Insurance coverage in India is low and the primary reason for this is the high amount of premiums. Even amongst the insured, a large number of people are under-insured. This is because they opted for traditional endowment or whole life plans, which are expensive. Individuals have personal life and families at the utmost priorities and often these memories hold a special place.
However, an affordable way to acquire adequate coverage is to opt for term policies. These policies entail lower premiums because they offer pure protection without any investment or savings benefits.
Term policies will provide the plan benefits to the family members in case of your demise. The money is paid as a lump sum, which may be used to repay a home loan, pay children's education expenses, or for regular expenditures.
You may purchase life insurance to replace your income in case you are unable to work or pass away. However, the need to replace income is not permanent and there are certain situations when term insurance makes financial sense.
Here are two such situations when opting for a term plan is a sound financial decision.
1. When you have no dependents
When your children are grown up and earning and do not depend on you. Alternatively, if you are single and your parents have passed away. Finally, if your children are earning and your spouse is financially independent through earnings and assets.
2. When your earned income is no longer needed
During your retirement, your children would be earning and you may have sufficient funds to sustain yourself. Alternatively, you may have sufficient investments, such as shares, property, or mutual funds that would support your family in case of your demise.
In the above situations, there is no requirement to replace your income. Buying policies that provide death, critical illness, or disability benefits is not necessary. On the other hand, opting for term policies is recommended.
Here are six factors you must consider before buying a term plan.
1. Tenure of coverage
An online term insurance plan provides flexibility to choose the tenure of coverage. You must choose a tenure that adequately covers the period when income replacement is important for your family members if you are not around.
In case you are unable to determine the tenure, you must choose a plan that allows you to renew the coverage without needing to undergo the underwriting procedure. However, the premium may be higher and purchasing a longer tenure would be cost-efficient.
You may purchase a short-term online term plan with the intention to change it to a permanent plan later. To ensure you are able to modify the plan, you must check that the policy is available with a convertibility feature.
4. Timely premium payment
Term policies lapse in case you do not pay the premium within the grace period. In such situations, you may not be able to purchase insurance if your health is no longer in good condition. To avoid this, it is important you make timely payments on your premium.
5. Insured event
When you compare different term policies offered by various insurers, you need to clearly understand the insured event, such as demise or accidental permanent disability. This is because not every term policy covers the same event and you do not want any surprises in case such an event occurs in the future.
Some plans allow you to include riders by paying a higher premium. You may include critical illness cover or permanent disability cover in the term plan for higher coverage.
Premiums depend on several factors, such as your age, health condition, and sum assured. It is recommended you conduct extensive research about the available options on the Internet to make an informed decision. Buying a term policy is an easy and affordable way to procure life coverage without facing financial difficulties.
Now you can record or write a special message for your loved ones and leave behind more than a secure future for them.