5 Things to Know Before You Buy First Term Plan
Nov 27, 2020
(3 min read)
(3 min read)
Term insurance was designed to provide the highest life coverage for a minimum annual premium. The plan covers one’s life up to 65 years or so. The simplicity of term insurance made it quite popular in the market. More and more people began to opt for it. This led to the insurance companies adding more benefits, features, and options to choose from.
While we cannot deny the benefits, the new additions have complicated term insurance for the common folk. There are different types of term plans, and not all of them are suitable for everyone. You will first need to understand a few things before you buy term plan for your life.
1. Start with the Coverage Amount
The ultimate aim of an insurance plan is to provide life cover and financially protect your family in case anything happens to you. For that, you will need to first know how much money your family would need one day in the future.
The aim here is to arrive at a large sum that will help your family tide over any financial difficulties. Once you have the amount ready, you can use online term insurance calculators to get an idea about the premium you have to pay per year.
2. The Duration of the Policy
What is term insurance? It’s a life cover that protects your family financially in case of your untimely death. If the policy duration is just for a few years, you might still be in the middle of financial commitments. If the tenure is too long, you’ll have to pay a higher premium without much benefit in return.
However, the duration will depend on your age, your liquidity position, and your risk tolerance. If you start young, you will naturally have to decide on a longer tenure. That said, taking life cover until you reach your retirement is recommended.
3. Choosing the Insurance Provider
There are various insurance companies in the market. Some of them are quite famous and have a large client base. Still, you should do your research about the company, check out the claim settlement ratio, talk to the agents, compare the policies offered by two or more companies, and then decide.
4. Be Careful with Add-ons
Add-ons are, no doubt, advantageous. But they also increase the premium. Choose only the ones that are truly useful for you- cover for critical illness, additional cover for accidental death, etc. These two are usually preferred by many people.
5. Single-Premium vs. Regular Premium
Though companies offer a single premium option when you buy term plan, it is not advisable to choose it. Paying a regular annual premium is the best choice. It isn’t that hard either. Moreover, it doesn’t make much sense to pay the entire premium at once when the future is unpredictable.
Apart from the above, you should be firm about your decision and not waver too much. Just make sure to inform your insurance company about your smoking and drinking habits (if any).
Information @ Finger Tips