Term Insurance is one of the most popular policies sold by all Insurance companies. The financial security to dependents and low premium of life insurance plans, are the two factors that make this the most sought after insurance.
Let us evaluate a few reasons due to which a person chooses a Term Insurance policy:
- Simplicity: Term Insurance Plans for a layman. The premium is calculated based on the entry age and the sum assured that the purchaser chooses. The insured is covered for the policy term. In case of death of the insured during the policy term, the beneficiaries get the sum assured amount. If the policy term has expired or the renewal payment has not been paid on time, the beneficiary doesn’t get anything. In case the insured survives, he/she doesn’t get anything. So, it’s an easy-to-understand policy for a common man.
- Low Premium: Being a pure life insurance policy, the premium is lowest in the band of all insurance plans. Hence, it is suitable for a person to start insurance at the beginning of his/her career, when perhaps, he/she cannot afford a high premium policy.
- Flexibility: Most Term policies provide the option for add-on riders like accidental death, premium waiver, critical illness etc. There is also a facility to convert the Term Policy into another high premium policy, at a later stage. This enables a person to shift to another category of insurance plan as and when his/her affordability factor rises. Also, consequent to marriage, children etc., if one wishes to increase the coverage, these plans enable the same.
- Security against Liabilities: This is an ideal plan to purchase for persons who have availed home loans, car loans and have a huge debt to service. Purchasing a term plan ensures that, in the event of their untimely death, these debts can be paid off and the dependents are not financially burdened. This also ensures that home, car and other assets remain with the family.
- Partnership Owners, Start-ups, and Professionals: These Term Plans are ideal for today’s young entrepreneurs who are starting their own venture. By purchasing a Term Insurance, the family can be secured from the vagaries of business.
Due to these features and advantages, most insurance buyers opt for a Term Insurance policy.
The next steps are:
When to Buy: The best time to buy a policy is today. Though most Term Policies can be purchased till the age of 80 years, it is better to buy the same at an early age, as the premium is lower. One should definitely purchase a Term Plan at various milestones. Say, a person is married and has his wife and children to support; it’s the time to buy insurance. Having availed a huge Home Loan, one should buy a Term Plan to ensure that the family is not burdened with a huge loan. In the case of starting a business with partners, where the liability of each partner is high, the dependents and family needn’t be affected in case of business failure. A Term Insurance policy at any such trigger point helps to insulate dependents in case of death of the earning member.
How Much Coverage: Normal thumb rule is to purchase Term Insurance that is ten times one’s annual income. So, if a person’s annual income is Rs 5 Lakh, he/she should purchase Rs. 50 Lakh policy. If a person wants to secure his/her home loan liability, obviously the coverage should at least be equal to the Home Loan or entire liabilities amount. Some people may like to consider future commitments like higher education of children, marriage etc and take a cover for the approximate expenditure estimated.
Comparing Term Insurance Plan
Comparison is an important step. It is very easy to be guided by agents who try to sell a product based on the commission they receive. Today, banks also lure their customers to purchase policies based on the incentive they receive or sell products of their insurance arm. Individuals must get information about the Term Insurance products, their features, and premium offered by all insurance companies. Fortunately, today, all insurance companies have websites detailing all the products offered by them. So, one must read, study and compare all the plans and then take an informed decision. Most of these sites have help lines that answer doubts or queries if any. They also assist in calculating one’s risk profile and suggest plans and riders which are most suitable. One can do a quick comparison of term plans easily at Coverfox.com
Is it vital to compare Term Insurance?
Given the plethora of information available, it is often confusing to know which term insurance is best suited. By giving basic input of age and assured Sum, you can get a tabular comparison of the various plans, on various parameters viz. policy term, premium amount, payment options, riders available, pay out options, claim settlement ratio etc. Purchasing a wrong, unsuitable policy can be a financial disaster. Hence, every person should study, assess and compare plans and only then purchase the most suitable term insurance plan.
How to Purchase:
Term Insurance can be purchased offline or online. Online plans have slightly lower premium and can be bought by navigating online through a user-friendly process. It is also a safe and quick way of purchasing a policy and financially securing one’s dependents.