Term insurance is a type of life insurance which offers pure risk protection. Term insurance is a term contract between the insured and insurer, under which the insurer pays out a sum called ‘death benefit’ to the beneficiary/nominee if the insured dies within the term of the policy.
Insured must pay premiums periodically to keep the policy active. There are no survival benefits under a normal term insurance plan. Insurers might insist on medical test to ensure that you are in good health before starting the policy.
The various life insurance policies are term life insurance policy, money back policy, endowment policy, unit linked investment policy (ULIP) and whole life insurance policy. Term insurance is the most basic form of life insurance. Term insurance is extremely important if you are the breadwinner of your family. Term insurance provides for your family even when you are not around.
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Documents required for availing term insurance vary across lenders. Below mentioned are the documents required to start a term life insurance plan:
Following are the documents that are generally accepted as proof of identity:
Following are the documents that are generally accepted as proof of address:
Below mentioned are the benefits of term insurance plan:
There are various types of life insurance available. The different life insurance policies are term insurance policy, money back policy, endowment policy, unit linked investment policy (ULIP) and whole life policy. Term insurance is the most basic form of life insurance.
You need to analyze your requirements before opting for any life insurance. A life insurance policy must come in handy when you need it the most. Availing a life policy just for the sake of saving taxes is not a good idea.
The word ‘right’ differs across people. The wide range of term insurance plans offered by the insurers has made it a challenge to choose from. It is a challenge not just for selecting the insurer, but also to choose the best suitable plan. It is critical to be aware on the parameters that must be considered while availing a Term Insurance Plan.
The main intention of availing a term insurance plan is to financially secure family’s future, in case of untimely death.
The best term insurance is the one that offers the highest sum assured at lowest premiums. Availing term insurance at young age would keep premiums low. This is because insurers feel the risk of insuring youngsters is low. Sum assured and premiums payable would depend on your requirements and the riders availed.
Coverage: With rise in cost of living, you need to make a rough estimation of your family’s future expenses, by keeping inflation as a factor in mind. Your Term Insurance Policy must be able to meet all expenses of family’s lifestyle and clear off any unpaid debt. It is advisable to choose a policy that covers at least 15-20 times annual income.
Get the tenure right: Insurers offer different term policies for 5, 10, 15, 20, 25, 30 years or more. You must choose the tenure wisely as per financial goals and commitments. The term you choose would also play a factor in determining the eligible benefits. It is good to opt for a term that covers you, at least till retirement.
Make a wise decision: There are various term insurance policies offered by insurers. You must be aware of the features, benefits and policy terms and conditions so that you make a wise decision. Compare across insurers and arrive at a conclusion.
Periodicity and mode of payment: Different insurers have different periods of renewal. Choose that insurer who has the renewal period best suitable for you. Insurers demand premiums to be paid using a certain mode of payment. Make sure that you can make premiums payment in the mode that your insurer wants.
Rising prices: Prices are increasing each day due to inflation, which has to be considered while choosing a term policy. With increasing prices, coverage of the policy must be sufficient to provide for the family when you are not around. There are insurers who offer flexible options of increasing insured amount annually by a fixed rate of 5-10%, to deal with high inflation. You must remember that these plans have higher premiums when compared to a normal term plan.
Habits: If you are in the habit of consuming alcohol and/or smoking cigarettes, then you must inform the insurer on this. You would still be insured in spite of these habits but at higher premiums. This is because insurers feel that the risk involved behind insuring a person with these habits is higher. Please make a note that you provide proper details of your habits. Wrong details furnished would create problems at the time of claiming benefits.
Riders: Availing riders would offer add-on features on top of your basic term insurance policy. Though these riders are a bit expensive, you must consider availing them if needed. Don’t look at price alone when availing riders.
It is important to compare term insurance plans, as life insurers in the market are offering various term life insurance plans. Importantly, each insurer offers various variants of term plans. This can be a daunting task.
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