Is the cheapest term insurance the best?

Many life insurance companies have hopped onto the online term insurance bandwagon. Since this is the simplest form of insurance on offer and a direct comparison of premium is possible. Couples of insurers have even entered a slugfest on who offers the cheapest term insurance policy.

These insurance covers that offer a pre-set death benefit are cheaper than the regular term insurance plans purchased through insurance agents and brokers. The benefit of online term plans is that one does away with the insurance middlemen and thus saves up on the commission paid to the agent out of your premium paid. Online term plans help you save 1/3 to ½ the premium paid for offline plans.

But then is premium the only consideration to opt for a term insurance plan, where the heir of the insured would get the sum assured upon the death of the policyholder. It has been observed that the chances of claims being rejected are higher when the cost of life insurance isn't commensurate with the actual risk involved. Policyholder declaration of health and existing conditions too are responsible for claim rejection

Few other essential factors need to be considered. Here are five parameters that you should assess apart from premium to zero down on an online term insurance plan.

Maturity age offered: Insurance companies offer a maximum maturity age between 65-80 years of age. Higher the maturity age the better for you as higher the age more the chances of death and better the utilization of a term plan. LIC and SBI Life, which are public sector insurance companies, offer a 70 year maturity age, while HDFC Life offers a 65 year maturity age.

Higher policy term: Term insurance policy term used to be 25 years earlier. The scene is now changing. Insurers offer a term of 35-52 years as well. The higher the term, the better for you as you need not purchase a second term cover at higher age if you exhaust the term of the first one purchased early in life. HDFC Life, Bajaj Allianz, SBI Life have a term of 30 years. LIC, Reliance Life, Aviva Life and PNB Life provide a term of 35 years, while Tata AIA Life and India offer a 40-year term.

Actual premium: The premium quoted online or through charts is just an indicative premium and your actual cost may escalate once your medical tests reveal your health condition. A smoker would have to cough up 25-30% more. So, find your actual premium before selecting options.

Claims rejection ratio: This is an important factor to be examined before taking the online term insurance India. An insurer may be offering the cheapest term plan, but if it rejects 40% of the claims then your money paid over the years may be down the drain.

Companies with strong financial background and reliable in terms of claim settlement should be looked at. As per IRDA, public sector life insurer has a claims ratio of 98.14%, while HDFC Life ranks third in terms of claims settlement by paying 94.01% of the claims received.

Keep an eye on the claims rejection ratio too which is indicative of the number of claims that have been declined by an insurer.

Ease of claim handling: Your heir should not be left running from pillar to post to make the insurance claim. Also, several insurers have a long list of pending claims. So, study the past record of the insurer before taking up the term plan. For instance, DLF Pramerica has a shocking 53.96% of its claims pending, while HDFC Life has only a mere 1.29% claims pending. 

[Source: http://economictimes.indiatimes.com/is-the-cheapest-term-insurance-the-best/articleshow/47232489.cms]

Six Common Misbeliefs Why People Don’t Need Term Insurance

Instead of knowing the term insurance advantages and disadvantages, majority of people refuse to pay for this policy. Below is a list of the common excuses why people think they don’t need to purchase term insurance India and why it is completely wrong:

• ‘Single’ Status

Buying online term insurance India is important even if person is single. It is essential for those who have financial obligations, including having outstanding balances on credit cards or running some loans. Your family will be left to make those repayments when you are no more around. In fact, this improves the lifestyle for policyholder’s parents as well. In case your parents are not dependent on your salary currently, but they may rely on your income post their retirement.

• Young and Healthy

Actually, it is the right time to buy online term insurance India because you can save some handsome amount of money on premium and get guaranteed cover. As your age grows, you may suffer with health issues and will have to pay a higher premium or may not get desired coverage.

• I don’t have Children

Term insurance policy gives safe financial future for your spouse when you are not around to take care of their needs. Your spouse may have to manage monthly expenses and your loan EMIs. It will not be easy if your spouse is financially dependent.

• Have Employer’s Term insurance Policy

There is a huge difference between having enough term insurance for whole life and just term insurance. Only the right amount of coverage can successfully replace policyholder’s future earning till his or her retirement in insured’s absence. Usually, insurers give coverage which is twice the employee’s annual salary. But, such benefits may be sufficient to support the family maximum for two years.

• Spouse is Covered and Primary Earner

Still, you do take on responsibilities and hence, your income impacts the lifestyle of the family. As a homemaker, you are running the household and life will become challenging in your absence.

• No Returns

People have a tendency to compare term insurance for whole life with other financial products especially investment plans. But, policyholders need to understand that it is not about returns, it’s about peace of mind. This policy covers the risk of dying too early.

[Source: http://blog.policyboss.com/term-insurance/six-common-misbeliefs-people-dont-need-term-insurance/]

Importance of Selecting a Sum Assured in Term Insurance Policies

When a person buys online term insurance, selecting the sum assured is the most important task. Sum assured is the amount which policyholder’s beneficiary will receive in case insured die during the policy period.

According to expert financial planner, this sum assured must be around 10 times your annual income or 15 times your annual expenses. Those who have debts like home loan, education loan, do not forget to consider these factors while estimating their coverage.

Other policies which also double up as investment plans offer fixed sum assured to policyholders. IRDA has instructed a minimum insurance level in these policies so that they don’t just have pure investment policies. The minimum coverage is based on insured’s age and term.

• Policy Period of 10 Years+

The death benefit or the minimum sum assured on a term insurance policy online shall not be less than 10 times the annual premium for individuals below 45 years of age. The minimum sum assured is nearly 7 times the annual premium for individuals above 45 years of age. According to IRDA rules, death benefit offered to the nominee at any time during the policy period should not be less than 105% of the premiums paid.

• Policy Period of Less Than 10 Years

For plans with a period of less than ten years, the least sum assured is 5 times the annual premium for each individual. Under this scenario also, death benefit or the sum assured offered to the nominee at any time during the policy period should not be less than 105% of the premiums paid.

The limit for regular policies with a shorter tenure is relaxed by Insurance Regulatory and Development Authority because insurance companies in India showed difficulty in making online term plan with shorter period as well as with a minimum sum assured limit of ten times the annual premium.

• Tax Implications

Term insurance policyholders will not be eligible to avail tax benefits if they select a sum assured of less than ten times the annual premium. Under section 80 C, tax deduction benefits have hiked to Rs 1.5 lakh. Maturity benefits would be tax-free under section 10(10D), if the premiums is not more than 10 percent of this sum assured or the sum assured is minimum 10 times the premium.

[Source: http://blog.policyboss.com/term-insurance/importance-selecting-sum-assured-term-insurance-policies/]

How to Shop for Term Life Insurance Online

The goal of life insurance is to provide a measure of financial security to your loved ones should you die. In its simplest form, it’s a tool to protect against the loss of income. Before purchasing a life insurance policy, you’ll want to carefully consider your financial situation and the standard of living you want to maintain for your surviving loved ones.

Today’s consumers are busy and like to have options. If you’re considering getting life insurance, purchasing it has never been easier because now you can buy life insurance from the comfort of your own home. Getting quotes and applying can be done from anywhere at any time.

Not everyone needs life insurance and maybe you are trying to decide if you should purchase or not. To help you determine if you need it, let’s run through a few scenarios.

Who Needs Term Life Insurance?

Are there people in your life that would be negatively impacted financially if you died? This would mean a significant other, children, or family members who depend on your income to live. If you are young and single with no children and are a member of a wealthy family, you probably don’t need life insurance.

Are you a small-business owner? If you died, would the business crumble? A term plan can work to fund a buy-sell agreement. This is a contract among the owners to buy a deceased owner’s share of the business at an agreed upon price in the event of death, disability, or retirement.

Do you have any debt? Did you co-sign a loan with anyone? Do you have any shared credit card accounts? If you answered yes to any of these and don’t want to saddle your loved ones with your remaining balance, then life insurance could help you.

Example: If your parents helped you through college by co-signing your student loans, then anything you didn’t pay off goes to them if you died. Benefits from a life insurance policy would go toward your debt, paying it off so your mom doesn’t have to.

Are you young and healthy? Your age and health play a large role in determining policy premiums. Essentially, the younger you are the cheaper it is so you may consider getting life insurance sooner rather than later.

Example: If you are a newlywed 29-year-old and plan on starting a family soon now may be the perfect time to get life insurance. It would cost less than one dollar a day and it would ensure your spouse and future children are protected.

According to a study by LIMRA, 85 percent of those surveyed say most people should have life insurance, yet only 62 percent do. Of those 85 percent, 86 percent haven’t bought life insurance because they think it is too expensive.

How Much and for How Long?

The rule of thumb is that you should have enough life insurance to cover 10 times your annual income, but this is an estimate and is not right for everyone.

Example: A single, childless man with an annual income of $75,000 does not need the same amount of coverage as a married father of three with the same income.

If you have loved ones who depend on your income you will want to get enough coverage to allow them to live their lives as planned despite your absence, you also want enough to cover your final expenses (funeral/burial), and cover your debt.

Determining the term length can seem like guesswork, but it’s easy to narrow down. If you are getting term insurance to make sure your loved ones are protected from your debt then you only need to get enough to cover it as you pay it off.

How Do I Get Life Insurance?

Here at Quotacy we make the process of getting life insurance as easy as possible. We don’t want you to have to give up your first born and a phone number just to get a term insurance quote and we don’t want you to worry that your personal information will be sold to third parties.

After getting your quote you can play around with our slider features. You can adjust your policy value, this is how much your beneficiaries would receive, and also how long you want coverage for. As you adjust these sliders your estimated cost is adjusted right along with you so you know exactly what you’re paying for (no hidden fees here!) There also is an easy-to-use needs analysis calculator to help you determine how much coverage you need.

[Source: https://www.quotacy.com/how-to-shop-for-term-life-insurance-online/]

What if I Can’t Pay My Term Life Insurance Premiums on Time?

Sometimes life does not always go as planned, which is one big reason term life insurance is a great financial product to own.  But what happens if you suddenly can’t afford to pay the premiums on time?  Maybe you were injured and are out of work, or an emergency called for a large amount of your savings, or you simply forgot to send in the check; whatever the reason, you suddenly realize you didn’t pay your premiums.  What happens now?

A term life insurance policy is a contract between you and the life insurance company.  You agree to pay a certain amount and they promise to pay out a lump-sum to your beneficiaries should you die.  If you stop paying the agreed upon amounts, then your policy will simply lapse and you would no longer be covered.  Don’t panic immediately though, all online term insurance plans in India include some sort of grace period.

Payment Grace Period

All term life insurance policies have a grace period for making your premium payment.  Most grace period lengths are 30 days.  As long as you make the payment and the insurance company receives and processes your payment within that grace period your policy will not lapse.  While it is important for you to make your payments on time, you will be relieved to know that you are still covered during the grace period.

                Example:  Your term policy’s monthly premium is due April 30th but you are unable to make the payment by that date.  If you die May 5th the insurance company will still pay out the death benefit because you died within the grace period.

Lapsed Policy

If you aren’t able to make the premium payment by the due date or within the grace period your policy will lapse.  A lapsed policy means that it is no longer active.  You will not be covered and your beneficiaries would not receive a death benefit if you died.  You will not be refunded any of your past payments if your policy lapses.  After a policy first lapses, the owner may have the option to reinstate the policy within a certain period of time depending upon the company, but you may have to prove your insurability again by going through an underwriting process.

Reinstating a Lapsed Policy

If your policy lapsed, but you still want to be covered you can apply for reinstatement.  Each company has its own guidelines for reinstatement but most will allow you to apply up to five years from the end of the policy’s grace period.

This is what is usually required when applying for reinstatement:

• Reinstatement Application – All companies will ask you to complete a reinstatement application which is similar to the original application you filled out for the policy.
• Health Statement – Most companies require this to see if anything has changed with your health since you first applied. If you apply for reinstatement within 30 days of the grace period ending, many insurance companies won’t even need this statement and no underwriting would be necessary to reinstate the policy.
• New Medical Exam – Most companies won’t require this if you apply for reinstatement within a certain amount of time, typically within six months of the end of the grace period, but this varies by insurance company.

Even if you apply for reinstatement within a couple months you may still be asked to complete a new medical exam if the answers on your health statement suggest health changes.  It would not be wise to attempt to trick the system and lie on your health statement.  If it is discovered during the claims process that you laid, the insurance company can dispute all or part of the benefit your beneficiaries were to receive upon your death.

As a general guideline, the less underwriting the better because if a new health condition is discovered you may no longer qualify for the same rates and your premiums would increase when reinstated.  Also, if you are approved for reinstatement you will be required to pay the premiums due from the end of the grace period.  Consider this if you let your policy lapse for a few years; that would be a significant amount.  If you let it lapse for a considerable amount of time applying for a new policy altogether may be a better choice.

Automatic Payments

If the reason your policy lapsed is because life got crazy and you simply forgot to send in a check, switch to automatic payments.  All major life insurance carriers offer the ability to automatically draft your premium payments from your checking account.  Set it and forget it, as they say.  Make life easier on yourself.  With automatic payments, you will never need to worry whether your loved ones are financially covered should you die unexpectedly.

If your life insurance policy has lapsed and you are shopping for a new one, take a minute to see how little it would cost you to get a new term life insurance policy.  No need to enter any personal contact information and you are able to see your quote instantly and adjust the coverage amount and term length as needed before starting your application.  Term life insurance is peace of mind ensuring your loved ones are protected.

[Source: https://www.quotacy.com/cant-pay-term-life-insurance-premiums-time/]

Know More about Single Premium Term Insurance

Single premium term insurance policy is designed for those who want to buy a policy at one go. As compared to traditional insurance products, policyholders have to pay premium at periodic intervals for these policies.

It is a onetime payment solution for those who don’t want to go through the trouble of periodic payments. When the premium payment has been done, buyer becomes the policy owner with certain death benefits.

For single premium term insurance policy, policyholders don’t have to worry about paying any further premium payments or the lapse of your insurance if insured forget to make any payments.

All leading insurance companies in India offer this insurance for the benefit of their clients and customers can access some policy aggregator portals online to know which one is suitable for your needs. If you have a lump sum fund with you, then it is advisable to opt for a single premium term insurance plans.

Under this plan, policyholders get financial security against taxes. When person invests in this insurance product, he or she is given exemption of up to Rs 1.5 lakh. In case something happens to policyholder, his or her beneficiary would get the insurance money which is absolutely tax free.

But, insured is eligible to avail the tax exemption benefit only once for this policy because policyholder is investing in this insurance for one time only. As you paid up in full upfront for this policy, so you don’t have to worry about the plan getting lapsed if you forget to pay the premium amount.

Your policy is completely valid till the entire policy term and reduces the sum assured when the policy period comes to an end. It generates cash value. Person is building a financial asset for himself or herself when he or she makes the premium payment for single premium term insurance. It comes in handy if you want to apply for loan and can be used as collateral against loan.

[Source: http://blog.policyboss.com/term-insurance/know-single-premium-term-insurance/]

Make Term Insurance a High Priority

Every person needs to be concern about term insurance just like the way you are concern for your life. Under this insurance type, your loved ones get complete financial protection even if you are not with them to look after their needs.

Insurance offers you preferred alternatives to protect life of you and your family against various risks. Nowadays, people can buy online life insurance and there are many resources available for you to guide you how to select the best life insurance policy.

It provides financial support to the survivors to fulfill their requirements and to meet their goals in life. This policy is designed to match the needs and necessities of policyholder’s family. Life insurance companies in India will pay expenses to a specified party in case of an unexpected demise of policyholder because of a serious illness and accident.

The main purpose of this policy is to secure the family of deceased from the financial burden of their demise. Generally, lost earnings and funeral expenses are utmost concern. Normally, it is bought by breadwinners with dependents and spouse.

The cost of this policy increases with the age. Customer’s requirements for this term insurance plans are based on his responsibilities, lifestyle, number of dependents and age.

It feels the void between the financial requirements of your family and the amount available from different sources. Insurance service providers can help customers with these calculations.

Nominees get the face amount when a policyholder dies. Securing your family means replacing the income you earn in case you prematurely die. If insured has a mortgage on his home, death benefit offered by this insurance can help his family to repay policyholder’s home loan.

[Source: http://blog.policyboss.com/term-insurance-policy/make-term-insurance-a-high-priority/]