Term Insurance- Its Correctness Is Its Treasure
You may find the title little ambiguous as to what it really conveys? In simple terms it conveys that the value of term insurance lies in the contents. Every individual has different needs and situations. Every individual has different income levels. Hence, selecting the right term insurance becomes very important to reap optimum benefits of term plans.
Do you know how to analyze the correct level of cover you need? If not read this article to get essential inputs.
There are various rules one needs to follow to get a fair deal of term insurance plan.
Ensure the following basic things-
If the person is below 45, he/she must check that the sum assured sums up to 10 times his annual income.
If the person is above 45, he/she must check that the sum assured is 5 times his annual income.
Important aspects of term insurance to remember-
A term plan is a type of pure insurance. Therefore, there’s no surrender value or paid up value. Also there’s no loan available for or against such term policies.
Term plan’s premium is a function of the individual’s gender, age, policy period and general health & lifestyle habits.
Older the person’s age, higher will is the premium.
Premium for woman is less than men of same age. This is because female life expectancy levels or rates are usually higher.
Longer the policy duration, greater will be its annual premium. This is because as the person gets older, he tends to be reaching a stage where the risk factor increases of facing any negative events.
Smokers are charged higher premium amounts than non smokers.
People with obesity or other preexisting diseases also require paying higher premiums.
Most insurance companies before providing term plans, require the buyers above 35 years to undergo medical tests.
Favorable IRDA guidelines-
The new IRDA guidelines favors higher protection component across all indemnity policies. They have been increased by at least 7–10 times of the sum insured which also depends on the insured’s age. It’s a welcome move as it will make the insured person further aware of the protection aspect of the policy and not something for pure savings and/or investment.
There’s another variation of this which is known as Term plan with Premium Back. The idea is that if the policyholder survives throughout the policy term, he/she should at least get his total premium amount. Therefore, they are preferred by most in India.
One can buy term indemnity plans with riders like Accidental death and disability (ADD), Critical Illness (CI) and Permanent Total Disability. These riders have their own individual benefits and cost. Hence, one should select these riders judiciously and get the useful ones.
Who should purchase term insurance policy?
