Tag Archive | "Term Insurance"

What are The Factors That Have to Be Kept in Mind while Taking Term Insurance?

  • Easypolicy
  • 22 Jul 2016

If you are an earning person and your family depends on your income your life is very valuable. Like every valuable thing you must get insurance for your life. The loss of your life will be very heavy on your family, not just emotionally but financially also. The problem is even more serious if there is no immediate person in your family who could take the role of the bread winner .The sustenance of that family comes into question.

Term insurance is the purest form of life insurance  The company pays a specified sum Assured to your nominee in case you die between the Policy period, the company does not pay anything in case you survive the policy Term or duration.

Although term plan is the simplest form of life insurance to understand there are lots of factors you must consider before buying a plan. Some factors are discussed below.

Evaluate how much cover to go for

Your Premium increases with the increase in coverage. Thus, you must evaluate the needs and requirements of your family, your current monthly expenditure and savings of your family, your outstanding liabilities and based on those you must decide the coverage. The industry rule is that you must take a cover at least equivalent to 12 times of your current annual income.

Your present life stage

Your financial Coverage needs would vary on the number of dependents you have upon you. The responsibilities of a single person would be different from that of a married person. They may change further after having children and again when they grow up. The single earning person in a family would require more coverage than the one whose spouse is also working or have grown up kids. So assess at which stage of life you are at and then decide the cover.

Capability of family members to manage money

Many times it is seen that the family members are not adept to handle the lump-sum money received from the insurance company after the unfortunate demise of the policyholder. They may spend it all lavishly in a short period of time and then left with nothing afterwards. To protect them against this Hazard many policyholders go for a plan that provides payout periodically rather than in one go. So you need to judge the Maturity level and capability of your family and then decide the form of payout you need in your policy.

 Outstanding liabilities

Your term policy should be strong enough to pay all your outstanding loans and credits as you won’t want your family to deal with the creditors in your absence. Make your death easy on your family by not burying them below outstanding loans rather your policy should be good enough to leave enough for your family to lead a comfortable life after paying your debts.

 Protect the lifestyle of your family

Your family goes through colossal emotional loss on your death thus; it brings upon you a moral responsibility to not add financial pains on your family. It is not a nice scenario if your family has to bring down its current standard of living because of your demise. So, ensure that your policy brings in enough proceeds from the insurance company to enable your family to live with same standards as they are used to in your lifetime.

Policy Term

Policy term is the duration of the policy of it being alive. The insurance company is liable to pay only if the Policyholder dies within the term bracket. Ideally, it is calculated by deducting your present age from your retirement age. For example if your present age is 30 years and you would retire at 60 years. Then your policy term should be minimum (60-30) 30 years. If you are self employed and your retirement age is uncertain, you should go for the maximum term you can get in the market. The longer the term the longer are the chances of your nominee getting the claim.

 Choosing the right insurer

A term plan in general is a very long term plan. You would be paying premiums over multiple decades in most cases. So, you need to be double sure about the Insurer with whom you are planning to get into this long term professional relationship. The thumb rule is to go for companies which are old and have created good reputation and name for themselves in your country. You may consult an insurance professional regarding choosing a company. Another way to judge the insurer is to study its Claim settlement ratio (CSR). Claim settlement ratio tells how much claims the insurance company has approved out of the claims that were filed in a year. It should be minimum 90% and more. The closure it is to 100% the better.

Policy Mode

Another decision people have to make these days is to decide whether to buy offline term plan or online term plan. The online plans are cheaper by as much as 30% as there are middlemen involved as in case of their offline counterparts. But online plans are not available in every city of India as of now and there are people who are comfortable buying plans from their trusted insurance consultant rather than online. So, based on the availability, your comfort level and price factor decide the mode of your purchase.

The above are important factors that you must keep in mind before buying a Term Insurance plan. A very important thing to consider while buying a term plan is never conceal factual information from the insurance company as it may lead to breach of trust and would raise

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Do you Know About Term Insurance Policies?

  • Easypolicy
  • 30 Jun 2016

Term insurance is one of the simplest forms of life insurance still many people have ambiguities regarding it. This article is an attempt to clear many of those ambiguities and answer frequently asked questions about it.

For starters let’s find out what is a Term insurance plan?

A Term Insurance plan is the purest form of life insurance. Under this plan the insurance company pays a pre-specified sum to the nominee of the latter if he dies during a specified time period called Policy term. If the Policyholder survives the term of the policy then nothing shall be paid by the insurance company. This plan aims to replace the income of the deceased policy holder so that his family is saved from the sudden financial Risk by the cease in income of the deceased.

Some wonder, why is the premiums charged for Term plans so low as compared to other life insurance products?

The answer to that question is Term plans do not have any investment component. The insurance company is liable to pay only when the policyholder expires during the currency of the policy. There is no survival benefit that is why the Premium is kept low.

One of the most practical questions that people ask about term insurance is how to choose best term plan?

a)      Go for a company that has the best Claim settlement ratio. Claim settlement ratio of nearest to 100% is the best.

b)     Go for the company providing the maximum Coverage period.

c)      Company charging a cheaper premium is always more lucrative for the buyer.

d)     Term plans are highly customizable. Companies that provide the desired features lure more customers.

Another important question related to term plans is can everyone buy a term plan?

The answer to the above question is no. Only an earning person who can present valid income proof and falls in the age bracket of 18-65 years is eligible to buy a term plan. The eligibility criteria vary from company to company.

Can term plans be converted to other traditional plans?

Yes, the convertible option is available. The term plans can be converted to whole life insurance or endowment plans by paying extra premium.

What would happen if I missed a premium?

This question worries some curious heads. Generally a Grace Period of 30 days is granted when the mode of paying premium is annually and 15 days in case of half yearly mode of premium. So, even if you have missed your policy renewal date you can contact your agent or directly the insurance company and communicate your intent to continue the policy and submit the premium with the grace period.

Are medical tests required for the issuance of term plans?

The answer is yes. Generally, the insurance company issues a term plan only after conducting the medical tests and it may reject issuance of policy in cases where they find a person unfit beyond their acceptable limits.

Some people ask whether they would be issued the term policy if they are smokers

The smokers can be issued insurance policies but they would have some loading on their premium as the life risk is higher than a non smoker. As term plans are issued after a medical test if the health condition of some heavy smokers is very bad they insurance company may not issue them the policy.

Can I change the nominee during the currency of the policy?

Yes, you can. You have to intimate the insurance company your desire to change, add or reduce the nominee/s and the required changes would be made.

Can I buy multiple term plans?

Yes, you can buy multiple term plans provided you have not exhausted your eligibility. A person is eligible to buy term plans carrying sum assured worth not more than 20 times of the person’s annual income. With advancement in age the eligibility percentage keeps shrinking.

Another very popular question asked by people is whether suicide is covered under a term plan?

This is an interesting question. All types of deaths are covered under term insurance plan including suicide from the second year of the policy. Suicide is not covered in the first year of the policy.

What tax benefits will I get if I buy a term plan?

This is a favorite question of many proposers. The premium paid under term insurance plans is Deductible from the taxable income under section 80 C of the Income Tax Act, 1961. Maximum deduction under section 80 C is allowed up to Rs. 1,50,000. Moreover, the proceeds from the insurance company at the time of claims are fully exempt from tax under section 10(10)D of the act.

The above are some of the important questions asked by people while considering life insurance plans. While buy insurance plans it is good to ask as many questions that come across your mind. You should shoot numerous questions at your insurance advisor. The more you ask the more you know. Also plans of various companies should be compared to chuck out weaker plans. Comparing saves you money and promotes a satisfying purchase. Term plans are very important for your families secure future, thus, one must be double sure while buying a plan.

Guide to Buy Term Insurance

  • Easypolicy
  • 01 Feb 2013

The birth of a child is a life altering event. Soon after a child is born, parents plan and do things to ensure that the child has the best in life. They ensure that the child joins the best school or college in town and has the best things in life. However, you must have enough money in hand during the key milestones to provide them the best. Also, all of a sudden the bread winner of the family might be no more.

In these kind of situations, a Term insurance Policy comes to you and your family’s aid. The fixed term ensures that you have lump sum money in hand when you need it the most, and it provides the Assured sum to your family in case of your death. In addition, term plans are the cheapest insurance plans available as there is no investment involved. However, you should know all the policy features in detail to avoid the Claim getting rejected later.

Choosing the Right Plan

Though getting Term Insurance will make life easier for you and your family, choosing the right term insurance plan is a tough job. You must first read the policy documents in detail to avoid problems later. Here are some other important guidelines that will help you in buying the right term plan:

•    You must decide the time period for which you need the plan. Term life insurance plans in India usually provide protection for 10, 15, 20, or 30 years.

•    It’s advisable to buy the policy when you are young and in good health. Also, every insurance company has an age and term upto which one can renew a policy. The age is generally 65-70 years and the term normally is 30-35 years for renewal.
•    Companies may offer Riders like accidental death benefit, terrorism death benefit, Critical Illness benefit etc, which may be valid upto a particular age. You must get the ones you need, but they come at an extra cost.

•    Knowing the Exclusions and conditions when insurance amount will not be payable is very important to avoid unnecessary pain during claims settlement.

•    Buying online term insurance comes handy when you want to compare term plans from the comfort of your home, ideally using policy aggregator sites. You can compare term plan for minimum Premium and best features before you settle for a plan.

•    Some companies provide the option of converting term plans to other long-established plans like endowment plans or money back plans etc. at a later stage. Consider these to see if they benefit you.

•    Assess your policy every few years. This will help you modify your features and save money on your premiums if your situation in life has improved.

Buy a term insurance policy today and let your family be financially secure when they are struggling with the emotional pain of losing you. Also, you can avoid sleepless nights thinking of what will happen to your family when you are no longer alive to take care of them. However, knowing all the policy features well is imperative to avoid problems later.