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Things to consider prior to purchasing a term plan

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Things to consider prior to purchasing a term plan

Term insurance is usually perceived as the very best life insurance product available in the market. This is a policy for a fixed term which is available for an affordable cost and offers major financial backing to dependents of the one holding the policy. Suppose a non-smoking 30 year old person desires insurance coverage of Rs. 1 crore for 40 years. The policy premium will be approximately Rs. 834 every month or around Rs. 10,000 annually. Women will have lower costs with the same profile. The premium installment will also stay the same for the entire period of the policy.

There are several term insurance policies and there are additional riders and benefits available at extra costs as well. Before buying a term plan, consider the sum assured that you will get or the death benefit offered for the plan. There is a lump sum amount offered in case the policy holder dies and this will be the financial backup for your dependents. This sum assured can be 10-20 times of the current annual income that you have and will go to nominees upon your death. The tenure of the policy should also be considered. For example, if a person who is 20 years old wishes to buy a policy for 40 years, it will mature when he/she is 60 years old. Term plans should be purchased early in life in order to cash in on the low installments and the benefits can be garnered at the age of retirement or beyond. There are whole life plans available as well in which you can invest.

Age is a major factor behind premium calculation. The younger you are, the longer you can get a term plan for and also stand to benefit from a lower premium. The entry age is 18 years but people with stable earnings can purchase term plans. As a result, the sooner you buy a term plan when you start earning, the better it will be for you in the long run. Consider the premium and compare across different insurance providers. Term plans are tailored to offer financial security for all dependents and you should focus on policy features and not just getting a low premium. You should compare long term and low premium plans and also look at add-ons for a little extra cost. Assess your needs carefully before buying term insurance.

 

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