First-time term insurance buyer? Read this before you buy
Protecting the financial commitment of family members after your lifetime is of utmost importance for a confident and peaceful life ahead. A term insurance policy ensures this goal is taken care of by promising a guaranteed sum as a benefit payout in case of your demise during the policy term. Though it seems simple, many individuals who are new to insurance are facing troubles in understanding and choosing the right term insurance plan. Since it is the cheapest form of insurance available and also the most affordable, it makes a lot of sense for a first-timer like you to glance through the below points.
Sangeetha Kulkarni is a 32-year-old professor working for a famous engineering college in Kolkata. She lost a few of her friends due to COVID-19, which made her feel scared about her parent’s future as they live with her. She didn’t want her parents to suffer after her lifetime and started exploring the available investment options that would make their lives comfortable. Sangeetha couldn’t find an excellent guide to help her find the right insurance product and had to spend countless hours doing her research. Finally, she signed up for a term plan from a reputed insurance firm that offered increasing benefit payout. Sangeetha is now a satisfied person, having term insurance by her side.
Different Types of Insurance Policies:
If you are new to buying insurance, it will be overwhelming to look at the available choices for insurance products available in the market. First, make yourself aware of the types of insurance policies available:
- Term Insurance: It is the classic form of life insurance that assures complete protection for your family against any financial difficulties that may arise due to death, terminal illness, or critical illness in the form of benefit payout. Term insurance plans are also the cheapest among all the insurance products with very few premiums, making it the most favored option among first-time insurance buyers.
- ULIPs: Unit-linked insurance plans, also called ULIP, offer both insurance and investment in a single plan. A small part of the premium gets invested in providing life coverage. In contrast, the other part is invested in stock markets to generate returns. These plans are primarily suited for people looking to attain life goals such as retirement, children’s education, foreign vacation, etc.
- Whole Life Insurance Plan: As the name suggests, these are policies that provide coverage for the policyholder’s entire lifetime. While other term plans have a defined timeline ranging from 10 to 30 years, these whole life plans usually offer coverage until 99 years of age. These are particularly useful for those who may have many dependents in the family and need support for a more extended period, even after the retirement of the primary insured.
- Money-Back Policy: Very similar to term policies, but in these plans, the premium amount is repaid if the policyholder survives the policy term or at the time of maturity. Because of this, the premiums for these policies are usually a little high compared to the traditional term plans.
What do you need to look for in term insurance?
While looking to buy a term insurance policy for the first time, you are bound to come across many terms. But they are part of the feature list, which needs to be understood to make the right plan choice.
- Sum Assured: This is the value of coverage that a person chooses to secure their life. Also, it is the amount that the insurer pays in the form of benefit payout in case of the policyholder’s death.
- Age at Entry: Most term plans have a standard minimum age to sign up for a policy. The minimum age is 18 years, and the maximum age is 65 years.
- Maturity Age: The age at which the policy shall reach its maturity or expire is called the maturity age. Generally, the policy shall cease after maturity, and the policyholder may or may not get survival benefits depending on the chosen plan. Most policies suggest a maturity age between 75-80 years.
- Tenure: This denotes the duration of the policy and is up to the policyholder to choose their desired tenure from 10 to 40 years. For example, a person choosing to buy term insurance at the age of 30 may opt for a term plan with a tenure of 40 years, which is until the age of 70. Based on the entry age and your requirement, you may choose the policy tenure as most insurers are flexible in these terms.
- Benefit Payout: In case of the death of the policyholder, the insurer shall pay the sum assured to the nominees in the form of a lump-sum payout. But, you may also choose from a variety of multiple payout options, including part-payment, monthly income, decreasing or increasing monthly payout, etc. To buy a term insurance plan with multiple benefit payout options makes sense as the need differs for each family, and you will know the best as the primary policyholder.
- Claim Settlement: You must always choose an insurance company that pays higher claim settlements when purchasing a term insurance plan. Moreover, the ratio shows the percentage of claims that insurance provides.
- Riders: They are add-ons available to extend the functionality of your existing term policies to add more protection by making sure it covers specific requirements and making it into a comprehensive policy, rather than buying another policy. Accidental Death Cover, Accidental Disability Cover, Premium Waiver Cover, Critical Illness Cover, Terminal Illness Cover, etc., are popular riders.
With multiple insurance providers in India, each offering their variant of term plan, relying on agents is eliminated. Buying term insurance online driven mainly by the new age online platforms like iiflinsurance.com are helping first-timers by facilitating comparison, shortlisting, and buying their preferred term plans through the internet, sitting in the comforts of their homes.