Guide to buy a Term Insurance Policy at a Glance
Term insurance seems a familiar term, isn’t it?
Many of you find it tricky to choose the best term insurance plan, right? Simply because you’ll find a plethora of options to choose from, obviously it is a tough task to gather what’ll fit your needs and requirements best.
And if you’re reading this, chances are that you’ve decided to hop buying the old, traditional, and conventional endowment insurance schemes. You might have decided to buy a term insurance policy, which would cover the financial interests of your dependents, family and loved ones in the long run.
But, how would you proceed with buying term insurance?
You need to make some awesome and smart choices to get a better and comprehensive coverage. Isn’t it?
Many of will agree to this; after all why find the middle ground for the future of your loved ones, when you can get term insurance policy easily.
Curious to know how can you do it?
Well, this guide to buying term insurance policy says it all!
photo supplied, courtesy of guest blogging network
Term Insurance Policy can give you adequate backing!
While you go shopping, one feeling echoes through your mind – “whatever you buy, should be the best!”
It is quite natural to think so, as these feelings have a direct connection to the money you’re spending.
And, the more money you spend on anything, you’ll be more concerned to settle on the best item. Same is the case with term life insurance policy too.
Some of you may ask, “Isn’t buying a term plan a waste of money?”
Nope.
If it fulfills your requirements, then acts as a knight in the shining armor!
Term Insurance Defined:
Term insurance is the most economical pure life protection plan. The term plan covers the risk of the unfortunate and untimely demise of the policyholder during the term of the policy. It provides the highest coverage with a nominal premium.
Salient Features of Term Insurance:
There’s a list of salient features of best term insurance policy. If you plan to buy a term plan, you must examine the features mentioned below:
Tax Benefits:
Often, people look for tax benefits while making an investment, be it insurance or any other avenue of investment.
But, does term insurance comes with tax benefits?
Of course, term life insurance can help you avail lucrative tax benefits under the Section 10 (10D) and Section 80C of the Income Tax Act, 1961.
Moreover, your premiums towards Critical Illness Riders are also eligible for tax exemption under the Section 80D.
However, tax benefits are subject to changes in the laws of tax.
Age of Entry:
Term insurance plan has some eligibility criteria, according to which, if you fall into the age bracket of 18 to 65 years, you’re eligible to buy term insurance.
Age of Maturity:
Just as the term insurance has an age of entry, it also comes with age of maturity.
But, what is maturity age? Maturity age is the age at which the term plan expires.
Generally, a term insurance plan has a maturity age of 75 years, some of these insurance policies may even mature at 80 years of age.
Sum Assured:
Sum assured is the sum, which is payable to your nominated beneficiaries after your untimely demise.
Claim Settlement Ratio (CSR):
Buying a term insurance policy? Check for the Claim Settlement Ratio of the insurer first. But what, do you know what CSR is? No worries, what are we here for?
Well, claim settlement ratio or CSR is the percentage of the claims honored by the insurance company.
Still confused? Let’s take an example:
If the insurance provider has honored 92 claims out of 100 claims, then the CSR of that insurer is 92 percent. The higher the CSR, the better it is for you.
Riders:
Next comes the riders, but what are these riders? Riders are nothing but just the added benefits with the term insurance policy to make your coverage better. You just have to pay a little extra from your pocket.
Five most fundamental riders to tailor your term insurance policy are: critical illness rider, accidental death rider, accelerated death benefit rider, waiver of premium rider, and income benefit rider.
Health Check:
Anytime your insurance provider can ask you to undergo health checks, in case you apply at a particular age or need a higher insurance coverage.
Types of Term Insurance Plans:
Term plans are of different types. The main kinds of term plans are:
- Increasing or decreasing term insurance plans – The sum assured increases or decreases as per a certain percentage annually.
- Level term plan – This is a basic term policy, which pays the sum assured upon the untimely demise of the policyholder.
- Monthly income plan – These term plans pay the sum assured in parts i.e. in monthly installments.
- Return of premium plans – This is the one and only term insurance plan with maturity benefit. The insurance provider returns the paid premiums to the policyholder upon his/her survival.
Buying a Term Insurance Plan:
Now that you have a fair idea about term insurance. Let’s shed some light on how to buy a term insurance plan.
There are basically two ways to buy a term plan.
One – online, you can buy it from the insurance provider’s website directly or via insurance web aggregators. Which is beneficial? If you buy a term plan through an insurance aggregator, you’ll get to compare various insurance products across various categories. This will aid you in making a wise and informed decision.
Second – offline, you can simply walk-in to the nearest branch of your insurance provider. You’ll be required to carry your ‘Know Your Customer (KYC)’ documents and fill-up the application form to complete the application process. You can also buy term plans with the help of brokers or agents.
The Path Forward:
If you have dependents, then you must opt for a term insurance policy. In the event of your untimely and unfortunate demise, your dependents will have a backup income source. The sum assured of the term plan will fulfill their needs. These insurance products are economical if you buy at early stages of life.
Author: Vikas Singh Gusain
