The scheme, term insurance policy is to secure the immediate needs of nominees or beneficiaries in the event of the sudden or unfortunate demise of the policyholder. Under this policy, you set an amount as insurance for unfortunate death. You need to pay insurance premium whether monthly or quarterly or yearly basis till the term you opt for. During the policy term, if you die, the amount you have opted for will be credited to the nominee’s bank account. There is no monetary benefit if the insurance holder is alive till the period of term plan. The subscriber is free to choose a term plan in accordance with his time horizon i.e., up to 60 or 70 or even 80 years of age. Now, in this column we will discuss the 8 points to consider while buying a term insurance plan.

8 points to consider while buying a term insurance plan

Buy term insurance policy as early as possible

The most important thing is you should buy a term insurance plan at an early age. Whenever you start earning you should take a term plan. The earlier you take a term plan, the lesser the premium will be for the term plan. Suppose, you buy a term plan at the age of 24 and you want to continue this plan till the age of 60 years. So, the duration the term plan is 36 years. You can easily avail up to Rs. 1 crore as your life insurance for just Rs. 6000/- yearly. But if you delay for 5 years you need to pay a yearly premium of Rs. 8000/-. And you will remain uncovered or vulnerable for these 5 years also.

Buy term plan till the age of 60 years

Should you opt for a term plan till the age of 80 years? The clear cut answer is no. You or any individual should buy a term plan for the age of 60 years only. It does not matter what the individual’s current age is. When you are young, you are bound to fulfill many financial responsibilities in your life. At the early age, your earning also remains little and limited. So, it makes sense to take a term insurance plan in accordance with your need in case there is uncertain demise or loss of physical ability.

The life after the age of 60 years is considered retirement life. After this age any kind of loss can be tackled to some extent. Till the age of 60 years, a financially literate person accumulates a satisfactory amount i.e., assets for the rest of his life or for his family to run a happy retirement life. Again, until the age of 60 years a person does not remain the only earning member of his family and in most of the cases that person completes all his duties or responsibilities. So, it is better to opt for a term plan till the age of 60 years.

Buy the basic version of term insurance plan

Now a day, term insurance companies offer various options to choose from. These choices are namely single premium term insurance policy, regular premium term insurance policy either monthly or quarterly or yearly basis etc. The single insurance policy enables an individual to take a term plan in which he has to pay a single premium. Then he does need to pay anything for the policy.

Many policy holders consider this type of single premium policy good and beneficial. It is because the subscriber has to pay at once a single premium and then he is free from any further payments. The policy will cover up his life. But if you carefully read out the terms and conditions of the single premium policy, you will find these one-time premium policies cover your life for 10 years or 15 years only, while you need a term insurance plan till the age of 60 years.

Don’t be misguided by ‘per day premium’ marketing strategy

Many insurance companies sell their term plan policies in a tricky way. They advertise that you can avail Rs. 1 crore insurance only for Rs. 25/- per day. There are many such ads telecast in electronic media. Some people get trapped into these kinds of plans. Then after some years they find that they have been misguided or rather cheated. There are many terms and conditions hidden or imposed on these lucrative plans. These plans are designed or meant for a person under the age of 20 or 25 years. These lucrative schemes provide the coverage for a period of only 20 or 25 years of the subscribers. You need such a term plan that will cover your life security up to the age of 60 years.

Take term insurance riders accordingly

Currently there are many riders available in the market. These riders are,

Accidental death rider

Permanent & Partial disability

Critical illness

Actually these riders cover extra insurance for certain conditions in association with term plans. This extra coverage is offered by term insurance companies with extra fees. It depends on you whether you want to avail these riders.

If your occupation is such that you have to travel a lot, you can opt for accidental death rider along with a term insurance. On the other hand, if you require working hard and have to put physical work, you can opt for a permanent and partial disability rider. This extra rider will ensure your life if you become physically disable by any way . Again, if you have a tendency of any ailment, you can take the critical illness rider. So, taking a rider depends on several conditions. Choose according to your requirements.

Disclose whether you are alcoholic or smoker to the insurance company

If you consume alcohol or you are an active smoker, just disclose this to your insurance company at the time of purchasing term plan or while medical examination. Many a person has a perception that he is not a smoker or alcoholic if he consumes alcohol 2 or 3 times in a year or the same in the case of smoking. If you consume alcohol or smoke once in a year, you are smoker and alcoholic. If you hide this fact from your insurer then there is a great possibility that your insurance can be rejected at the time of claim.

Don’t hide your family’s health information

If you have any major health issue or have undergone any kind of operation or surgery you should disclose this to your insurance company. You need to furnish the health information in respect of your family. If any of your parents or grandparents or your siblings has any genetically disease then you should disclose this. Many a person makes question about the increasing premium to take the term plan than the usual rate. This happens just because of your health analytics. You should be thankful to the insurance provider that they offer you a term plan knowing the fact that you are an alcoholic or active smoker.

Don’t get trapped into the policies of 10 times of your yearly income

There are many lucrative schemes that claim to ensure 10 times of your annual income. Just ignore them. At the time of taking a term plan, you should consider your assets and liabilities for upcoming future. Let’s understand this with an example.

You are an individual with an annual income of 5 lakh.

Condition I

Suppose, you have taken a home loan of Rs. 20 Lakh and you have two kids’ one boy and one daughter. By taking a loan of 20 lakh on EMI option you are subject to pay around 17000/- per month @ 8% for the next 20 years. A total repayment paid by you to the lender is around Rs. 40 lakh. Now, at this point of time you need Rs. 10 Lakh in the upcoming years for children’s education and Rs. 10 Lakh for your daughters weeding . Therefore, after 20 years you will need to arrange a huge amount of money to meet up the goals of your life.

Home loan = Rs. 40 Lakh

Education cost of children after 15 years = 30 Lakh

Marriage cost of Daughter after 20 years = 40 Lakh

Your total cost in the upcoming 20 years = 40 + 30+ 40 = Rs. 1 Crore 10 Lakh.

Considering the above calculation, you should take a term plan of at least Rs. 1 Crore to meet the expenses for the upcoming 20 years in case of your uncertain or untimely demise.

Condition II

On the other hand, if you move with 10 times of your annual income policy and you opt for such a term plan of that then it is figured out like this = Rs. 3 Lakh × 10 = Rs. 30 Lakh. This is not adequate to meet the above expenses in the future if there is uncertain death of the policyholder.

The bottom line is do not delay to take a term plan. Many people over analyze different plans or schemes not to make any mistake and to take the best one. On doing so, they just keep thinking and can never buy a term plan. So, don’t compare too excessively and take your term plan in accordance with your need and time horizon.

If you have any question regarding term plan then make a comment and if you have found this post helpful please share with your loved ones.