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Checklist of Term Insurance – Risk cover of Death, Disability and Critical illness

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An Overview

Insurance Samadhan frequently receives emails from the general public seeking recommendations on Term Plans. We always emphasize that the act of purchasing insurance is more critical than deliberating over what to buy, when to buy, how to buy, or the price at which to buy. In an uncertain world, the act of buying insurance takes precedence. It is advisable to buy as per your convenience, as early as possible, because events like death, disability, and critical illness are unpredictable. Since we cannot predict the next moment, waiting for recommendations is not prudent.

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Insurance Samadhan’s Checklist for Informed Insurance Purchases

If we are thirsty, we drink the water available to us rather than seeking recommendations on which water to drink. The same logic applies to medicine. However, Insurance Samadhan can provide recommendations based on a checklist, as detailed below:

  1. Term insurance provides financial support to your family in the event of your death, with no payout upon survival. Premium rates depend on age, current health, and policy term. Premium rates increase with age and policy term. Therefore, it is advisable to purchase at a younger age for a term extending until age 65.
  2. All other plan variations, such as return of premium, come with additional premiums. For example, if the base premium of a Term Plan is Rs 10,000 and the return of premium is Rs 16,000, an additional Rs 6,000 is invested annually to create a corpus that returns your invested amount after the policy term. Hence, it is your own money that is returned to you.
  3. The probability of disability is five times higher than the probability of death, making it essential to add disability cover to receive an annual income, typically for five years.
  4. The probability of critical illness is eight times higher than the risk of death, making it imperative to include critical illness coverage in your term plan.
  5. It is advisable to opt for the regular premium option through ECS (Electronic Clearing Service). In the limited premium option, you pay a higher amount to cover later years. Investing the extra amount in a mutual fund can help you meet regular premium payments. Moreover, the value of money decreases over time. What may seem like a high amount today, such as Rs 30,000, will appear lower after ten years.Insurance Samadhan
  6. Opt for an annual payment mode, as choosing any other mode will result in a higher price.
  7. You must declare details of all insurance policies you hold. Additionally, you need to disclose all insurance applications, whether they were postponed or rejected by insurance companies. These are material facts that should not be overlooked.
  8. Declare all facts related to your health, habits, and occupation, as these factors determine the probability of death.
  9. Do not skip medical examinations. Undergo medical tests because they provide evidence of your health at the time of policy commencement. If medical examinations are not requested, consider arranging a comprehensive medical check-up independently and keep the results with your insurance documents.
  10. Nominate a blood relative or spouse as beneficiaries, as they are known as  Beneficiary Nominees, and this designation can help avoid disputes.Checklist_Insurance

Conclusion

A comprehensive term insurance policy is essential if you have dependents relying on your income, outstanding loans, or a family history of critical illnesses. Once you have purchased a policy, refrain from making changes due to Section 45 of the Insurance Act. Instead, consider purchasing a new plan without altering the old one.

In case you encounter any issues related to claims, you can always reach out to Insurance Samadhan. Remember that insurance is your responsibility and the best gift you can provide to your loved ones.

By Shailesh Kumar – Insurance Head & Co-founder

Also Read:  Navigating Health Insurance challenges - Mrs. Mehra (Case study)

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