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Over the last few years Term insurance plans have gained tremendous popularity. This is because –
Unlike ULIPs and endowment plans, a term plan does not include investment hence the cost of owning Term Insurance Policy is lower.
People are realizing that it is wiser to keep insurance and investment separate.
The cost of term insurance has also gone down significantly which brings them within the reach of a common man.
But before you are tempted with fancy adverts or benefits described by insurance agents, it is advisable that you educate yourself about a few basics that will help you choose the right term plan.
The purpose of the term insurance is to provide the family members of the Policyholder sufficient money which replaces his income in case of his unfortunate demise. Your insurance cover should therefore take into account basic expenditure of the family, any liability that the family may have and should also provide for the critical goals of the family such as education and marriage of the children.
When calculating your cover, do take Inflation into account. If the cost of educating your child is 10 lakhs today, it will be much higher after 10 years if you factor in inflation.
Another very significant factor is the term of your insurance cover. Earlier the ideal tenure was one which extends till the age of 60 years, however, late marriage and delayed child birth means, your responsibilities may as well extend till the age of 65 years. I suggest you not to buy insurance for short terms even if you find it cheaper as these may get over when you are still in your 40s. Realize that your need for cover is greatest when you are in your 40s. Moreover, if you go for term insurance when in 40s, it will cost you a lot.
Many insurance companies offer relevant Riders with their term plans. Depending on your preference you can buy riders such as critical illness, accidental d
Insurance comparison websites such as EasyPolicy.com help you compare insurance plans online and choose the best term plan. However, it is advisable that you do not choose the cheapest plan. Take into account Claim settlement ratio and customer service offered by the insurance company.