People often wonder how their family will survive in their absence. While they may never be able to avoid the emotional loss, they can do something about the financial gap that the family may face. Term insurance acts as an alternative monetary source for your loved ones in your absence. It provides life cover for a fixed period in return for the premiums you pay. Buying term insurance is a huge financial decision that affects you and your loved ones.
Here are ten things to keep in mind before you purchase a term plan:
Choose adequate coverage
The coverage amount is a key factor to decide on while buying a term plan. The meaning of term insurance, in a nutshell, is low premiums and high coverage. As a policyholder, take into consideration the financial needs that your dependents would require in your absence. Also, examine any loans or debts you have. Choosing the right amount of coverage ensures that your family will not face any financial insufficiency in your absence.
Prefer buying earlier
If you are young, you might not bother browsing for term insurance plans, since you may have little to no financial liabilities or responsibilities. However, the same would not be the case five or ten years later. If you purchase a term plan at a later age, you would be required to pay huge premiums. As insurance works simply, the more your age, the more likely is your premium. Buying insurance in your youth is valuable, as with low premiums you get a huge life cover.
Ensure transparency regarding health changes
As you age, you might develop blood pressure, diabetes, thyroid, or any other chronic conditions. Ensure that you keep the insurance company in the loop about it. Do not fret thinking that notifying the company would lead to an increase in premium. Hiding crucial information regarding your health may lead to claim rejection altogether.
Compare and buy
There are several companies offering term insurance. Ensure that you use a term insurance premium calculator, compare the choices you have, and then purchase one. When you evaluate the different options you have, you will find the one that offers the most value.
Choose the tenure carefully
The meaning of term insurance is life cover for a fixed period. You need to ensure careful calculations and evaluations while determining the tenure of your term insurance. For how long do you want your term life to be covered? For example, if you are 35 and you only want to be covered till you are 60, plan accordingly. If you feel that after 60, you do not need any life cover, choose a 25-year term plan. If you select a tenure less than you require, it might again lead to the purchase of term insurance at a later age, which is expensive. While, after 60, if you have no dependents and liabilities, term insurance would seem unnecessary.
Read the contract carefully
When you are buying any financial instrument, reading the fine print is essential. Ensure that you are well aware of all the terms and conditions of the insurance company before buying a term plan. Also, ensure that you have filled in all your details carefully.
Prefer buying online
When you are browsing through different term plans, you will notice differences in prices online and offline. As when you buy through an agent, the agent’s commission cost is added to your insurance. An online purchase is more cost-effective while offering the same benefits and features. Use a term insurance premium calculator online to get an estimate of your premiums and coverage.
Consider the rider options available
Riders are like the add-on coverage on your existing term insurance plan. The common riders that you can choose with term insurance are disability, accidental death, or critical illness. Look through each rider and choose the ones that add value to your existing term plan.
Choose a trustworthy insurer
When you are narrowing down the term insurance plans available, remember that the insurers that offer the lowest premiums may not always be the best ones. The claim settlement ratio and the overall reputation of the company play a huge role. Look for a company that has a good claim settlement ratio and is well known in the insurance sector.
Do not withhold any information
Many policyholders avoid disclosing facts about themselves that would lead to a higher premium. While your insurance company may not know it now,if they find out about it later, your nominee’s claim might get rejected altogether. Instead, disclosingthe habits you have, be it smoking or drinking, or any chronic health conditions, ensure that your insurance company knows all about you.