Term insurance is a type of life insurance that provides coverage for a specific period of time, known as the policy term. If the policyholder dies during the policy term, the death benefit is paid out to the beneficiaries.
Here are 10 things you need to know before you buy term insurance:
- How much coverage do you need? The amount of coverage you need will depend on your individual circumstances, such as your age, income, and family size. The perfect fit in terms of coverage is 25 times that an individual’s income should be the sum assured.
- What is the policy term? The policy term is the period till when the insurance policy is eligible for coverage. In terms of life insurance, the policy term usually lasts till 75-80 years of age.
- What are the premium payments? The premium payments are the amount of money you will need to pay to keep the policy in force.
- What is the surrender value? The surrender value is the amount of money you will receive if you surrender the policy before the end of the policy term.
- What are the different types of term insurance? There are many different types of term insurance, so it’s important to compare your options before you buy. Some factors to consider include the premium amount, the death benefit, and the policy terms.
- What are the surrender charges? These are fees that you may have to pay if you surrender your policy before the end of the term. It’s important to understand the surrender charges before you buy a term insurance policy so that you don’t end up paying more than you expected.
- What is the claim settlement ratio of the insurance company? This is the percentage of claims that the insurance company has paid out in full. A high claim settlement ratio is a good indication that the insurance company is reliable and will likely pay out your claim if you need to file one.
- What are the ad-ons (features) available for insurance? Term Insurance comes with certain riders, aka ad-ons one can select while choosing the insurance. It includes additional cover for death due to accident, cover for critical illness, a waiver for premium on disability or critical illness, etc.
- What are the different premium payment options? You can pay your term insurance premiums monthly, quarterly, semi-annually, or annually. The premium payment option you choose will affect the overall cost of your policy.
- What is the right term length for you? This will depend on your individual circumstances, such as your age, health, and financial goals. A shorter term length will have lower premiums, but you will need to renew your policy more often. A longer-term length will have higher premiums, but you will not have to worry about renewing your policy as often.
Term insurance can be a valuable financial tool to protect your loved ones in case of your death. However, it is important to understand the terms and conditions of the policy before you buy it.