• Questions You Should Ask Before Purchasing Term Insurance

    Life Insurance
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    A term insurance plan is a basic life insurance cover that provides a death benefit to the nominee upon the life assured’s death, provided all due premiums were paid as per schedule during the policy term. Term insurance plans have become a popular choice for policy buyers since they offer a high sum assured to the buyer and are priced conveniently when compared to other traditional life insurance policies.

    If you are looking to purchase a term insurance policy, it is best to first assess your needs and then compare the various policies available, before selecting a particular plan. There are also certain questions that you will need to ask your insurance provider or insurance advisor before purchasing the policy in order to better understand the workings of the plan.

    1. What benefits/payouts does the policy provide?

    The main purpose of purchasing life insurance is to avail the payout provided by the policy in case of a particular eventuality. In the case of term insurance plans, most policies only provide a death benefit. Thus, if the life assured succumbs to an accidental or natural death, his/her nominee will receive the death benefit. It is important to remember that term life insurance plans do not provide survival or maturity benefits. However, certain term insurance plans come with a ‘return of premium’ option, wherein the total premiums paid during the policy tenure will be returned to the life assured at the completion of the policy tenure. Thus, before purchasing a term insurance policy, make sure to ask your insurer about the benefits and payouts offered by the plan.

    2. What are the various exclusions and limitations under a term insurance plan?

    All insurance plans come with certain exclusions. For example, almost all life insurance plans do not cover suicide during the first policy year and the first year after the revival of the policy. Similarly, certain term insurance plans will not cover death due to adventure sports, pre-existing diseases, alcohol intake, etc. Thus, you will need to ask your insurance advisor about the policy exclusions and make a note of the same.

    3. Are there any riders available with the policy?

    Insurance providers offer riders as a way to help policy buyers increase the coverage offered by the base policy. The benefit of purchasing a rider is that you can avail an enhanced coverage by paying a nominal premium, in addition to the premium you pay for your base policy. Further, since the rider is linked to your base policy, you don’t have to go through the hassle of maintaining two insurance plans. However, not all riders are offered for all insurance plans. Thus, when purchasing a term insurance policy, it is vital that you ask your insurance provider if you can purchase riders along with the base policy.

    4. Will a claim be honoured if the death occurs outside the country?

    In most cases, term insurance plans will cover a death that occurs outside the country if the policyholder has intimated the insurer of his/her impending travel. However, in case you are travelling to a country that is known to be unsafe, your insurer might not provide you coverage during your stay in that specific country. Thus, in order to be completely sure of the policy’s coverage outside the geographical boundaries of India, make sure to ask your insurer this question before purchasing your term life plan.

    5. Will there be a change in the premium payable if I start smoking or drinking after buying the policy?

    Excessive drinking or smoking can reduce the life expectancy of the policy buyer. Thus, in this case, the risk undertaken by the insurer is more. Therefore, if you start smoking or drinking after purchasing your term insurance policy, make sure to inform the insurer about the same without delay. While some insurers might allow you to pay the same premium for the policy despite the increased risk, certain other insurance providers may re-assess the risk and charge you a higher premium for the remainder of the policy tenure. Regardless of whether you may be charged a higher premium or not, make sure to inform your insurer since this will ensure that your nominee doesn’t have to face any unnecessary hassles at the time of filing the claim.

    6. How will claims be settled if I have more than one life insurance plan?

    If you feel like you need additional coverage, it is a smart idea to either purchase a second life insurance policy or make an enhancement to the sum assured of your present policy. In case you already have a life insurance policy at the time of purchasing a term insurance plan, you will need to inform the insurer about the same. In most cases, your nominee will be able to raise claims with both insurance providers if you have paid the due premiums for both policies. Thus, make sure to ask your insurance provider about their terms and conditions regarding the same.  

    7. Are premiums for term insurance plans fixed for the duration of the policy tenure?

    Unless it is otherwise mentioned in the policy brochure, the premium payable for a term insurance plan is fixed for the duration of the policy tenure. However, given the fact that the premium rate is linked to the policy buyer’s age at entry, you may be charged a higher premium when renewing the insurance plan. Thus, it is advisable to purchase a term insurance plan at an early age and choose a long policy tenure.

    In conclusion, purchasing a term insurance policy is a smart choice if you want to provide financial security to your dependents in case of an unfortunate eventuality, without paying a high premium for the policy. Since a life insurance policy is a long-term contract, make sure to do your due research and speak to a financial/insurance advisor about any queries you might have, before purchasing the policy.

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