5 Not-So-Common Facts about Term Insurance!
There must be a lot of people who look at term insurance plans as nothing more than an economical method of ensuring death benefits for their family. However, when you study the functioning of term plans in detail, you will know how this age-old concept is not just a protection tool.
In fact, a term plan can be classified as an outright solution, which makes it a must-have tool in your financial portfolio.
Most of the people buy term plans without really looking at their inherent features. If you think you do not understand term plans and their benefits completely, it would be worthwhile to know the not-so-common facts about this type of insurance coverage before you put your money and trust in them.
Let us start with what exactly does term insurance mean?
How about we say that term cover is like taking life insurance on rent for a particular period of time? It makes sense!
It is more affordable as compared to endowment or whole life plans; however, it includes no such thing as cash surrender value. It can also help you in availing a sufficient amount of cover at lower premiums.
Here are some of the lesser-known facts about term life insurance.
#1 Incorrect Disclosures Can Lead to the Rejection of Claim
Not disclosing important information regarding your lifestyle or pre-existing diseases is a general practice for avoiding higher amounts of premium. Usually, people hide about their habits of using tobacco or smoking to avoid the payment of higher premiums.
In case you have a habit of smoking or consuming tobacco in any form or are already suffering from a chronic illness, your premium amount will rise by 25-50%. At the time of claim settlement, the insurance providers will go through all your documents and history. If they come across any incorrect information from your end, then they can reject the insurance claims.
#2 Term Plans Are Real and Pure Life Covers, Others are Only Gimmicks
Term insurance is the only pure form of life insurance, which covers your life sufficiently and proves to be guaranteed financial protection for the family in case of any unfortunate event. On the contrary, other life insurance products like endowment plans, money back plans, and ULIPs are not pure life covers as they are primarily linked to investments.
Hence, if you plan to buy life insurance for the appropriate reason, that is, for the purpose of financial protection and social security, a term plan is the most suitable financial tool to put your money in.
#3 Offers Coverage Up to the Age of 75 Years
Although the majority of you must be aware of the benefits and features of term cover, there are many out there who do not know that you can buy a term insurance policy not only in your early 20s, but also in your late 50s and enjoy the benefits till you are 75 years old.
Now, you must be thinking if it makes sense? There are a lot of people who are confused if it is a good idea to buy term policy in their 50s?
The bottom line is that your insurance will not be very economical at this age, but the benefit is that you will still be able to secure your family from potential risk. These days, most of the people work even after their retirement, sometimes even in their late 60s.
Therefore, the insurance providers are offering plans that offer coverage for up to 75 years of age. And, the maximum duration of your term plan can be 30 years.
#4 Amount of Sum Assured can be Up to 20 times Your Income
It is important to determine an adequate amount of coverage for your dependents to protect them in case you’re not around. A suitable sum assured is dependent upon your monthly expenses and annual income.
While deciding the sum assured, you must take into consideration the factor of inflation also. Usually, the sum assured must be 15-20 times of the annual income. Depending upon this, the insurance providers have made the maximum amount of coverage to be 20 times your annual income.
#5 Sum Assured can be Increased within the Policy Tenure
Would you agree when we say, life is pretty dynamic? Your life may change as you move along different stages. A different stage or phase in your life may lead to a change in your pattern of spending, especially when it comes to marriage or eventually having kids.
You can insure these changes in your life later within the policy tenure, as when they take place. This feature will help you in adjusting the changes in your lifestyle as well as your financial situation at different phases of your life on making payment of an extra amount of premium.
There can be an increase in the sum assured majorly at these three life stages- marriage, the birth of your 1st child, and then the 2nd one.
In a Nutshell!
Of all the other things, the main reason for buying a term life insurance is protecting your family when you are not around. Therefore, it is the major thing to keep in mind as opposed to anything else.
Nevertheless, it is important to know what this pure form of life insurance is before you choose a plan for your family’s financial safety. If customized and selected well, your term insurance has the capability of doing wonders to your financial planning.