Yes. For example, if you are a smoker, the premiums will be higher than those for non-smokers. This is because it poses a higher risk of health-related complications which can even be fatal.
Things to Consider While Buying a Term Plan
Buying a term insurance plan is a significant financial decision that can have far-reaching consequences for you and your family. While it's one of the most straightforward and cost-effective ways to secure your family's future, the choices you make when purchasing a term plan can greatly impact its effectiveness in providing financial protection.
Let’s explore the critical factors and considerations you should keep in mind when buying a term plan to ensure that it aligns perfectly with your needs and provides the peace of mind you seek.
15 Things to Consider Before Buying a Term Insurance Plan
1. Selecting Inadequate Coverage Amount
The most essential point is this one. The very essence of term insurance lies in the fact that it provides an adequate financial cushion to your dependents in your absence. If you choose a lower insurance coverage with the idea of paying lower premiums, you will be making a mistake. This can lead to a financial crisis for your family in your absence.
Hence, you must evaluate the essential factors well, such as the number of members in your family, their current lifestyle and their future goals, then decide the coverage amount based on these factors.
2. Not Adding Appropriate Riders
Adding the necessary riders is essential to prepare sufficiently for financial emergencies. You should add riders like critical health cover, accidental death cover etc as per your requirements to make your investment more aligned with your investment goals.
However, do not opt for riders that are not applicable to your lifestyle. Otherwise, this can increase the cost of your premiums significantly without being of any use to you.
3. Do Not Delay Your Purchase of Term Plan
The price of policies keeps compounding with an increase in your age. This is so because, with increasing age, you become more susceptible to diseases, raising the chances of your natural death.
Also, if you delay the purchase and meet with an unforeseen situation beforehand, there will be no financial coverage for your family. So, to avoid this and stay financially protected, you should purchase a term insurance policy without delay.
4. Do Not Select a Lower Policy Duration
Select a policy duration that is optimum. It should provide coverage at least till the time you have dependents on your earning, be it during pre-retirement or post-retirement years.
If you select a lower policy duration, thinking that you will be at an advantage by paying fewer premiums, then you are probably wrong. This is so because if the policy expires even before your retirement age, then you will no longer be covered. You may even have to purchase another one to continue coverage. Also, unforeseen situations can hit anytime, what if you are not there after your policy’s term is over. Your family is left without a financial coverage.
5. Compare Term Policies Across Different Insurers
It is essential to compare the different term policies available in the market. This will aid you in selecting the most appropriate one at affordable rates. Eventually, you can save more on your premiums and explore exciting offers for your term plan.
Check the product features, premium for a certain coverage, riders available, returns guaranteed or non-guaranteed, the worth of the insurer, claim settlement ratio etc.
Select an insurer with a credible market image, hassle free processes and simplified terms and conditions. This ensures that in your absence, the claim process is easy, and your family doesn’t have to run from pillar to post.
6. Don’t Hide Crucial Medical Information
When your nominee raises a claim for the insurance amount, the insurance company will conduct a stringent check before approving. If they find out that you had neglected to mention crucial medical information while buying the insurance policy, they might reject the claim. This can cripple your family financially in case of your unfortunate demise.
Hence, it’s absolutely essential to disclose all your medical conditions while applying for an insurance policy. You can also select a rider against the same for maximum financial protection. This will increase the chances of claim approval and settlement at the earliest. So, your family will not have to turn to anyone for financial assistance in your absence.
7. Choose a Suitable Payout Option
Some insurance providers allow you to customise your insurance payout. For instance, you can choose periodic inflow of money instead of a bulk amount at one go. This can help to keep a check on the expenses.
On the contrary, if you have enough faith in the money management skill of your family members, you can go for a bulk payout option. So, you must decide carefully which one to opt for to ensure judicious usage of the money.
8. Fill Your Application Form by YourselfThere can be plenty of mistakes if anyone else fills out the application form for you. Also, you might not want to share your personal details with a third party. So, you must always fill the application form on your own and with utmost care. In case you are unable to understand any point, you can contact the insurance company or your financial advisor for the same.
9. Check the Claim Settlement Ratio
Claim settlement ratio refers to the number of claims the insurance company has settled against the ones raised. This is readily available on the insurance company's website. On studying this ratio, you can understand their chances of settling your nominee's claims without complications and delay in the process.
A high claim settlement ratio implies a better chance of your claim getting settled. Hence, choose a company with higher claim settlement ratio.
10. Purchase the Policy Online
Purchasing the policy online has multiple benefits. You can get attractive discounts on your policy premium by purchasing it online. You can complete the application process from the comfort of your home and at any time of the day. Hence, it can save you both time and money, which you can in turn invest in other ventures.
Additionally, you can skip the long queues that might keep you waiting to fill out the application form offline. You can also compare across different insurance providers to get the best deal.
11. Don’t Skip Terms and Conditions of the Policy
You must read and understand each and every term and condition of the policy thoroughly. In case you have any confusion, reach out to the customer care executive of that company for better clarity.
This is important to make sure that you strictly adhere to these terms to get hassle-free approval of your claim. Otherwise, there are chances of claim rejection if there is any deviation.
12. Don’t Get Lured with Low Premium QuotesThere can be several companies in the market that will try to lure you with low premium offers. However, you must verify their statements and check their market reputation instead of choosing them just for the low premium.
13. Do Not Shift in Between the PlansYou can terminate a policy and purchase a new one if the previous one was not beneficial enough. However, if anything happens in the middle of this process, you will be left financially unsecured. So, make sure that before discontinuing the previous one, you purchase a new one to receive continuous protection.
14. Explore the Variations of the PlanThere are several variations of a term insurance plan that can prove to be beneficial for you. This might involve the premium payment options, amount of the premiums, modes of payout, availability of riders and so on. Hence, you should explore them to get the most out of your term insurance policy.
15. Keep Your Nominees Informed About the Plan
It is essential to inform your beneficiaries about the policy and its terms and conditions. Otherwise, they will not be able to raise a claim on your unfortunate demise. Also, you must ensure that they are aware of the policy terms and the steps to follow when raising a claim.
Purchasing a term insurance plan is a significant step in securing your family's financial future. By carefully considering the above-mentioned factors you can tailor a plan that meets your specific needs.
Life is unpredictable, and having a comprehensive term plan ensures that your loved ones are shielded from financial uncertainties in your absence. Take the time to research and compare options, so you can make an informed decision that offers peace of mind and protection for the long term.
Frequently Asked Questions
Yes, if you have any outstanding loan repayment, then you must consider the EMIs as well while deciding the sum assured. This way, your family will be able to pay the monthly instalments on time without any trouble.
Yes, it is essential that an insurance provider has a minimum solvency ratio of 1.5. If it is lower than that, it reflects the insufficiency of funds with them to settle claims. Thus, you should not purchase an insurance policy from them.
Yes, you can buy more than one term insurance policy in your name to strengthen the financial security of your family.
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- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.