Term insurance policies are relatively long term investments that must be made with utmost care. Before purchasing a term insurance plan, it is advisable to ask the following questions to ensure that you make an informed decision:
Who is the seller?
First things first, find out details about the company from which you are buying a term insurance policy. You must know the duration for which the company has been operating, how well it is rated, what are its offerings, etc. Find out how many agents work with the company, how good its claim settlement ratio is, and every other detail you can get your hands on. Choosing a reputed and trustworthy insurer is the first step to getting the most out of a term insurance policy, so do your homework before putting your money somewhere.
How much insurance do I require?
Once you have selected the company from which you will be purchasing a term insurance policy, you will then have to determine how much money you will be investing in the plan. Your sum assured will be determined by a number of factors. You will have to take into consideration things such as your age, your liabilities, your future financial needs, and inflation among other factors to figure out how much money you can invest without adversely affecting your current standard of living.
How long will I have to stay insured for?
After computing your sum assured, you will have to decide on the tenure of the term insurance plan you wish to purchase. Term insurance policies are sold for a specified number of years, so ask yourself how many years you can afford to pay premiums so as to receive benefits upon maturity. In most cases, the higher the tenure, the higher the returns. Consult with a professional insurance agent and calculate after taking into consideration your current salary and its expected growth in the years to come to determine how many years you can stay insured for.
When is the best time to purchase a term insurance policy?
The sooner you purchase a term insurance plan, the better. When insurance companies calculate the risk an individual brings to the company, younger investors are likely to receive better terms and conditions as they have fewer health problems and are also in a position to earn income for the entirety of the tenure of the policy. Purchasing a term insurance plan when you are relatively young is the best option, but if you haven’t purchased a policy yet, there is no need to worry as “better late than never” is a concept that applies to term insurance as well.
What benefits can I expect from the policy?
The benefits offered by one term insurance plan may vary from the next. Find out what are the advantages of purchasing one plan over the other. Ask your agent if the benefits you receive, be it on maturity or death of the policyholder, are they worth the premium payments and the sum assured? And then find out about the fees and charges associated with late payments, premature withdrawal, etc. Make sure that you go through all the features and benefits of a plan and understand them fully before purchasing term insurance.
What are the implications of overdue premium?
There may be situations wherein you may not be able to afford premium payments. Maybe you had too many expenses in one particular month, owing to which you could not pay your premium. What happens to your policy? This is one of the most crucial questions as uncertainty can arise at any time and make it difficult to pay your premiums on time. In such cases, most companies offer a grace period to make due premium payments, and failure to pay within the specified period results in a policy lapse, which must later be revived at an additional cost. Find out the implications of overdue premium payments before purchasing a policy as failure to do so has the potential to create serious complications later on.
Will there be a change in policy term if I start smoking in the future?
Although this is one of the unlikely questions asked by most people, it is important to ask your insurer if there will be a change in the terms of the policy should your start smoking or drinking or get into any habit that could lower your life expectancy. Most companies usually increase the premium amount for such customers as they would have entered a different risk pool, while some companies are known to terminate the policies of such customers immediately. Any such changes in habits must be brought to the attention of the insurer immediately as failure to do so could create problems at the time of making claims.
Will the policy be valid even if death occurs outside India?
Term insurance policies are considered valid regardless of where the death occurs. However, it is essential for the policyholder to communicate his exit from the country and that he / she resides in a different country. Most companies allow customers to migrate to other countries whilst ensuring that their term insurance policy is still in force. However, some companies defer the policy in case the customer is migrating to a nation that is regarded as unsafe, such as Somalia, Pakistan, etc.
What kind of deaths are not covered by term insurance plans?
Term insurance policies do not usually cover deaths caused due to natural calamities such as tsunamis or earthquakes, or even man-made calamities such as terrorist attacks. It is important to note that casualty in such cases will be very high and the insurance company won’t be able to settle claims as they may run into millions of rupees. Talk to the insurance agent and find out what kind of deaths are not covered by term insurance plans as doing so will ensure that your nominees will not be in for a surprise in the event of your untimely demise.
Asking the aforementioned questions before purchasing a term insurance plan will ensure that you have invested wisely and that there will be no concerns at the time of making claims.