There are only two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle.”
― Albert Einstein
Life indeed is a gift and it is our prime duty to live it to the fullest. However, securing life and shouldering its responsibilities is also equally important, which brings us to term insurance.
Read on this article to learn about how you can choose a good term insurance plan.
What is Term Insurance?
Term Insurance is a life insurance plan which provides financial coverage to the beneficiary of the insured person for a given period of time.
In the event of the death of the policyholder, the beneficiary can claim death benefits from the insurance company. One can choose if they want to receive a lump-sum amount or amount in equal instalments or a combination of lump-sum plus monthly premiums, as per their requirements.
Term Insurance helps provide a strong financial stability to the family once the insured is no more, which is extremely important in today’s day and age.
Why Should You Buy Term Insurance
A term insurance works wonders when the breadwinner of the family is no longer around to feed his family. The term insurance premiums are low but yet it provides the family of the deceased with a full amount.
There are a few points that one should keep in mind before buying term insurance:
- If the insured survives the policy tenure, then the family will not be provided with any kind of maturity/ survival benefits.
- The term insurance policy should be such that it should be able to provide the family with adequate income post the insured’s death
Mentioned below are reasons why you should buy a term insurance plan:
- Low premium rate: There is no investment element in the insured amount, therefore the premiums are lower. Only one percent of the annual income goes in investing for the life cover.
- Financial security: It is always a good idea to provide a financially secured umbrella to the family on that unanticipated rainy day.
- Low rate of claim rejection: Always make sure to disclose all relevant details about you to the insurer viz; health conditions, personal habits, finances etc. This way an insurance company will never be able to claim non-disclosure of facts and your claims settlement process will become easy.
- Low brokerage: Brokerage fees are mentioned while selling a term insurance plan and it is a recurring expenditure. A certain percentage of the premium is deducted each time the premium amount is deducted.
- Riders: Additional benefits that come with term insurance plans to suit the requirements of the insured can be bought at an additional cost. Riders include critical illness, accidental death, partial or permanent disability etc. However, it makes sense to opt for a rider only as per one’s requirement.
Therefore, one should buy a term plan for the aforementioned benefits and also because it covers the personal expenditures of the family in the absence of the insured.
Term Insurance Benefits
Term insurance plan is known as a pure risk cover plan because it helps in mitigating the financial problems associated with any rising life threat, and also helps the family through any financial trauma incurred by them.
- Securing family future: In case something happens to the sole breadwinner of the family, the family members can still hold on to their former lifestyle as the financial cover will help them deal with their financial responsibilities.
- Safeguard against liabilities: Liabilities like purchasing a house, car, which are paid over time, can be paid off by the term insurance policy in the case of your unexpected demise. This way, it will also help your dependants in managing financial problems in your absence.
- Term life insurance plan is low maintenance: You can avail a term insurance plan at a relatively lower rate than other policies. Like mentioned earlier, only a measly portion of your income will be contributed in constructing a life cover for you.
- Tax savings: A term insurance policy provides you tax benefits under Section 80 (C) and Section 10 (D) of the Income Tax Act.
- Easy to understand: Term insurance plans are traditional pure risk life insurance plans. They are simple and easy to understand. They aren’t complicated like other life insurance products.
Term Insurance Tips
- Buying a term insurance plan in need: You should buy term insurance only ifyou feel you need it and not because others buy it or someone suggested you to buy the same. Calculate the amount of premium for yourself, the cover amount that you require and the tenure you’d like the cover for. However, experts suggest buying a term insurance plan early in life rather than waiting for the last moment. By doing so, the premiums too would be charged at a lower rate.
- Choose online mode over offline mode: Making a purchase online or offline will widely affect the amount you intend to invest and also your mode of convenience as well. You can buy a term plan online at the comfort of your home, office or for that matter any place offering internet services. Buying a term plan online will involve zero intermediaries and also fetch you cheaper options. You save on the fee of the insurance agent as well as the administrative charges, so going online is clearly the better deal.
- Decide the tenure you need the cover for: The tenure of the term plan is crucial. Ideally, a term insurance plan should cover the person for as long as he is working. The policy tenure should be the amount of time between the policyholder’s current age and the age he gets retired at. Also, the more the age of the policyholder, the higher would be the premium.
- Consider inflation: Inflation increases the price of every commodity, so the cover you find appealing today might not even be sufficient 30 years down the line. The periodic increase in the sum assured will also help increase the income as well as inflation rate.
- Compare the costs and benefits of the plan: Do thorough groundwork before going for any of the term plan. Your decision on which plan to buy should depend on the pros and cons of your term plan options.
- Claim Settlement Ratio: The claim settlement ratio of a company is the number of claims settled by a company in a given financial year. A company’s viability depends on it because the higher the claim settlement ratio, the better would be the company’s service and reputation. This is also a determinant of buying the right term insurance plan.
A term insurance plan should be bought analysing the aforementioned determinants, and buying it online is as easy as a pie. Just log on to Coverfox.com and find a gazillion plans at your disposal and choose the good term insurance plan by weighing all your options.