Five Tips To Follow Before You Buy Term Insurance

• Reduce taxable income by up to Rs. 1,50,000 deduction under section 80C**
• Convenient payment options - annual, half-yearly, quarterly or monthly premium payments
• Do more with plans that offer pure protection, retirement planning and investment options

There is a host of insurance products that you can avail, and among them, one of the most sought-after product is term insurance. Term insurance can safely be called the purest form of insurance as it only provides coverage to you and protects your family in case something happens to you. However, it is important that you research properly before choosing an appropriate term insurance plan for yourself. So, what are the factors that you must keep in mind before purchasing a term insurance plan for yourself? We list them down below.

• Choose the right amount of coverage: You must be sure regarding the coverage you will require. There are various calculators which you can find online that will help in determining the cover amount suitable for you. The rule of the thumb is that your sum assured must be 15-20 times your annual income. However, the cover amount will ultimately depend not only on your annual income but also on other factors such as your age, financial liabilities you have to take care of, the number of years left for you to retire, etc.
• Choose the right type of term insurance plan: You have the option to choose between a simple vanilla term insurance plan and an income replacement term insurance plan. The difference is simple between the two. The former pays out a lump-sum amount to the nominee in case of your death, while the latter pays a part of your sum assured regularly for a certain period of time till the total cover amount is completely paid and is completely exhausted. You will have to be sure about what will be suitable for you and your family. If you think that a regular income will help your family members to take care of their needs easily and not exhaust the sum assured quickly then it is recommended that you choose an income replacement term insurance plan. A vanilla term insurance plan will be suitable if you are sure that your spouse or nominee is adept at investing the lump-sum and taking care of his/her future needs.
• Purchasing a term insurance plan online: You can purchase term insurance online and offline. If you are someone who is tech savvy and doesn’t want to go through the hassle of meeting an insurance agent, you can purchase term insurance online. The process is fast and hassle-free in nature. You can compare various insurance plans online and calculate the premiums you will have to pay, following which you can instantly purchase a suitable plan for yourself. You can also purchase your plan offline as it gives you the option of directly interacting with the insurance agent and instantly get your queries cleared. The mode of purchasing insurance depends upon your comfort level, though you must know that purchasing term insurance online is cheaper as compared to buying a plan offline. When you get in touch with an insurance agent and buy a plan from him/her, a part of your premiums is paid as commission to the insurance agent. The same does not apply when you purchase a plan online as you are directly buying one from the insurer and they are not required to pay anything to anyone as commission.
• Choose plans which offer riders: You must choose a plan which offers you a rider. A rider or add-on plan provides an extra layer of protection and covers your family in case you die due to an accident or suffer from any critical illness or permanent disability. Having a rider does make the premium slightly expensive, but it is worth having it as it provides those extra benefits which can be very helpful to your loved ones.
• Do not hide information: Do not hide any information while purchasing a term insurance plan for it might cause problems during the time of claim. If you smoke and drink on a regular basis, it is recommended that you do let the insurance company know about it. Hiding information can result in the insurer not only rejecting your claim in future but also penalising you for it.
• Check the insurer’s claim settlement ratio: Choosing the right insurance company is as important as choosing the right term insurance plan. One of the parameters that can help you select a good insurer is to check the claim settlement ratio of the company. A high CSR implies that the insurer is reliable when it comes to settling claims.

Choosing a proper term insurance plan is extremely important. Simply purchasing any term insurance plan may prove to financially harmful in future. Hence, with proper research, and keeping in mind your future goals, you will be able to select a suitable term insurance plan for yourself.