Is Buying a Term Insurance Plan a Smart Decision?
Why Term Plan is a Must Have
The share of pure protection plans in the total life insurance offerings surged from 27% in 2014 to 45% in 2015, says an article published in DNA published in January 2016. So, why is the popularity of such plans increasing?
Term insurance policies are the only pure life insurance product sold in India. They tend to offer a higher cover at a lower cost as the entire premium amount goes towards funding the risk. A term plan is the only product that offers a comprehensive cover to take care of the financial needs of your family after your death. Moreover, it offers peace of mind that you have fulfilled your responsibility towards your loved ones. Tax deductions on premium payments are no less than icing on the cake.
How to Choose the Right Policy?
Once you have decided on term insurance policies, the next step is to choose the right one. For this, you must first determine your insurance needs. Although it does offer tax savings, treating it as a mere tax saving instrument can leave you under insured and totally defeat the purpose of buying life insurance. You must choose a cover amount that will take care of your family’s financial needs after your death.
Some of the factors that you must consider while choosing the cover are your family’s standard of living, daily expenses, your child’s education and marriage expenses, debts that you are paying off and the inflation rate. While choosing the tenure, you must keeping your debt paying time window in mind. You can either choose a tenure till your retirement or till the time you expect your children to become independent.
While choosing a policy, you must weigh its pros and cons and determine whether it is value for money. You must also check the claims settlement ratio of the insurer, says an article published in PolicyBazaar.com in October 2015.
Online vs. Offline Policies
It is a good idea to buy term insurance online as these policies can be as much as 40% cheaper than their offline counterparts, says an article published in BusinessToday.in in September 2015. This is primarily due to the fact that there is no intermediary involved. You can either get lower premiums for the same cover or a higher cover for the same premium. Buying a policy online also saves you a lot of time. All you have to do is calculate your premium, upload your KYC documents and make the payment via net banking and you are done!
Do and Don’t of a Term Insurance Plan
Although term policies are fairly simple products, but simple mistakes can cost dearly at the time of claims settlement. One of the first things you must remember is to buy a policy as early as possible. You may need to pay higher premiums as you age.
One of the other ways to lower your premium is by choosing the annual mode of payment, says an article published by Firstpost in March 2016. You must also provide complete and correct information. Providing incorrect personal details may result in claims rejection.
It is important to review your insurance needs and nomination from time to time, says an article published by Bharti AXA life. You may have bought a policy when you were single and had nominated your mother. You can enhance the cover once you get married and make your spouse or child the nominee. You can also split your term plan and buy separate policies for two different nominees. This ensures that the sum assured is received by the person you intended it for.