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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.
Term insurance 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 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.
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.
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.
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 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.
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.
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