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The Ultimate Guide to Buy a Term Life Insurance

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The Ultimate Guide to Buy a Term Life Insurance

Nowadays, life insurance is not restricted only to the age-old, traditional endowment insurance covers. The expansion of the insurance sector in the past decade has brought in a several companies, catering a variety of choices and options with a wide range of plan features. This includes a plain life cover, or a money back policy plan for your family commitments or a pension cover with regular income streams.

So, do not get baffled with these choices. We give you an easy and ultimate guide to help you through the buying process of a term life insurance.

What is Term Insurance?

A term insurance is a pure life insurance product that is easy on your pocket. The term plan covers the death risk and promises to offer a lump sum death benefit to the beneficiaries of the insured in case of any mishap during a specific period of time. In the event of any unanticipated condition, the family of the policyholder is taken care of and assurance of financial stability is given. However, if the insured survives throughout the term of the policy, no benefit is provided, except in case of the premium return policies where the insured receives the aggregate of all premiums paid.

Since no investment is attached with the Term Insurance Plan, the premiums are to be paid only towards the mortality charges. This is why the Term Insurance premiums are less expensive than various other Life Insurance options in the market.

Key Features of Term Insurance Plan:

There is a list of key features of a term insurance plan. If you are planning to buy a term insurance cover, you must scrutinise the following features of the plan:

Sum Assured:

The Sum assured is the amount that is payable to your nominees after your demise.

Entry Age:

A person falling into the age bracket of 18 to 65 is eligible to buy a term insurance cover.

Maturity Age:

The age at which the policy expires is called as maturity age. Usually, most of the policies have a maturity age of 75 years; however, a few may even go up to the age of 80 years.

Tenure:

The duration for which the policyholder has a life cover is the tenure of the plan. For instance, if a person with an age of 50 years wants to enter the term plan with a maturity age of 80 years, will have a tenure of 30 years. The tenure of a term plan may range from 10 to 40 years. You must seek for maximum possible tenure that the company allows for your age to obtain the best possible life cover.

Claim Settlement Ratio:

If you seek a term life insurance cover, you must ensure that you are buying it from an insurer who is offering a higher claim settlement ratio. This ratio signifies the percentage of claims that the insurer offers. For instance, if the insurer honours 90 out of 100 claims in a year, the Claim Settlement Ratio (CSR) comes out to be 90%. One must choose a company on the basis of its claim settlement ratio.

Riders:

The added benefits provided by the insurer to your term insurance plan that make your insurance coverage better. For instance, you buy a term plan with an accidental death rider. It may pay Rs. 50 lakhs in case of your death and an additional amount of Rs. 25 lakhs will be paid if the demise has been caused due to an accident.

Health Checks:

The insurer can ask you to undergo health tests if you apply at a certain age or need a high insurance cover. For instance, if you are an applicant who has attained an age of 50 years, then you will have to go through a comprehensive health test including Urine sample test, blood sample test, and HIV test and so on.

Types of Term Plans:

There are several types of term plans rolling over the market. The main types of term plan are as follows:

  • Level term plan
  • Increasing or decreasing term plan
  • Return of premium plans
  • Monthly income plans

Level Term Plan:

Level term plan is a basic plan. The insurer pays the sum assured at the demise of the insured.

Increasing or decreasing term plans:

The sum assured is increased or decreased according to a specified percentage each year.

Monthly Income Plans:

Despite the fact that, the sum assured by many of the term plans is paid in a lump sum as a death benefit. But the sum assured is paid in monthly instalments under the monthly income plan.

The Most Common Riders and Add-ons:

The coverage of your Term Insurance Plan can be improved or increased by adding the following term insurance riders:

Monthly Income:

The nominee of the insured is paid a monthly income in some term plans for a specific number of years. A small percentage of the sum assured could be the size of the income. This income can be more than the sum assured. The monthly income can be above and beyond the sum assured. Moreover, this rider also has an escalating income variant in which there is an increment in the assured income at the end of every year for which the income is assured.

Accidental Death or/and Disability Rider:

The accidental death or/and disability rider caters an additional sum assured in case of the demise of the insured or any disability is caused by an accident. This covers both temporary and permanent disabilities.

Premium Waiver:

Under special circumstances, a few of your premiums are waived off in some term plans like terminal illness, disability and critical illness.

How to buy a Term Plan?

You can buy a term plan via two means, i.e. online and offline.

You can purchase a term insurance cover directly from the website of the insurer or through an insurance aggregator. Buying through an insurance aggregator lets you make comparisons of several products available with their features so that you make a wise choice as per your preferences.

With the offline mode, you can visit any of your nearest branches with your KYC documents and fill-in the application form to complete the buying process. You can also purchase an insurance cover with the help of agents and brokers.

If you have dependants in your family, then you must have a term insurance plan to secure their future. In case of your demise, your dependents can have their needs fulfilled with the sum assured received from the insurer. Term plans are not only affordable but also assure peace of mind for you and your dependents.

You may also like to read: 6 Reasons Why Term Insurance is a Must Buy

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