Things you should know before buying a term insurance plan
Before going through the points, you should keep in mind that while buying a term insurance plan, let’s quickly understand what it actually is.
Term insurance is a life insurance plan that gives financial protection to your family if something happens to you. In other words you pay a small amount every year (premium) for a certain number of years, and if you pass away during this period, your family will receive a lumpsum amount (sum assured) from the insurance company.
You have noticed that term insurance plan is really a big deal and offers financial coverage against the unfortunate demise of the insured during the policy term and that’s why it is important to be attentive while buying the policy. Here are some points that should be kept in mind when you buy a term insurance plan:
1. Be honest in your application:
Insurance is based on the principle of utmost good faith, which means both you and the insurer must be completely honest with each other so if the insurance company finds out that you withheld important details, they have the legal rights to reject your claim even if you’ve paid premiums for years.
So always disclose the truth about your health, lifestyle like whether you smoke/drink or not, your medical history and any other existing policies.
2. Claim settlement ratio of Insurance companies:
This ratio outlines the percentage of claims that were paid out of the total claims filed. It means the higher the ratio, the easier it will be for your dependants to claim the insurance in your absence. If the Claim settlement ratio is above 80% it is considered good, and if it exceeds 90%, it indicates exceptional value in insurance products.
3. Consider your current lifestyle:
Your lifestyle may also be a factor that should be kept in mind while buying an insurance plan. You should consider your lifestyle choices like occupation, habits, health, etc while deciding the type and amount of coverage you need. For example, if you are working in high risk occupation like construction area, mining, defence etc then you should require a higher coverage to mitigate potential risks.
Conclusion:
Buying term insurance plan is one of the most important financial decision you can make to secure your family after you. Before purchasing a one you should not rush rather you should compare the most beneficial plan, read the terms and conditions, inspect insurance company’ claim settlement ratio (CSR), analyse how much premium you can afford to spent.
Buying a term insurance plan is not a policy rather it’s a protection to your peace of mind.
