10 tips about term insurance
- Temporary Coverage – A term insurance policy gives you temporary coverage. The fixed amount received during the cover of the policy can be exhausted until family obligations and debts are repaid. The policy should be taken before retiring. The premium amount increases with age, so the policy term should be cautiously determined at older ages. Term insurance is the most economical way to protect the family financially in the long run.
- Net Death Benefit – The term insurance policy does not provide any monetary benefit if you are alive. If the insured dies during the policy term, the nominee gets death benefit. Hence it is called pure risk protection scheme.
- Can not make capital – Term plans are not for investing. The main objective of these schemes is to provide financial security to the family on the untimely demise of the insured. So you can leave the policy whenever you want. On discontinuing payment of premium, the policy terminates without any maturity payment.
- Fixed coverage amount – Term plan offers high death benefit at very low premium. The amount of your coverage depends on the premium you pay. Your financial situation changes over time. So while availing term insurance, you should choose the sum insured based on your loan, family responsibilities and other expenses. So that your family’s needs can be met in future.
- Medical Test for Policy – Before offering a term insurance policy, companies ask the customer to undergo a medical test. This medical test is performed in a hospital, which has a tieup with the insurance company. This test measures a person’s height and weight, collects blood and urine samples, and collects data on medical history or hereditary conditions. The premium of the term policy is determined only on the basis of the test results of the medical test.
- Tax Free Death Benefit – One of the main benefits of a term insurance plan is that the death benefit given to the nominee is tax free. This is because the term plan is designed to provide financial assistance to the family of the policyholder in case of death in comparison to other investments.
- Benefits of not smoking The premium amount for term plans is usually higher for smokers and nicotine users. This is because smoking habits give rise to lung cancer, heart diseases, stroke and other serious diseases in people and this increases the risk of the insurance company. If you smoke in the insurance form while taking the policy, then you must mention it even if your premium amount increases, otherwise the claim can be dismissed after the company is aware of this. Sometimes insurance companies refuse to insure more smokers. If you try to hide this fact, the insurance company can detect nicotine from your blood and urine samples. So if you are planning to buy term insurance, it is better to quit smoking.
- Take advantage of the rider – The extra cover is provided when the rider takes advantage of a slightly higher premium. The rider allows you to modify your term policy and add certain benefits such as critical illness cover, permanent disability cover and accidental death benefits which are usually excluded from basic cover.
- Make a change in lifestyle – If the insurance company finds out that you have died due to drug or drug addiction, the company may dismiss your claim. Therefore, to protect your family from rejection of insurance claim in future, you should make necessary changes in your lifestyle.
- Increasing Term Plan – An increasing term plan is one in which your insurance amount increases each year. The premium amount may or may not be the same throughout the term of the policy. The cover a person gets depends on his or her health.
Keeping the above mentioned things in mind, you will definitely benefit from buying a term policy and will help you to avoid any kind of problem.