10 Steps To Get Your Ideal Term Insurance Policy

A term insurance policy is a life insurance policy that provides you maximum coverage at a reasonable price. Before going into how you can have the perfect term insurance policy in 10 easy steps, let us have a look at the benefits of such policies.

5 Benefits Of Opting For A Term Insurance Policy:

• Financial Protection:

  The first thing these policies provide is financial security for your loved ones. In the unfortunate case of your untimely demise, your family might fall prey to financial instability. Term insurance policies ensure that they have a source of income even after you pass away. Thus, opting for a term plan is a prudent financial decision to safeguard your family’s financial future.

• Low Premium:

  They provide a substantial amount of money at easy-to-afford premium rates. In fact, a term plan is the easiest way to get the highest life insurance coverage at a lower premium.

• Additional coverage:

  These policies also often cover you in case of critical illnesses. Depending on the policy conditions, they might cover your family too.

• Tax Benefits:

  Availing of these policies allows you to apply for certain tax relaxations from the government. For instance, the premium paid towards a term insurance plan is tax-free under section 80C up to Rs 1.5 lakhs per annum. For term plans with a maturity benefit (such as Term Plan with Return of Premium option), the maturity benefit is tax-free under section 10(10D). Death Benefit is completely tax-free in the hands of the nominee. So, a term insurance plan is completely tax-free from all aspects.

• Additional coverage:

  You can easily choose to enhance the overall coverage of your term insurance plan by adding riders such as accidental benefit, critical illness, etc., as and when needed. Once you know the importance of opting for a term plan, it is critical to even know how to buy one.

10 Steps To Buying Your Ideal Term Insurance Plan

How will you know which term insurance policy is right for you? For that, you need adequate research on the matter. Here’s a checklist you should look at before selecting one:

1. Coverage:

   An important step towards investing in these policies is planning how much you want to buy as life cover. This is different for every person depending on how much they need which can usually be calculated depending on your annual income. The general rule is to have coverage 15 to 20 times the annual income. Moreover, you should also factor in any loan or financial obligation that might fall on your nominees after your premature death.

2. Policy Tenure:

   Figure out the tenure you want for your policy. A term Plan is needed only as long as you are financially responsible for your dependents and not longer. If you opt for a longer tenure, your premium will be higher. So, it is advisable to buy the policy till your retirement age only, although you can always choose to opt for longer plans.

3. Add-on Riders:

   You should also consider utilising riders or add-ons to improve or update your initial policy. This can be a great way to satisfy all your specific requirements under one insurance without much complexity.

4. Additional coverage:

   By opting for an incremental plan, you can get higher coverage. With a positive approach, you can pay increased premiums as you earn more over the years in your career. This way you will increase the assured amount, hence also tackling the problem of inflation that diminishes the value of money over time.

5. Liabilities:

   You need to plan when you want to avail the life insurance policy. Usually, it is considered that the earlier you start the more beneficial it is. Plus, depending on how early you are opting for the term plan, you should calculate the coverage. Early on in your career, you will have more liabilities, such as loans and dependents like small children who need to be taken care of in your absence.

6. Opt For the Right Insurer:

   One of the most important aspects while considering a term insurance plan is the insurer’s Claim Settlement Ratio (CSR) which is calculated by comparing the number of settled claims of the insurer with the total claims made annually. The higher this rate is the higher the chances for you to settle your policy claims. According to IRDAI, the CSR of LIC is 98.62% in 2020-2021. Moreover, the solvency ratio of the insurance provider is also crucial as it indicates the financial stability of the company.

7. Nomination:

   Your beneficiaries should be aware of the fact that they have been named as such. Whereas the nominee is supposed to receive the assured amount upon the death of the insured person, the claim will be disputed if the nominee is not a legal heir that only includes close relatives like parents, spouses, and children. If you nominate any of these legal heirs, only then they will be considered the undisputed nominees, known as the beneficial nominees. Hence, you should always update the details of your nominee to avoid any issues regarding claim settlement.

8. Freelook cancellation:

   The simplest yet most important step is to go through all the terms and conditions of the policy carefully before you buy it. You should also keep in mind the freelook cancellation period of 15 days which allows you to cancel a term plan if you are not satisfied with it even after opting for it.

9. KYC:

   You have to go through the Know Your Customer (KYC) process where the insurer will verify your identity for which you will have to submit documents such as Aadhar, PAN number, address proof, etc.

10. Claim Process:

    Help your nominee understand the claim process in case they need to claim when you are not around!

Buying a term insurance policy is a good idea as it would provide financial security to the ones you love even after you are not around. But you need to conduct a thorough comparison of the options in the market and make an informed decision considering all parameters to buy the term policy that is perfect for you.

Also Read: Everything You Need To Know About Zero Cost Term Plan