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Friday, March 29, 2024

4 Key Factors To Consider When Buying A Term Insurance Plan

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[dropcap]H[/dropcap]aving life insurance policies like that of term plan is important in today’s world, but what are the steps that a prospective insured must take to choose the term insurance plans available in the market?

It is important that the insured’s insurance is adequate. This guide will pave the way for you to make the following necessary considerations, while about to buy the term plan that fits your budget and requirements.

Life Insurance is not something you can afford to test the waters with. Choosing the best term insurance plan would need to involve prudence and pragmatism. This is because life insurance does not only protect the family members of the insured from any unexpected turns of life but also provides financial security in the face of the passing away of the family’s only earning member.

The truth of the matter is that a term life insurance plan is not supposed to be about an investment of the insured’s money, that sees a return upon being matured. Rather, a term insurance plan, is more geared towards providing financial stability to loved ones upon the demise of the insured.

One of the key logic behind the hefty amount of the entire insured sum in any life insurance policy would be that the insured sum must be huge enough to be able to take care of any liabilities of the dependants that may be outstanding as well as their future endeavours. Simultaneously, it is important to check up on the other considerations regarding the life insurance policy, such as tenure.

It is important both have the life insurance policy as well as ensuring that the insured sum is adequate with regards to expected necessity. The calculations regarding the sum assured that will be sufficient for the insured both as an individual as well as a family man with dependents, is exceedingly important. As a thumb rule, salaried individuals who are of 40 years of age, or below it, must have covers that are around 20x their yearly income. Those above 40 years of age may choose a cover of around 10-20x their annual income.

1. It Is Important to Provide The Insurance Company with Exact Details at All Times

An insurance contract is, in its entirety, based upon the principle of trust and good faith, between that of the insurer and the insured. Any health insurance policy would become nullified immediately in case of the insurance company discovering that incorrect details have been provided by the insured. The premium to be paid by non-smokers may be significantly lower, but if you are indeed a smoker, do not get tempted by this difference and choose the wrong option. It is good to let the insurance company know of your smoking habits, other detrimental lifestyle habits like drinking or any existing medical conditions either of you or family member, such as diabetes, well in advance, so that you do not face immediate rejection of claim, like some claims that do get rejected due to falsification of information.

2. It Is Important to Choose the Right Tenure

The chief objective of term plans is replacing the policyholder’s income upon his demise. Therefore it is important to take up insurance till the policyholder’s expected work life, which can come between a range of 55 – 65 years of age. Longer plans offering coverage up to an age of 100 years are also available in the insurance market. If you buying LIC term plan offering coverages till a mere 15-20 years, ending up on the insured reaching his/her 50s does not make much sense. In reality, this age is when your insurance needs are the highest. However, buying policies after reaching the age of 50s is quite expensive. Hence it is advisable to buy cover at earlier stages of income when there are much fewer possibilities of getting lifestyle diseases due to the young age of the insured.

3. Prices Must Not Be The Only Concern

Undoubtedly, pure term insurances are the very cheapest of their kind, since they come with zero investment component. As of now, for a sum of Rs. 8,000/- – Rs. 10,000/- each year, an insured may buy covers worth an assured value of around Rs. 1 Cr. But, for any policy seeker the lower amount of premium cannot be treated as the sole deciding factor while choosing a term insurance policy. It is always better off to compare the various benefits and other features such as the ratio of claim settlement and the different add-ons associated with the plans online before finalising a policy. It does not make much sense to buy covers which cost less but provide coverage less than what is necessary.

4. Always Get The Prerequisite Medical Test(s) Done

Since any term insurance would generally provide high-value covers, the insurance company would ask the policy seekers to undergo thorough medical tests before they issue any policy. Nevertheless, in exceptional cases (mainly if the age of the prospective policyholder is young) the insurance company may not insist on getting the medical examination done. In that case, only a self-declaration ensuring the insured’s good health suffices. However, any policy seeker, logically speaking, must avoid signing upon the self-declaration form as it might later put you in a bad place. In cases of the sudden and early demise of the policyholder, the insurance company sometimes tries to prove that the policyholder had lied while buying the policy, misleading the company against the fact that he or she was already suffering from pre-existing diseases. By being thorough with the extensive medical tests, the responsibility of ensuring the policyholder’s condition would shift to the company and the examining doctor(s) instead. Ensuring the proper medical examination would make sure that the insurance company is never able to dispute the claim laid by the policyholder upon untimely demise.

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