Wednesday, 21 January 2015

The 7 Vital Aspects of Term Insurance Plans in India

We all know about life insurance plans. Term insurance is one of the simplest forms of life insurance plan. Its fundamental objective is to provide financial security to the family members after the demise of the policyholder.
Term insurance is a policy type which is the purest type of life insurance policy. As stated before, its basic objective is providing financial security subsequent to the demise of the policyholder who acts as the main wealth provider for his/her family. Hence, a sudden demise of such policyholder can put the family members under terrible situation, who may not be able to bear huge debts like mortgage loan, children education, etc. In such scenarios, term insurance acts as a savior which takes care of such huge expenditures when the bread winner is no more able to provide.
Term insurance does not provide anything if the insured survives throughout the policy term. However, there are term plans named as Term With Premium Back policies’ which enables the insured to get back all his premiums. These plans however require more premiums.
Further, you’ll learn the 7 vital aspects of term insurance plans in India.
Advantage of getting multiple term insurance policies-
It is beneficial to get two term plans say for 50 lakhs than an individual plan of 1 crore. In this way if either of the policy reduces its premium rate you will benefit from a lower premium.

Listing the policy beneficiaries
One should list those family members or dependents who feels are more vulnerable whether it’s spouse, children or parents. Account for specific percentages of the sum insured to different beneficiaries.
Deciding the sum insured amount
According to a fundamental rule, the person who is under 40 years should aim for a sum assured value of 15 times his yearly income.
For a person who falls between the age bracket of 40-45 years, he/she should aim at sum assured value of 10X his yearly income.
The person who is above 45 years should aim for sum assured value of 5X his yearly income.
Determining the policy duration
As per the thumb rule a younger person must aim for longer policy duration. There is a simple formula which gives an idea about the policy duration for a particular person of particular age.
Formula: Desired Retirement age - Present age
The right time to buy
There’s no specific time to purchase term insurance.  In fact the right time is now. You should purchase one when you’re healthy so as to avoid greater premiums. Also don’t forget to mention any kind of existing ailments you’re going through. Otherwise, the insurer can refuse to underwrite the risk and grant lower premiums to you if it discovers any medical discrepancy in future which was not informed earlier.
Importance of additional riders
It is beneficial for people to take advantage of rider options to get additional necessary protection. You can take help of critical illness rider for cover against severe accidents. People with disability problems can take help of Permanent Total Disability rider.  
Combination of Savings and Risk Coverage

Term insurance also acts as risk cover and as saving elements. It is advisable that each policyholder should assess their requirements, needs and the amount of income that they are willing to invest, before deciding on which type of insurance product to buy and invest in. 

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