Any individual, who is married and has kids or parents who are monetarily dependent on him, should certainly be financially prepared and take measures to ensure an alternative income source for his dependents after his untimely demise. A term insurance plan is a life insurance plan that assures a predefined sum of money, called Sum Assured, to the nominees as declared by the policyholder.
Pure Risk Protection – Term Plan
This sum assured is payable to the beneficiary or the nominee in case of the policyholder’s demise during the term of the policy. Therefore, a term insurance plan is a pure risk protection measure and the simplest form of life insurance available.
The premiums payable for a term insurance plans are very affordable. This is because term insurance, being pure risk protection, provides life cover based on the level of risk of mortality associated with the policyholder and doesn’t provide money back or returns.
Term Insurance Premiums
A 28-year old, non-smoking male will be required to pay premiums ranging from Rs. 7,400 to Rs. 9,000 for duration of 35 years (known as the policy term) or till maturity i.e. till the policyholder turns 70, whichever happens earlier. While for a smoker, the cost of premiums for the same plan would turn out to be in between Rs. 8,256 to Rs. 14,430 per annum.
Most of the insurance companies, nowadays, offer the policyholders with a facility to pay the premiums semi annually or even monthly. However, is imperative to check the claim settlement ratio of the insurer before buying a term insurance plan in order to avoid rejection of claims in the time of need. The higher the claim settlement ratio, the lower are the chances of your claim getting rejected.
To buy the right term insurance plan, it is important to assess the adequate amount of cover you would need. It is essential to calculate the amount that will truly be able to balance the loss of income your family will have to face in unfortunate event of your demise. You need to ensure that the amount is neither less nor does it exceed the need. While deciding this amount, do consider the major events that are yet to come in the life of your dependents, events such as child’s marriage, his higher education, higher education, etc.
It is very important to consider the rate of inflation while assessing your goals and calculating the required level of cover. Knowing the cost of higher education and its value post 10 years is extremely essential. Keeping such things in mind, while calculating the term life insurance cover, will help you achieve a realistic figure that you need to seek life insurance for. For further more accurate results and estimating the premiums you would need to pay for your required amount of cover, you can also use term insurance calculators that are easily available online.
Term Insurance Policy Terms
The duration or term of a life insurance policy is equally important as the cover amount and premiums of the policy. As claimed by experts, an individual should be insured till a minimum age of 65 years.
The term insurance covers for duration of 15 to 20 years can be purchased for comparatively lower amount of premiums, but are yet not advisable due to the policy term being insufficient. Also remember, that the term insurance premiums can be considerable higher for the people buying life insurance plans after 40. This is because the risk of mortality starts o increase after this age.
Apart from the above mentioned factors, it is imperative to consider the factors considered by the insurers in order to decide the amount of premium. These factors include occupation, current health, health history, weight, etc.