What is Term Insurance?

Imagine a situation where you have to pay a nominal amount as a premium and you get to walk away with life insurance cover that can ensure that your family is well taken care of in case the worst should happen. This is going to be a policy where there are no strings attached and the insurance cover will not depend on the performance of the markets. The insurance cover will also not require you to pay premiums that can burn holes in your pocket, thus making it a very affordable policy. The premiums that you pay will also be eligible for tax benefits. This, in a nutshell, is what a term insurance policy is all about.

A term insurance plan is a plan that is sometimes referred to as the most basic form of life insurance. Under such plans, applicants enter into a contract with an insurer that states that the insurer will provide life insurance cover for a fixed period of time to the insured and the insured will pay a premium for such facility. In case the insured dies while the policy is still in effect, the beneficiaries of the insured are paid the sum assured. However, if the insured person survives the policy then, in most cases, no maturity benefits are paid.

How does Term Insurance Works?

A term insurance policy can be considered one of the most traditional forms of insurance. To understand how it works, you can look at it in these three situations:

Buying the policy: To be able to buy a term insurance policy you don’t need to put aside tens of thousands of rupees every year. Many of the insurance policies can offer you a sum assured of up to Rs. 1 crore for a premium that could be as little as about Rs. 10,000 per annum (These are indicative figures. The actual premiums may differ depending on the sum assured and the insurance providers).

Keeping the policy: Just like any other insurance policy, you pay the premium towards these policies at a frequency chosen by you. These premiums can be paid every month, every quarter, every 6 months or once a year. They can also be paid as a lump sum instead of being paid at regular intervals.

Redeeming the benefits: Term insurance plans don’t typically come with any maturity benefits, except for term insurance with. Their main objective is to provide life insurance cover and that is exactly what they do. In case the policy holder passes away, the person who is named as the beneficiary of the policy will receive the sum assured.

The way it works is also one reason why you will notice that a lot of the time insurers refer to these plans as pure protection plans. There are no frills attached to the plan. You pay the premium and you get a fixed sum if case something happens to you.

Why should you buy Term Plans?

It can be argued that term insurance plans do get overlooked when compared to other types of life insurance policies. This could happen as a result of the assumption that term insurance plans don’t offer as much in terms of returns as compared to other plans but these policies can be used to form a great safety net. They are also very affordable which makes them easier to take and offers higher sum assured for lower payments.

Does it Make sense For Senior Citizens To buy Term Insurance?

 Term insurance replaces the income lost due to the sudden demise of the bread-earner by offering financial aid to his family. This brings us to a thought-provoking question: “Does it make sense for senior citizens to buy term insurance?”

Well, mostly NO, however there are circumstances where buying life insurance by a senior citizen will make sense.  Remember buying a term insurance at this late age will require high premium. Also, age acts as a deterrent for companies who are not forthcoming in offering insurance. So, you must take the decision of buying a term insurance at this age prudently. Think it through.

There is a table at the end to help you exactly understand the financial implications of a term insurance at various age brackets.

Let’s see those scenarios closely wherein buying term insurance (irrespective of high premium) will be useful thereby weighing its pros and cons.

Scenario 1= Your kids are financially dependent on you

Term insurance is imperative if your kids are financially dependent on you. These days, this is a common scenario owing to late marriages and having kids late in life. By the time you cross 60, your kids are most probably still studying and financially dependent on you.

Scenario 2= You want your wife to be self-reliant

 If your wife depends on your pension and you don’t have provision of a family pension then buying term insurance will make sense. If there is no other source of income then to keep her self-reliant post your death, a term insurance is needed.

Scenario 3= You are working post retirement

You need a term plan if you are working post retirement owing to financial liabilities. It would give financial protection to the family by replacing your income after the death.

Scenario 4= You have liabilities and unpaid debts

Usually major loans, like home loan stretch till 50-60 years. However what about the money which you owe to a friend or relative? In that case, opting for a term insurance makes sense. If something untoward happens, proceedings of term insurance may be utilized to pay outstanding debts.

The purpose of term insurance is to ensure that your dependents are not left in the lurch after your death. But if you don’t have dependents or have a steady retirement income, you can go without a term cover. Similarly, individuals who are not working don’t need to opt for a term cover. 

Keep a Check on High Premium Rates

Buying term insurance at the ripe age is not an easy task. First, your age will make it difficult for you to find a good term insurance plan. Second, if you do find one, you would have to undergo stringent medical tests to prove you are fit for that plan.

Above all, premiums of term plans shoot up after you cross the 40 mark. (Refer to the table below.) For instance, a married man at the age of 60- year has to spend Rs 76,224 to seek Rs 1 crore life cover under HDFC ‘Click 2 Protect Plus’ plan of 15 years’ tenure. This term period is the maximum tenure given to a 60-year old person. However, a married man at the age of 50- year has to spend Rs 34,529 to seek Rs 1 crore life cover for the same plan. Similarly, premium rates of the same plan for 30- year and 40- year married men are Rs 7617 and Rs 13792, respectively.

So think before acting. Opt for a term plan only if it is unavoidable and no other option is left.

Source: http://www.policybazaar.com/life-insurance/term-insurance/articles/does-it-makes-sense-for-senior-citizens-to-buy-term-insurance/

How to Choose the Right Term Insurance Plan for You?

The life insurance industry offers many options to individuals. The discerning individual is particularly interested in term insurance plans, so how does he choose the right term insurance plan?

Selecting the right term insurance plan involves focusing on the key features that can make a difference to you and your dependents.

We have shortlisted some of the more important features for you:

1.       Human life value

The main reason for taking life insurance is to offer financial cover to your dependents in your absence. They expect the insurance policy to provide financial cover to the dependents in their absence. That is why they must make sure the life insurance cover is adequate. Or like they call it in insurance – the insurance must cover the individual’s human life value (HLV).

Simply put, the HLV is the individual’s income / salary plus liabilities like loans. This forms the basis for the life insurance cover and the right plan for the individual is the one which provides for at least the HLV.

2.       Cost

We have all heard that term plan is the cheapest. But that does not mean they can’t get cheaper. Go for term plans with the lowest expenses since this translates into lower premiums for the same cover. Also give preference to insurance companies that offer discounted premium rates – like for instance to non-smokers.

3.       Riders

The best term life insurance plan for you is the one that has all the angles covered. One way to achieve this is through riders. What is a rider? A rider is an add-on to the primary policy, which offers benefits over and above the policy subject to certain conditions. The policyholder can attach riders to the term plan. So if let’s say there is a critical illness rider, he is entitled to receive the sum assured on being diagnosed with the critical illness. .This is in addition to the death benefit of an equal amount on death over the term of the policy. Likewise there are other riders like disability cover, loss of employment cover, waiver of premium cover, among others. The policyholder should select riders based on individual and family needs since they can add considerable value to the life cover.

4.       Enhanced cover

A feature offered by term plans of certain insurers is the flexibility to enhance the life cover during critical stages of the policyholder’s life. For instance, an insurer may allow policyholders to enhance the life cover by 50% at the time of marriage and by 25% at the time of turning a parent. This allows policyholders to start with a modest cover and enhance cover as responsibilities increase as also their ability to pay higher premium.

5.       Convenience

Across the gamut of life insurance plans, one finds term life insurance seeing the maximum innovation. For one, costs and by extension premium rates have been reduced considerably and this process is on. Buying a term plan has been made easier thanks to the internet. It is now possible for a healthy individual, as defined by the insurer, to buy a term plan on the company’s website without taking a medical test.

Which Term Insurance Plans You Should Prefer

Issues related to buying online term insurance can be resolved easily if person knows his actual requirements and how to address them with correct products. There are 24 life insurance available in the market and provide more than thousand plans across segments such as endowment, term life, child plan, money back, ULIP and annuities and so on.

These policies are available with a wide range of riders and other options. As a customer, if you really want to make sense out of all your requirements, then you must know three things which are mentioned below:

·         Your needs

·         Coverage period

·         Process of buying

Instead of focusing on their sales speech, know your two fundamental risks in life.

·         Early demise

·         Living too long

If you die at young age, you leave your family without sufficient financial support. On the other hand, second scenario leaves you with inadequate financial support in your old age. It is advisable to consider the impacts of these two risks.

If your family is dependent on your income, then you have to make sure that your loved ones continue to enjoy the same standard of living in case your income is no longer available to them. In this scenario, buying online term insurance plan is a smart move as this policy pays the beneficiary an insurance amount equal to the sum insured in the event of policyholder’s demise.

Generally, customers require that fund to be equal to their salaries. Usually, it has been observed that people insure themselves up to the age of anticipated retirement. Buyers can purchase life insurance online or from an agent.

The product cost is fixed, so just do online term insurance to get the best deal. Mention all information correctly in the application form to avoid claim rejection.

In India, life expectancy is below 70 years of age and majority of people have sufficient retirement savings which will be enough for few years post-retirement. But, what if you live more than that age? Today, employers are not offering guaranteed lifelong pension and hence, will depend on their children for financial support. To avoid such situation, start thinking about how to handle these risks.

Annuity is a completely different concept and to buy it, customers have to pay lump sum money. In return, insurance companies in India pay a guaranteed monthly income to policyholder until your partner is alive. But, do not invest your complete retirement savings into annuities.

Source: http://www.policyboss.com/blog/term-insurance/which-term-insurance-plans-you-should-prefer

Your Complete Guide to Buying an Online Term Insurance Plan

With the internet becoming a routine of our life, the number of net-savvy insurance buyers is gradually increasing. Non-life insurance products such as personal accident, health, motor and travel have fuelled the growth of online insurance products. Now, while a similar trend is yet to gain substantial momentum in life insurance, online term plans have been in particular gaining popularity. As per the statistics, one online term plan is bought every 5 minutes in India! The online quote systems and price comparisons on portals like trucompare facilitate the insurance buyers to buy a term plan easily and as best suited to their needs.

Aegon Religare was the first insurance provider to introduce an online term insurance plan called ‘i-Term’. Today, almost every insurance company from LIC to Max Life insurance offer online term plans.

Now, if you are wondering if you should buy an online term plan, how safe it is compared to an offline version and what is the process, here is a complete guide to simplify your decision.

Reasons to Buy

1.       Convenient and Quick: One click, anywhere and anytime buying – that’s what an online term insurance plan is about.

You can do term plan comparison – browse, research and compare the quotes, features and benefits of the online term plans instantly across the websites of different insurance providers.

You really don’t have to contact or follow up with any insurance advisor(s) or fear misselling of any kind.

You can scan and submit the KYC documents.

You can pay premiums by choosing any of the multiple payment methods available – credit card, debit card, net banking and even IVR (Interactive Voice Response).

The policy is processed and issued quickly, so your life cover does not get delayed much.

You can renew the policy online as and when the premium due or if it lapses.

2.       Cheaper Cost: The premium of online term insurance plans is about 30 – 40% cheaper than the offline plans. There is a misconception pertaining to economical cost of online term plans, though. Most customers believe that lower the premium, the higher is the probability of a claim rejection or that there is some catch. Well, that’s not true. There are several reasons why online term plans are more affordable. First, there is no agent commission or channel sales cost involved in the pricing. Second, insurers consider an online customer a low-risk profile – he is educated, earns well and prefers to take a life cover. Third, since an online transaction is paperless, the processing and administration cost also comes down significantly for the insurer.

Transparent Process: One of the major problems that an offline insurance buyer faces is transparency – right from meeting(s) with the advisor to filling up the form. You usually rely on the advisor’s advice to understand the key offerings of the plan. There are also chances that your personal details could be misspelled or mentioned incorrectly in the physical form. Whereas, in an online plan, you would be doing all the formalities on your own. You have all the information at hand to make a sound decision. There is a step-by-step procedure to guide you, so the error rate is considerably low.

Drawbacks

Lack of Human Touch: If you are someone who prefers the face-to-face support and advice for before (buying) and after (premium payment reminders, claim settlement, etc.) insurance, you may not be comfortable buying an online policy. However, you must also note that the most advisors do not stay for long with one single insurance company. So, if you think that the advisor who sold you policy will stay with you till the end of the policy term (unless he is someone who you know personally), you are mistaken! The good side is that you really don’t need an advisor’s help to buy an online term plan for the reasons stated above. These days, insurance companies send automated text and email status updates / reminders for your policy. And to ensure that the claim settlement procedure is hassle free for the nominee(s), it is advisable to choose a reputed insurer with the best claim payout ratio.

Insurance Lexicon: While applying for an online term plan, you may not understand the insurance wordings on the website. You may have to either dig up more information from the internet to comprehend their meaning or rely on the insurance provider’s customer support service.

Choosing the Right Online Term Plan

Now that you have decided to buy an online term insurance, the question is how to choose the right one. We have already written a detailed post on this earlier. Read here to know more.

Process

The process of buying an online term plan differs from one insurance company to another. However, the submission of personal details and KYC documentation remain same. As far as medical tests are concerned, you may have to undergo the same if the insurance provider deems necessary.

We will take examples of two insurance companies – Max Life Insurance and Bajaj Life to explain the process of online purchase of term policies.

Buying Tips

Buying online term plans is reliable and safe as long as you chose the right insurer and the right plan. But, you should also keep a few important points in mind to ensure smooth processing of your application and effortless claim settlement process for the nominee(s).

Understand the plan If required, consult your family, friends or an expert. You must also do term plan comparisons to make the right decision.

If you are using a comparison site to seek information, you should verify the information for its relevance and freshness.

Read all terms and conditions on the website carefully, especially the ones in the fine print.

Do remember that most claim rejections result from non-disclosure, incorrect or misleading information. In order to ensure that the nominee(s) does not face any problem in the event of a claim, a precaution at your end while buying a plan is of the utmost importance. You must be honest about your disclosures. For example, you should mention your smoking or drinking habit. Or, if you have any previous life cover, that should be too declared. You may have to pay a higher premium, but it is worth your peace of mind.

The browser page address line should show a secured connection. That is, it should start with ‘https’ instead of ‘http’.

Before making a payment, ensure that the website has Secure Sockets Layer (SSL) certificate so that your transactions are safe and secure.

Save the acknowledgement or reference number of the transaction, whether it was successful or unsuccessful. Ideally, keep a screenshot of the transaction page. This will act as a record till you receive the policy document by courier.

Remember, that you are buying a term insurance plan for the financial security of your family. Online term plans are convenient and cheaper to buy. But, these alone should not be the decisive criteria. Choose an online term plan which meets your financial goals and gives you peace of mind.

Source: http://trucompare.in/blog/your-complete-guide-to-buying-an-online-term-insurance-plan/

Term Insurance

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Why To Worry About Term Insurance?

The greatest gift Adam got from god was “Life”. Life is a divine journey which drives our being. Trudging along the path of joy and worry, through smiles and tears, triumph of victory to silence of failure, all collectively constituent towards this beautiful journey called life. Indeed we all spend our whole lives trying to fetch great things for our loved ones, Setting up impersonal goals and professional excellence is something which tops our priority list. Modern times have challenged human existence with quite many challenges when it comes to health, hazards, and accidents and so on. Human life expectancy has fallen drastically over the years and millions of people tend to die every year due to illness, accidents and other fatal events. Doesn’t it all make us think? Don’t we think what will happen to our family after we die? Indeed this thought sends chills down our spine bringing a fringed worry below our high tousle.

 It’s better to act than to worry. Invest at the right time to have desired returns. Investing in profitable insurance term policy can be the most fruitful investment in terms of futuristic approach. Term plans are investments domains which help in securing future of your family even if something happens to you. Many insurance providers devise insurance policies with a aim to reach out people who want to secure the future of their loved ones in-case something happens to them.

With the rapid increase in disease and fatal health worries, people tend to worry about the financial security of their loved ones after their deaths. Term insurances assures for beneficial returns for your investments when your family needs it the most. Term insurance plans are investments in which your investments are taken in terms of premiums which you pay on an agreed upon time span, monthly, bi-annually or yearly. These premiums are to be paid till the policy time span lasts and in order to avail benefits of the coverage; the insured should pass away during the fixed age of the policy. To avoid fortification, premiums must be paid on time along with no breach of terms and policies. Various insurance providers give different term insurance plans to meet the preferences of the niche audience.  The cost of the insurance is also dependent on factors such as age, profession, financial and health condition.

Source: http://www.policyx.com/blogs/why-to-worry-about-term-insurance/