6 Questions to Ask Before Buying a Term Insurance Policy
This variant of life insurance i.e., term insurance has gained a lot of popularity over the last few years as it provides a lot of value for its price. In fact, for someone who is seeking to find the maximum coverage insurance plan at the lowest possible premium, there is nothing better in the market than a term insurance policy. This explains why policy seekers that are looking for a financial shield for the future of their loved ones opt for a term insurance policy.
Also, every term policy out there and the add-on riders available along with them may not be suitable for anyone and everyone. There is no ‘one size fits all’ strategy here. Therefore, before going out there and opting for a term insurance plan, it is sensible for you to ask some questions and also compare across the different options of term plans offered by the insurance provider in order to determine the one that is best as per your needs.
Here are the 6 essential questions to ask before buying a term insurance policy.
Should I Purchase a Term Insurance Policy?
The first question that needs to be put out there before going forward with the purchase of a term insurance policy is: do you need a term plan?
This is vital as a term policy may not be for everyone out there. For instance, if you are someone falling in the younger generation, say you have just started off with your career, and you do not have anyone who is financially dependent on you, then a term insurance policy or for that matter any life insurance policy, may not be as suitable for you. However, for instance, if your job description requires you to travel quite often, then you might need some coverage in the form of travel insurance. But once you have entered the phase of your life in which you are married and have dependents, then it becomes very important to find and opt for the most suitable term plan.
There are, of course, certain scenarios where you may need to opt for a term cover even if you are single. For example, when you are single but you have financial dependents such as your parents or any siblings of yours depend on your income. Similarly, if you are planning to get married anytime soon or after some time, you are likely to have dependents. Sufficient life coverage is important in such scenarios also. And term insurance definitely fits the bracket of giving you cover in the best (cost-effective) way.
However, everyone’s situation and needs are different, which is why it is important for you to assess your present along with your near future scenario before coming to a conclusion for this question.
When Should I Opt For a Term Plan?
Once you have come to a decision about opting for a term plan, the next question to be asked is, when should you buy a term insurance policy. As per the professionals, the earlier you opt for a term plan, the better it is for you as well as your family members. This is because of the very basic reason – the premium charges increase with one’s age. Therefore, it makes sense to opt for a term life cover in your early years, say about 25 to 30 years. There is no limit set for buying a term cover, but as you age, you are likely to fall prey to illnesses or diseases that might contribute a huge hike to the premium charged to you by the insurance provider. It is also easier to buy a term plan when you are younger.
Should I Choose a Single or Regular Premium Policy?
The policies with single-premium are most of the times seen to be as a convenient option, however, they can cause a lot of burden on your pocket unless you have some funds lying idle in your account or your luck has suddenly played out to reward you a good amount that you want to secure. Also, investing your money in one go can expose you to the volatility of the market as compared to opting for a regular term insurance policy that protects you against the fluctuations in the market.
What are Add-on Riders? Should I Opt For Them?
You should be aware that riders are additional benefits that can be added to your base policy to increase the scope of coverage offered. You should assess your needs and then accordingly invest in the riders that seem suitable. Some of the riders that a policy seeker should take into consideration are:
- Accidental Death Benefit: This is a benefit that is offered over and above the sum assured that has been decided under the term insurance policy. This rider comes into play when the insured’s demise is caused by an accident during the term of the policy.
- Critical Illness Rider: Under this rider benefit, a lump sum is paid out to the holder of the policy in case he or she is diagnosed with any critical illness (such as cancer, kidney failure, heart attack, stroke, etc.) that is stated in the policy contract.
- Accidental Disability Rider: If the insured individual suffers a permanent or a partial disablement that is caused because of an accident, this rider comes into play. The payment stream can either be a lump sum payout or recurring regular payouts.
- Waiver of Premium: If the insured individual is no longer in a state to pay the premium on their policy due to a disability or loss of income, then the future premiums are waived off and the policy status remains active.
Should I Disclose my Tobacco or Smoking Habits?
Any type of insurance policy, even a term insurance policy, follows the principle of utmost good faith, wherein, both the insured and the insurer must disclose all facts and information related to the policy in each other’s good faith. Holding back lifestyle or health information such as a smoking or tobacco habit may create complications in the future while settlement of the claims.
How Much Coverage Should I Opt For?
As per what the experts say, one should opt for coverage under the term insurance policy that is about at least 20 times of their annual income or salary. You should assess any current and future liabilities that maybe there along with any debts. This could be your child’s marriage or further education, or any loan that you might have taken. Depending on these factors, you should decide an amount for the coverage you require.
The Bottom Line
Once you are clear about all your answers to the above mentioned 6 questions, it is time for you to move forward with buying a cover as a term insurance policy. However, always make sure that you have done a thorough comparison across the different providers and policies in the market. It is important to compare the policies’ sum assured, the premium charged on the policy, the reputation of the provider, etc. before opting for any single policy. This can simply be done online in a matter of minutes as per your budget.