Currently, when it comes to buying a life insurance policy, there is no restriction of age, unlike the typical endowment insurance covers. The growth of the insurance sector in the past few years has attracted several companies offering a lot of choices and a wide variety of policy features. It includes life insurance policy, money back policy for your family goals, or pension cover that secures your future with steady income returns. It is challenging to choose a comprehensive insurance policy, but you don't need to stress as there is a complete insurance buying guide for first-time buyers.

What is a term insurance?

One of the most authentic life insurance policies is term insurance. It is a pocket, solid insurance plan. In case of any mishap during the policy period, the term insurance plan covers to offer a lump sum death benefit to the beneficiaries of the policyholder. The family of the policyholder is taken care of and also given financial stability assurance. Furthermore, the insurer doesn't provide any benefit to the insured or the beneficiaries if the insured survives throughout the policy term.

Exceptional to this clause are premium return policies where the insured is offered the average of all the premiums paid. There is no investment attached under the term insurance plans, so the premiums are paid only towards the mortality charges. This is the only reason why term insurance plans are cheaper than other insurance covers.

Main characteristics of the term insurance plan:

If you are planning to buy the term insurance cover, you must be aware of the following features:

  • Sum Assured- It includes the amount that is payable to the nominees after the insured dies.
  • Entry Age- A person falling in the age group of 18 to 65 is eligible to buy the term insurance plan.
  • Maturity age- The maturity age defines the period at which the policy expires. Ideally, most systems have a maturity age of 75 to 80 years.
  • Tenure- Tenure is the duration of the term insurance plan. For instance, if you are 50 years old, you should enter a term insurance plan with a maturity of 80 years, so you have a tenure of 30 years. Ideally, the tenure plan is between 10 to 40 years. You should seek for maximum tenure that the company allows for your age to obtain.
  • Claim settlement ratio- When it comes to buying a term insurance plan, you should choose an insurer that offers a higher claim settlement ratio. The ratio indicates the percentage claims that an insurer provides.
  • Riders- The insurance coverage can be made better by the added benefits provided by the insurer. For example, if you choose a term insurance plan that features an accidental death rider, so under it, you will be paid 50lacs if you die, but you will be paid an additional 25 lakhs if you die because of an accident
  • Health checks- When you apply for a term insurance plan, the insurer will ask you to undergo some health checkups. For example, you are 50 years old, and then you have to go through comprehensive blood tests, including HIV tests.

Types of term insurance plans:

  • Level term plan- It is a necessary term insurance plan that offers the sum assured after the demise of the insured.
  • Increasing or decreasing term plans- The sum assured in the policy can either increase or decrease in each following year as a specified percentage.
  • Monthly income plans- Irrespective of the fact that the sum assured in several term plans is paid in a lump sum as a death benefit. Under the monthly income plan, the sum insured is paid in monthly installments.

Some casual riders and add-ons:

  • Monthly income- Under this, the insured is paid a monthly salary for specific years. The size of income may be some percentage of the sum assured. Also, in a few cases, the monthly income can be above and beyond the monthly rent. Furthermore, the rider also has an escalating income variant in which there can be an increase in the monthly income at the end of every year.
  • Accidental death or disability rider- The unexpected death or disability rider covers an extra sum assured if the insured dies or becomes disabled due to an accident. It covers both temporary and permanent disabilities.
  • Premium waivers- under some unique circumstances, a few premiums are waived off by the company, including term plans like disability, critical illness, and terminal illness.

How to buy a term insurance plan?

You can buy a term insurance policy, both offline and online. You can buy a term insurance plan from the official web portal of the insurance or through an insurance agent. When you buy an insurance policy from an insurance provider's website, you can compare several products available with unique features so that you make the best choice that meets your requirements.

When you buy an insurance policy offline, you have to visit the nearest insurance branch with your KYC documents and fill in the application details to make the buying process complete. You can also buy insurance policies through insurance agents.

Things to keep in mind while buying a term insurance policy:

  • Better to buy the insurance plan early- Even though there is no minimum or maximum age limit for term insurance, but it is better if you purchase it first. It is advised to buy the term plan at the right age because, as you age, your premium amount also increases, and it is challenging to get an insurance plan if you develop any disease.
  • Avoid buying single premium policies- When you have to choose between regular premium and separate premium policy while purchasing a term insurance plan, it is better to go for monthly premiums as not all can pay the entire premium in one go. The best option that works for all is the yearly premium.
  • Take an increase in premiums positively- This is a crucial step to understand- When you buy a term insurance plan, your premiums can accelerate after you get a medical checkup done. After you get your health checkup done, you might be asked to pay an extra premium due to health issues, and it is valid for an insurer to ask for the additional premium.
  • Don't be overjoyed by add-ons- When it comes to term insurance plans, riders are fantastic add-ons. But you should only go for add-ons when you require them seriously, and you shouldn't add them just because they are available and gives you higher security.
  • Present all the material facts- When you buy a term insurance plan, ensure you present all the material facts transparently, including being a smoker or a drinker. As the premium is calculated on these bases and if you are hiding these facts, it could result in rejection of your claim at the end. Thus it is essential to fill the form with mandatory requirements of the insurer.

Therefore you must buy a term insurance plan if you have a family dependent on you to secure their future. In case you aren't there, the dependents can live comfortably with the sum insured. Term plans promise you peace of mind.

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