All responsible adults should purchase a term insurance plan. Yet, it is a decision that is often postponed, while more frivolous purchases are fast-tracked. A big reason for this is the lack of understanding around the product. In this article, we have put together all you need to know before purchasing a term insurance plan.
Calculate how much insurance you need
The purpose of term insurance is to ensure your family’s financial security. Therefore, to arrive at the amount of insurance you need, you would first need to estimate the amount of money they would need over the long term. You could arrive at this number based on actual annual expenditure or use one of many thumb rules that people use for this purpose. The most common of them recommend multiplying your current annual salary by 15.
Always select (and update) the nominee
Insurance is not an investment. It is more akin to a risk management technique. Therefore, you need to ensure that you put everything in place to simplify the claim process for your family. Therefore, while purchasing the policy, always mention a nominee. It is most common to name a spouse, child or another family member as a nominee. It is best to avoid nominating persons who are much older than you. If this must be the case, and the nominee expires while the policy is in force, be sure to change the nomination. This will ensure a smooth claim process.
Pick the best term plan available in the market
There are many term insurance plans in the market & it is not practical to go through each one of them. What we recommend you to do is evaluate the most important things: ensure that the insurer offers flexible payout options, allows you to keep the policy even beyond retirement age, etc. The term insurance plan offered by Kotak Life is currently among the best plans in the market, and offers special rates for women, tax benefits and life cover up to 75 years of age.
Don’t hide medical records
It is imperative that you declare all medical records to your insurer prior to purchasing the policy. While most insurers require you to undergo a basic medical examination before issuing a policy, the onus of providing accurate health information is on you.
If you have any complications, your family is prone to a particular illness or have undergone any major surgery, do not fail to disclose it to the insurer. This may result in a higher premium, but is essential to a successful claim, should the need arise.
Notify the insurer if you smoke/drink alcohol
An extension of the previous point, but it deserves to be mentioned separately. It is highly important for you to declare the exact intake of alcohol and cigarettes. As the whole purpose of insurance is to ensure the payout of the claim, in case the need arises, it is important that you give the insurer no reason to think that you were hiding something at the time of purchasing your policy.
Do remember that we cannot predict the future, but we can be prepared for it. The purchase of a term life insurance plan is the best way to ensure that our loved ones remain happy and content, come what may. The five above-mentioned steps will make it easy for you to ensure that you are on the right track while purchasing your term insurance plan.
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Updated Date: Dec 09, 2019 16:13:50 IST