What is term insurance?
It is one of the simplest forms of life insurance, where an individual pays a fixed premium and in case of death, the family receives a lump sum payment from the life insurer.
Why term insurance?
It ensures that the family is not left financially vulnerable in case something happens to the earning member.
What are the benefits ?
Having a plan that provides financial protection against critical illness enables the family to continue with their regular life without an additional financial burden. Term plans are now cover accidental death, critical illness and terminal illness, along with providing a life cover. These days, life insurers offer nominees the option of receiving the claim amount as a regular income.
What is the ideal cover?
Consider a 30-year-old married male, with a child, who has a monthly income of Rs25,000 and an outstanding home loan of Rs10,00,000. If something were to happen to him, the family needs to pay off the loan and continue with their lives as well. The ideal cover for this individual, to enable the family pay off the loan as well as sustain, would be calculated as: Rs 25,000 x 12 months x 28 years + Rs 10,00,000 = Rs 94,00,000. He should continue with this cover till his retirement.
What are the points to be considered?
Buy early: The cost of buying insurance increases with age. The earlier one buys, the lesser one pays.
Claims settlement ratio: Ensure that the insurer has a consistently high claim settlement ratio.
Truthful disclosure: Disclose all information about yourself, especially medical information, truthfully. This will facilitate a smooth claim settlement.
