Term insurance is the purest form of insurance where for a fixed premium, you cover yourself against any unforeseen contingencies. Term plan is also the cheapest form of insurance as it offers only protection and no savings. Further, these premiums are tax deductible under section 80C of the Income Tax Act, 1961, subject to provisions stated therein. While this sounds like an attractive proposition, it is natural to wonder if it is the perfect fit for you.
Before investing in term insurance, you should ask yourself these questions to make an informed decision.
Q1. Should I opt for term insurance?
Term insurance is a suitable option for those who want a high sum assured for relatively low premiums. It is the purest form of insurance where the entire premium goes towards covering your life and ensuring that your loved ones meet their life goals even in your absence. Hence if a term plan is meeting yours and your family's life goals, opt for it.
Q2. When should I buy term insurance?
The ideal time to invest in term life insurance is today. The earlier you buy it, the lower your premiums are, as your premium depends upon your age, health factors, term of the policy, etc. A lower age results in a lower premium which is fixed for the entire duration of your insurance. Over the years, that adds up to quite a sizable sum saved simply because you acted in time.
Q3. What is the sum assured that I should be insured for?
The sum assured should be based on the amount your dependents would require to live a fulfilling life even in your absence. This amount can be determined based on their needs and goals as well as on your loan, liabilities and other factors. Based on your sum assured, your premium would be calculated taking into consideration risk factors such as your age, health, lifestyle diseases like diabetes or heart disease, lifestyle habits such as smoking etc. You can also check premium quotes online using a premium calculator.
Q4. What should the ideal tenure of my term insurance plan be?
Your term insurance plan should cover you for the duration of time you intend to work. So, if you plan to retire at 65, you should plan on staying insured up to that age.
Q5. Do I need to add a rider?
Riders can be added to the base policy to additionally guard you against a wide gamut of situations such as a critical illness or accidental permanent disability. These should be carefully chosen based on your needs.
Q6. Should I buy a term insurance policy even if I have no dependents?
If you are likely to have dependents in the future, it makes sense to buy a term plan at a younger age, since the premiums are lower.
Q7. Should I buy online or offline?
An increasing number of prospective policyholders are choosing to buy life insurance online. These work out to be much more economically-priced, since the insurance is bought directly from the company. Be sure to thoroughly evaluate your options, since the onus of choosing rests with you. If this seems like a daunting task, going through an insurance agent and buying a policy offline may be worth the additional cost.
Q8. How do I choose the right insurer?
As with every service provider, choosing the life insurance company is an important factor. It makes sense to compare insurers to find the ones who are offering you the most value-for-money options to suit your needs. Further, one needs to look at the claim settlement ratios of the insurers. This ratio indicates the percentage of claims they have honoured, so a high claim settlement ratio would make an insurer preferable.
Term Insurance is an affordable way to get a high enough sum assured for ensuring your family is looked after even if you are not there to provide for them. With this safety measure in place, you can peacefully live your life knowing that your loved ones will continue to achieve their life goals and fulfil their dreams.