Last Updated on December 31, 2019 by Gopal Gidwani
In India, the insurance sector has grown rapidly. Due to the penetration of insurance in the Indian markets, many insurance companies have introduced numerous products like term policies, endowment plans, money-back plans, and so forth. However, due to less awareness and knowledge about term insurance, many of you do not purchase term plans. According to a report, only 8% of the urban Indian population purchase term plans.
Although a term plan is a simple form of insurance, you might be unclear about various aspects of the policy. Before purchasing term insurance plans, let’s go through the frequently asked questions about term insurance plans:
1) What is term insurance plan?
Term insurance is risk coverage to protect your family members financially from the uncertainties of life. During an unfortunate event, your loved ones can receive a monetary payout called death benefit. With death benefits, your family can continue to live their current lifestyle in your absence. After your demise, your family can obtain the death benefit either as a lump-sum amount or as monthly income.
2) How much coverage should you choose?
The tenure of a term insurance policy can vary between 5-30 years. In addition to this, you can receive life coverage up to 75 years. As a policyholder, you should opt for coverage, which is at least 8-10 times your annual income. For instance, if your annual income is approximately Rs. 10 Lakh, your coverage should range between Rs. 80-100 Lakhs.
3) Does the premium remain consistent throughout the tenure of the term policy?
Usually, your premium can remain the same throughout the tenure of your term policy if you don’t make any significant changes. However, if you develop a smoking or drinking habit before the purchase, your premiums would be high.
4) Under which circumstance can death be covered?
Under term insurance plans, you can receive death benefits for circumstances like accidental death, death due to critical illness, or natural death. As a policyholder, you can obtain coverage for death caused outside your resident country. If there is death outside the country, you should intimidate your insurer.
Although a term plan offers substantial coverage to cover your death, you can avail riders to receive additional protection in such circumstances. You can look for riders like critical illness rider, permanent or temporary disability, accidental death, and so on. Such riders can strengthen your base term policy.
5) Can you purchase a new policy at your old premium rate when you reach the maturity period?
Once your term policy matures, you should buy a fresh policy. However, the premium of your term policy might not remain the same. For instance, if you have purchase a 10 year term policy at 25, your policy would usually expire at the age of 35. As you reach the 30s, you might be prone to health conditions like cardiovascular diseases, kidney failure, etc. Therefore, your premium might rise after the tenure expires.
6) What should I do if I don’t want the cover after the purchase?
A term insurance plan might offer a free look period of 15 days from the date of purchase. After you purchase a term insurance plan, you can be granted a 15-day period wherein you can decide whether you want to go ahead with the policy or not. If you don’t wish to opt for the selected term insurance plan, you can surrender the policy.
As highlighted above, you might have many questions in mind while purchasing any new insurance product. The questions mentioned above are the most common questions you should consider before purchasing a term policy. As a first-time buyer of an insurance product, you should conduct thorough research and compare different policies so that you get the best term insurance benefits for yourself.