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Every time you plan a dinner with a couple of friends, you end up paying worth of Rs. 1000 at the minimum. The latest superhero movie along with some nachos and a good company sounds amazing. And it would cost you about Rs. 600-700. These are things that most of us do on a regular basis. Imagine if by paying an amount similar to this, you could secure your future, wouldn’t that be great?
Let us assume you are someone who is 30 years old, paying a premium of Rs 700-800 per month would give you a life cover of 1 Crore for a duration of 30 years. Sounds too good to be true? That is term insurance plan in a nutshell for you. The purest form of insurance that gives you a large cover by paying a very small amount as insurance premium. Of course, cost should not be the only criteria for selecting a term insurance. Here are a few things to look out for while selecting a term insurance plan.
Having a life cover that is not adequate, kind of defies the very purpose of buying a term plan. You should opt for a sum assured that not only would take care of regular expenses, but also handle larger expenditures such as education of children and pay for debts like home loan when you are not around. Apart from all these, you also need to factor in inflation to decide the sum assured.
This is the most crucial as well as light hearted part of the term insurance. People in the age group of 25-35 can walk away with a term insurance of 1 Crore cover by paying an amount equivalent to a bottle of mineral water daily. Of course, the premium amount varies among insurers, but younger people enjoy cheap premium amounts. A male non-smoker of 25 years old would end up paying Rs 7500 as a yearly premium for a term plan of 35 years. On the other hand, a male non-smoker of the age 40 years would have to shell out approximately Rs. 16000 per year for a plan of 20 years.
The term of a term insurance plan is as critical as the cover that you opt for, if not more. Having a term plan throughout your working life gives additional financial security. The average working life was about 60 years for a very long duration. But experts now believe that it has gone up to about 65 years. Thus, look for a plan that gives you cover till 60-65 years. You can, of course, opt for a plan of 15-20 years, but that would give you coverage only till your 50s. When your responsibilities are at peak, you wouldn’t want to leave anything to chance. One can opt for buying a new policy to extend the term, but later in life, the premium of these policies might go up dramatically.
Make it a point to be as clear as possible when it comes to providing information regarding your health while filling up the term plan forms. Insurance companies do charge you lower premiums if you do not have any medical problem history, but that might come back to haunt you if you are not being transparent. Insurance companies discard about 2% of all term plan claims every year. That’s because the insured failed to disclose all information regarding their health. You might end up paying a few hundred or thousand more, but don’t leave any room for error when it comes to claims.
It is a good habit to look into the financial stability of the insurance company you want your policy with. The simple rationale being, a term plan is a long-term association and the company should be stable enough to pay for claims made. A company that has a good history of claim settlement is doing quite good and does not have any probabilities of shutting down would be ideal for the choice.
Term insurance plans bring lots of flexibility along with them. Thus, you can choose to expand the horizon of your insurance cover by adding riders to your plan. The following are some of the riders that you can add up to your existing plans such as:
To ensure that your policy doesn’t lapse in the event of you being unable to pay the premium amounts, you can opt for this rider.
Critical IllnessThis rider becomes extremely resourceful during the diagnosis of any critical illness. It keeps most medical expenses at bay for you so that there are no financial hindrances as far as your treatment goes.
This is an additional cushion for your term plan. If you are someone who travels a lot or wants to leave behind a substantial amount of money in case of sudden death, you can opt for this rider.
Any form of partial or permanent disability due to accidents may result in loss of income. This rider enables regular payments (certain percentage of sum assured) to the family of the insured in such cases.
You can opt for this rider if you are the bread earner for your family and wish for a regular source of income even when you are not present.
Keeping the above points in mind, one should go ahead and purchase a term insurance. It is the best financial gift you can give to your family for securing the uncertain future.