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Guide to purchasing the right one
In a term insurance policy, if the insured individual passes away within the policy term, the death benefit, also known as the cover amount, is paid to the nominee.
Let's imagine that Shashank is a young professional with a wife and two kids. He has always been the breadwinner of his family and his income is the sole source of support for his loved ones. He knows that if something were to happen to him, his family would be left without a source of income and would struggle to make ends meet.
That's why he decides to get a term insurance policy. He knows that if he were to pass away within the policy term, his nominee, his wife, would receive a lump sum of money, called the death benefit. In Shashank’s case let’s say the death benefit is 1 Cr. This way, if something were to happen to him, his family would have the financial resources to cover living expenses and other financial obligations such as home loan repayments, children's education and other important things.
So, if Shashank were to pass away, his wife would receive the 1 Cr death benefit and use it as a replacement of Shashank’s income, and she could use the money to keep up their lifestyle, cover the cost of their children's education, and ensure that they don't struggle financially.
Financial security for your family:
If you are the primary breadwinner, purchasing a term plan would cover your family's monthly expenses while you are away.
Secure your Assets:
You may have taken out a vehicle, housing, personal use, or education loan. Your family may experience financial hardship while you are away due to the payback of these debts. Your loans are paid off with the income from your term insurance plan, which also ensures that your family won't have to shoulder the further debt.
Risks related to lifestyle:
With age, there is a higher chance of having a lifestyle illness. Some term insurance policies include critical sickness coverage, which safeguards your family during unforeseen events while you are still alive. The critical illness2 benefit offers cash protection against several serious health issues, including heart attack and cancer.
| Age Range | How many times of Annual Income |
|---|---|
| Below 40 | 20 Times |
| 40-50 | 15 Times |
| 40-50 | 10 times |
Term Premium for ₹ 1 crore
Aged 45, Up to Age 70
Yearly Premium: Rs. 31,920
which is month: Rs. 2,660 and per day: Rs. 88
There are three categories for term insurance's payout option:
1.What is the Term Insurance One-Time Payout?
Time Lump Sum is a standard term insurance payout option where the insurer pays the beneficiary or nominee the full death benefit.
For instance, if you choose the payment option for a one-time lump sum that offers Rs. 1 crore in life coverage, the whole money would be paid to the designated beneficiary or beneficiaries upon your passing (policyholder)
2. What is the Fixed Monthly Payouts + One-Time Lump Sum Payment?
In this instance, the policyholder paid an extra monthly amount for the following five years in addition to the lump sum distribution of the absolute value insured to the nominee.
This payment type benefits the nominees or beneficiaries who can utilize the additional funds to cover their daily costs. Let's use an illustration to assist you in grasping this: The nominee would get Rs. 1 crore as a one-time payment instantaneously and Rs. 40,000 each year for the next ten years if the policyholder purchases an Rs. 1 crore life coverage under this payout option.
3. What is the Increasing Monthly Payouts + One-Time Lump Sum Payment?
When the policyholder dies, this option gives a one-time payout to the nominee equal to the whole sum insured value. Additionally, the nominee will receive installments of monthly payouts for a specific time that rises with each passing year (decided by the policyholder while buying the policy). Some limitations and restrictions apply to specific payment alternatives.
Take a life insurance policy of Rs. 1 crore as an example. If the policyholder dies, the nominee will receive Rs. 1 crore immediately. Additionally, Rs. 40,000 is paid each month for the first year, after which the payouts grow by a predetermined percentage, or 10%, for ten years after the insured person's passing. In the second year, the candidate will receive a monthly salary of Rs. 44,000, and so on.
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Let's go through the advantages of term insurance in more depth.
1. High Sum Assured at Affordable Premium
A straightforward type of life insurance is a term insurance policy. The low price of term insurance is one of its main advantages. A term insurance plan is offered at a more affordable rate than other types of life insurance. Another significant benefit is that the rate for term insurance will be reduced the earlier you get it.
Additionally, obtaining term insurance online may lower premiums than doing it offline. In other words, one of the advantages of a term insurance plan is that the cost savings that occur at the insurer's end are transferred to you. Even better, you may immediately assess the benefits of term insurance online.
2. Easy to Understand
While purchasing a life cover, you can find it challenging to comprehend the insurance-specific words pertaining to numerous life insurance policies. Term insurance plans' ease of understanding is one of their key advantages.
A term insurance plan does not include an investing component because it is a pure life insurance policy. To provide the advantages of term insurance, you pay the premiums, and the insurer insures your life for a predetermined amount of time.
3. Benefits of a husband buying a policy under MWPA:
Any life insurance policy purchased by the husband for his benefit and endorsed under the MWPA on behalf of his wife, children, or any of them, will remain the husband's and wife's property.
Thus, in the case of life insurance policies taken by married men under the MWPA, the benefits in all situations - death, survival, paid-up policy, surrender - would go only to the beneficiaries named in the policy.
If you intend to get term insurance, you should be aware of the following characteristics:
Sum Assured: This figure represents the sum paid to the nominees upon the insured's death.
Entry Age: Anyone between 18 and 65 may purchase a term insurance policy.
Maturity age: The maturity age establishes the time frame for the policy's expiration. The ideal maturity age for most systems is between 75 and 80.
Tenure: The tenure of a term insurance policy refers to its duration. For instance, if you are 50 years old, you must enrol in a term insurance plan with an 80-year maturity period, providing you with a 30-year tenure. Between 10 to 40 years is the best tenure plan. The wisest course of action would be to continue working as long as the company lets you.
Claim settlement ratio: When purchasing a term insurance policy, you should pick an insurer with a higher claim settlement ratio. The ratio shows what proportion of claims insurance pays.
Riders: The insurer's additional perks can improve insurance coverage. For instance, if you select a term insurance plan with an accidental death rider, you would be paid 50 lacs if you pass away but an extra 25 lakhs if you pass away due to an accident.
Health examinations: If you apply for a term insurance plan, the insurer will want you to get various health examinations. For instance, you must undergo extensive blood testing, including HIV tests, after reaching 50.
If you intend to get term insurance, you should be aware of the following characteristics:
A level-term plan: provides the sum assured upon the insured's death. It is an essential term insurance plan.
Term plans with increasing or decreasing guarantees: According to a certain percentage, the sum promised in the insurance may either rise or decrease each year.
Plans for monthly income: Even though the death benefit in several term insurance policies is paid in a lump amount. Under the monthly income plan, the insured amount is paid in monthly instalments.
Monthly income: In this scenario, the insured receives a monthly salary for years. The amount of income might be a portion of the amount promised. Additionally, the monthly revenue may occasionally exceed the monthly rent in some circumstances. Additionally, the rider offers an increasing income variation in which the monthly income may rise yearly.
Accidental death or disability rider: If the insured person is killed or becomes disabled due to an accident, this rider will pay out an additional sum promised. Both temporary and permanent disabilities are covered.
Premium waivers: In some exceptional situations, the corporation may waive some premiums, including those for term insurance policies that cover disability, critical illness, and terminal illness.
A term insurance policy is available for purchase both offline and online. A term insurance policy can be purchased directly from the insurance company's website or via an insurance agent. When you purchase an insurance policy through an insurance provider's website, you may compare various products with unique characteristics to choose the one that best suits your needs.
When purchasing an insurance policy offline, you must go to the closest insurance branch with your KYC papers and complete the application information. Additionally, you may purchase insurance plans through insurance brokers.
Early insurance purchase is preferable: Although term insurance does not have a minimum or maximum age requirement, buying it initially is preferable. When you are young, it is advisable to purchase a term plan since your premiums increase as you age, and acquiring insurance if you become sick becomes more difficult.
Avoid purchasing single premium plans: It is preferable to go for monthly premiums rather than single premiums when acquiring a term insurance plan because not everyone can pay the total price at once. The annual premium is the most practical choice for everyone.
Consider a premium rise favourably: This is a crucial step to comprehend. Your term insurance rates may increase if you get a medical examination after purchasing the policy. Following your physical, the insurer has the legal authority to ask you to pay a higher premium due to health issues.
Don't get carried away with add-ons: Riders are great extras for term insurance policies. However, you shouldn't add add-ons simply because they are available and provide enhanced security; instead, you should only do so when you genuinely need them.
Present all relevant information: When purchasing a term insurance policy, clearly disclose all relevant information, including whether or not you smoke or consume alcohol. Since the premium is determined based on these factors, omitting these facts might ultimately lead to the denial of your claim. Therefore, completing the form with all the insurer's needed information is crucial.
Earlier you buy, you pay a lower premium
Term insurance has no minimum or maximum age restrictions. The insurance is better the earlier you get it.
Avoid waiting too long to get a policy since, as time goes on, your premium will rise with your age, and it will become more challenging if you are sick or have a condition. Decide to take action within a few months if it is evident that you need a particular quantity of life insurance.
Recommended term cover is till your retirement age
What age is required to purchase a term plan? A 30-year-old should purchase an 80-year term plan. The response is NO. It would help if you didn't get it for as long a period as you can because you need life insurance coverage up to retirement and nothing more. This is because, after you reach retirement age, few family members will financially dependent on you.
It is sensible to obtain a large cover when we are young because we have more financial obligations. However, as we get older, our wealth will expand, and we'll get closer to retirement age when we can no longer support our families.
Declared everything correctly
Buyers of insurance commit the severe error of concealing any relevant medical information at the time of purchase. You should tell the insurance provider immediately if you have any health difficulties or have had any significant operations or surgeries. Hiding vital data from the insurance company while buying the policy is one of the reasons claims for term insurance are rejected. Please do not wait until the insurance paperwork specifically requests your answers.
In legal terms, an insurance policy is a proposal from your side; you must give all the details, and the insurer will either accept or reject your claim. The benefit of sharing all the information is thus on you.
To protect the future of your dependent family members, you must get a term insurance plan. The dependents can live happily with the insured amount even if they aren't there. Peace of mind is what term plans guarantee.
Our team is happy to provide guidance and answer any questions you might have.
And the best part? Our assistance is completely free and with no obligations to purchase the insurance. Let us help you navigate the insurance landscape.