answer is yes, then don’t worry. Your application for a term insurance plan won’t be rejected. However, your term insurance premium will increase. If you hide the fact that you drink or smoke, your family’s claims could be rejected. Fill out the proposal form yourself. You can’t afford to make mistakes which can lead to claim rejection. Your insurance agent might not know you smoke or drink. He might even ask advice you to state you are a non-smoker/drinker to enjoy lower premiums. Never do this or your family’s claims could be rejected.
Does claim settlement ratio really matter? Yes, it does. Claim settlement ratio is the number of claims settled by an insurer to the total claims received. Always opt for a term insurance plan with an insurer that has a higher claim settlement ratio. If you opt for an insurer with a low claim settlement ratio, chances are your family’s claims could be rejected.
Following is the table illustrating the claim settlement ratio of various companies for 2016-2017 as compiled by the IRDAI.
When you have found an ideal term insurance policy matching your needs, keep in mind the following:
The main purpose of availing term life insurance is to ensure your family’s financial security. Therefore, it is of utmost importance to mention the nominee’s name. Also, mention this in your WILL or take a life insurance policy under the MWP Act (Married Women’s Protection Act). Make your spouse the beneficial nominee where the death benefit is paid only to that person. You can also change your nominee if you wish.
Make sure you tell your family about that term life insurance policy. Let them have access to the policy papers and contact details of the insurer. Also, educate them on the claim process.
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