Term insurance, unlike other insurances, is slightly different and not much familiar among the public. But term insurance is a simple insurance product that offers affordable premiums and insures your life until you pay regular premiums. Then, in case of your sudden death, the insurance company pays out a lump sum amount to your family to meet the financial needs during that time.
However, it’s an important decision to be taken before you buy term insurance because if you have not chosen the right policy, your family might end up facing financial hardship in your absence, even after you invest your hard-earned money in insurance.
Also, term insurance is an effective option to invest in for saving the tax payment. You can use a tax calculator, to determine how much amount you need to pay as tax or not. That being said, this article is all about knowing five important things before you buy a term insurance policy.
1. Check Premium Payable Using A Term Insurance Premium Calculator
Before you jump on into a term insurance plan, check for the premium to be paid using a term insurance premium calculator. This helps to determine the exact estimate of how much amount you need to pay as a premium based on the coverage amount selected for your desired policy.
2. Ensure That You Get Adequate Insurance Cover
It’s imperative to decide how much cover you need to get, and it should be taken carefully as well. Many people pick a random lump sum amount of 50 lakh and 1 crore, which seems sufficient to them, but that can lead to increased liability for you in the future, especially when you have already home loans or any other loans to repay off.
3. Disclose All The Information Correctly And Accurately
There is no use in hiding your information, and it won’t benefit you with any additional benefits, especially to your insurer. If you have lifestyle habits like smoking and drinking, you need to disclose them to your insurer, as breaching the contract can, later on, result in the rejection of claims. Whether it’s your existing medical condition or that you have drinking habits, disclose all the information required correctly and genuinely.
4. Specify A Nominee Name Without Fail
Nominee, like in any other bank operations, you need to specify a nominee for the policy as well. This ensures that the financial coverage reaches the right beneficiary as desired by the insured. A nominee can be your wife, children, or parents, whom you wish to see enjoying the benefits of a term insurance cover.
5. Disclose All Your Existing Policies
People might have one or more insurance policies, taken for different purposes. Before you buy a new term insurance policy, disclose all the details of your existing insurance policies, along with the company name, policy amount, and number. Hiding any of these details can also result in claim rejection.
6. Buy A Term Plan Only Until Your Retirement Age
Though term insurance needs to be taken for a longer tenure, it is not recommended to take even after your retirement age, why because, by that time, your kids might have grown up and started earning for themselves, where you no longer have to provide financial support to your entire family members.
7. Don’t Buy Single Premium Policies
A single premium policy might sound good for some people, but as they don’t have to go behind this for regular interval payments.
8. Choose Riders Wisely
Just because multiple riders are available, doesn’t mean you need to choose them all for your existing term insurance plan. For example, let’s say if you feel that in the future, you might have chances of getting heart disease or any critical illnesses, then you can add a critical illness rider. Only add riders if it is required.
When considering the best way to secure your family and save from paying tax, term insurance is the best choice. Apart from financial security, you are also getting tax benefits for insurance taken under the Income Tax Act. So choose wisely and select the right plan that works for you.
In addition, while you will find numerous options for term insurances, remember to do your due diligence and research. Always look for options from reputable insurance providers who are trusted by many, and provide customer-centric products and services.
Besides, you can also check the claim settlement ratio of the insurance provider to know the number of claims the specific company has paid out – this ensures that your loved ones don’t have to go through any hassles and easily receive the payout!
