Insurance requirements are unique in the sense that
a particular policy suitable to one may not be suitable to another person. However,
there are some general norms applicable to term insurance policies. These pure
term plans provide basic protection and are the cheapest policies. Every
earning member of a family needs term insurance to provide financial protection
to the dependants. The following are some common rules while opting for term
insurance.
Common
Rules of Term Insurance:
1. Term insurance plans are the cheapest of all
life insurance plans
2. Of all the life insurance plans, they provide
highest benefit of life protection
3. They are also known as protection plans or pure
insurance plans
4. For these plans, the premium payable is the
lowest and sum assured the highest
5. Sum assured is the amount of cover (protection)
provided by the life insurance company
6. For pure term plans, sum assured is returned to
the legal heirs or nominees in case of death of the insured. If the insured survives till the end of
the selected period, no amount is payable by the insurer.
7. You should not see life insurance plan as some
sort of investment that gives you return
8. You should never mix insurance and investment.
Unfortunately, insurance is often seen as a savings plan by many Indians.
9. If you mix insurance and investment in one product,
you will get very low returns
10. With term insurance, you are providing
financial protection to your family
11. If you are a salaried person, you are likely to
retire by 60. One thumb rule is that you don’t require life insurance
protection beyond the age of 60 years.
12. The idea is that once you reach your retirement
age, you’ve have accumulated some wealth and taken care of your loved ones. So
beyond 60, your family’s dependence on you will be minimal and as such you
don’t need any further insurance cover.
13. If you are 30 years old, you can go for a
policy with a period of 25 or 30 years
14. If you start buying term insurance at an early
age, the premiums are much lower. As you age, the premiums go on increasing at
a faster rate.
15. So it’s better to start buying insurance
polices at a young age as you start earning your salary or professional income
16. Suppose at age 30, you opted for a Rs 50 lakh
term policy (that is, policy with a sum assured or life cover of Rs 50 lakh).
After five years, you can consider to take an additional term
policy—effectively increasing the original cover of Rs 50 lakh, because your
income would have gone up after five years.
17. Whenever you opt for a life insurance policy,
better to go for a medical check-up to avoid any complications in future while
settling the claim
18. While filling in the policy application,
provide all personal details correctly (don’t lie)
19. In the insurance industry, there are several
instances of agents selling unsuitable or wrong policies. In general, agents
tempt you to take policies that fetch them higher commission. So beware of
agents’ marketing tricks and don’t fall prey to their tricks.
20. Always pay your annual/semi-annual premiums in
time. Never allow a policy to lapse.
21. Some agents tell you to go for term insurance
that offer return of premium. Don’t consider such plans. Because the life
insurance company will return only the money paid by you.
22. When it comes to term insurance plans, Life
Insurance Corporation of India
23. LIC’s indicative premiums for term insurance
polices are two and a half times costlier than the policies of HDFC Life, ICICI
Prudential, or Kotak Life Insurance.
24. So, don’t buy LIC’s term insurance plans
25. Before buying a policy, study all the features
of the policy that is suitable to your individual needs
Case
for Online Term Insurance Plans:
1. You can buy term insurance plans online by
visiting websites of insurance companies
2. The premium payable for online plans is much
lower than that of offline plans
3. Offline plans are plans that you buy through a
life insurance agent/broker
4. Offline plans are costlier because the life
insurance company has to pay hefty commissions to agents or brokers
5. Some online policies come with additional
benefits of critical illness and accidental death riders. Of course, you’ve to
pay a litter higher premium for these add-on benefits.
6. Now several companies in India
7. These online term policies are no different from
the ones you buy through offline, that is, through agents. If you need a total
life cover of Rs 50 lakh, you can buy two policies of Rs 25 lakh each from two
different companies.
Illustration:
Let us take an example and compare some online term
insurance plans:
Consider a male who is married, non-smoker and
healthy. The indicative premiums sourced from respective company websites (on
29Dec2013) are given in the above table.
As indicated above, the premiums range between Rs
6,400 and Rs 8,300 for these four companies. You better check these policies
thoroughly for various features and suitability of the product. Other life
insurance companies, like Aegon Religare, Aviva, Bharti Axa, PNB Metlife,
Reliance Life and Tata AIA also provide online term policies.
Conclusion:
The choice is plenty for online term insurance
policies now. As stated earlier, each individual needs are unique depending on
their annual income, total wealth, number of dependants, lifecycle stage, marriage
status and others. Online policies are equal to offline policies in terms of
their features and service.
Online policies are much cheaper as compared to
offline policies. For example, the premium for a HDFC’s offline term plan is
more than two times that of an online term plan with similar features. So is
the case with Bharti Axa term plans.
Ideally, your insurance needs are to be dovetailed
into your total financial plan.
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Disclaimer: The author is an investment analyst, equity
investor and freelance writer. This write-up is for information purposes only
and should not be taken as investment advice. Investors are advised to consult
their financial advisor before taking any investment decisions. He blogs at:
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