What is Term Life Insurance : It is a contract between a person and insurance company where a person pays certain amount of money(premium) frequently and in exchange he gets benefit on death.
Buying term life insurance policy is an essential need of our life. It should be our topmost priority once we start earning. It is advisable to take such kind of decision early in our life, because our premium depends on age. Once age increases, premium too increases. It is necessary to have some basic research before buying term life insurance policy. It will lead you to take better decision and eventually will provide you benefit in case of uncertainity. Now. let us see which parameters we should keep in our mind while buying a term life insurance policy.
- Coverage you need : There is a need to do some basic analysis before deciding coverage of your policy. 2 things which are utmost important for deciding coverage is your age and your earning amount. You can predict your retirement on the basis of your age. Multiple of your annual salary and no of years left for retirement will be satisfactory coverage. Suppose your age is 40 years and annual salary is 5 lakh. If you are planning to retire at age 60. So, as per above formula, it will be 20*5 i.e 1 cr. primary purpose of term life insurance is to provide financial security by replacing income of life insured.
- Term of your policy : It is one of the important factor which decides your premium. Premium is directly proportional to policy term. It means premium increases with increase in policy term. You need to know your retirement age. On basis of retirement age, you can decide on policy term. Suppose your age is 25 and you want go retire at 65, minimum policy term you should take should be 40. It would be great if you cover yourself till age 99.
- Premium paying term : Regular or limited are two options available. Regular means policy term and premium paying term are equal. Limited means policy term and premium paying term are different. let us understand with an example, a person of age 50 wants to buy a term plan. he has decided to retire at 60. His earning life is now for only 10 years, but he wants to cover himself for more than 10 years. in such scenarios, limited plan comes in picture, where his policy term is 20 and premium payment term is only 10 years. Post 10 years, he will be free as he don’t have to pay any premium. If he has opted for regular plan, policy term and premium paying term both would be 20 years. He will have to pay premium for 20 years. In limited plan, customer pays premium more than regular plan.
- Premium you can afford : Insuring yourself for higher coverage is significant decision. One most important part is to have an eye on your premium. It is advisable to calculate your expenses like EMI, household expenses,etc. On basis of calculation, you will understand whether premium is affordable or not. Once you are clear on savings and expenses, you will be confident enough to take decision, which won’t create any chaos in future.
- Frequency : You have to decide how frequently you can pay premium. There are various options available i.e Yearly, half-yearly, quarterly or monthly. On the basis of your potential, you have to choose whether you can premium at one go or not. Most of the plans offer discount in premium for yearly and half yearly. It is a good decision to opt for yearly or half-yearly rather than quarterly or monthly.
- Riders : Riders are additional cover on the base plan which you can add to avail more benefits. You have to pay additional premium too for adding rider. There are various riders like Additional death benefit, Disability, Critical illness etc. Accidental death benefit comes in picture when life assured dies due to accident. During such circumstances, Life assured gets base as well as rider benefit provided his policy should be in in-force(all premiums are paid till date) status.
- Compare premium : When your above points get cleared then you should compare premium of different insurance companies. It is good to check online insurance policies too, so that we can have adequate options. Based on research, appropriate decision can be taken.
- Check claim settlement ratio : This is the most important step while buying term insurance plan. We all buy insurance policy for financial security of our dear ones. It is our responsibility to buy term plan where claim settlement ratio is finest. it is advisable to have some basic research of claim settlement ratio of respective life insurance company.
- Beneficiary : Beneficiary is the person who gets benefit on your policy. In case of uncertainty, beneficiary will receive Sum assured. Multiple beneficiary can be added provided total percentage should be 100. If you have added minor one as your beneficiary, appointee too is required. Appointee should be greater than 18 years.
- Have policy from trusted agent : Try to take policy from your near ones, from which you have good relation. He can guide you to choose best policy from available ones. Policy servicing is required sometimes which can be done with least efforts. Example of policy servicing is that you have to modify a beneficiary or you have to change frequency of your policy. Agent can guide you in such cases. In case of any uncertainty, agent can help your family to get claim easily.
Disclaimer :
This article is not sponsored and not meant for endorsing any particular insurance company. Please Check Terms and Condition of respective organization along with inclusion and exclusion before buying insurance policy.