Categorized | Term Insurance

things you need to know before You buy a term plan

Having Dependants is a matter of responsibility and we need to ensure that we take this up well. Earning enough financially, offering a good quality of life and taking good care of your family dependants is the major aspect of this responsibility.

But the responsibility does not just end here. You also need to ensure that the dependants in your family are also taken care off well and lead the same quality of life even in case you met with an unfortunate early death. So, we need to buy Term insurance which will provide the necessary Risk cover to deal with such situation. Buying any Term Insurance is not going to solve the problem and you need to be prudent while making a choice of term insurance plan.

To buy the right policy, you need to be aware of the following:

1) Do I need a risk cover?Term insurance is required if you have family members either children, spouse or parents who are dependent on you and you do not have enough savings  to cover the cost of living for the family for the rest of life and any ongoing/future loan liabilities.
 
2) How much Risk Cover is adequate?

The higher the risk cover you choose the higher would be the Premium on the plan. Be sure that the term cover you choose is adequate to help your family sustain the same quality of life as they are pursuing today. Thumb rule says that you should be covered for an amount that is 5-10 times the annual income.
 
3) Benefits of term life insurance

You need to be sure of term life insurance benefits before buying one. A term insurance is a pure vanilla insurance product that offers risk Coverage in the event of an unfortunate death of the insured. Buying term life insurance is cheaper when compared to alternate insurance product like unit linked insurance policies (ULIP) and endowment policies. By paying a relatively small insurance premium, the risk coverage that can be obtained is much larger than for ULIPs. Like other life insurance policies, you also enjoy term insurance tax benefit.
 
4) Do I need additional cover beyond pure life cover?

A pure vanilla term plan offers risk cover only against death of the Insured but there are other situations in life when a risk cover would be as important like suffering from Critical Illness or Accident leading to permanent disability. There are Riders that come with a term plan and if you think these riders will add value you can add it your term plan cover.
 
5) What is the right age to purchase a term insurance?

The earlier you buy a term plan, the better it is for you. If you have started earning it is advisable that you buy a term plan. Buying early gives you the benefit of lower premiums.