At MyInsuranceClub, we receive a lot of queries on life insurance and most of the doubts indicate that people usually evaluate their insurance purchase 3 years after they have bought it. Insurance surely does not have a strong appeal like a Porsche sports car or cool features like the Apple iPhone but still it needs to be evaluated as closely as we do before purchasing these electronic gadgets or cars.
Life insurance is a very important financial instrument and a term insurance policy is the purest form of insurance which offers protection. The premiums paid by the customer are allocated entirely towards the risk cover and such plans do not have any investment angle or money back feature. Before one buys a term insurance plan, he/she must keep a few things in mind; some of them are discussed below:
Amount of protection cover – Sum Assured as it is called in the technical terms is an amount that insurance company pays in case of death of the policy holder. You should select an amount that you feel is sufficient to take care of your family’s basic needs in your absence. This amount should more or less be sufficient to take care of their financial woes. Also, keep the component of rising inflation in mind so that there is sufficient buffer for future.
There are many calculators available to arrive at the amount of sum assured an individual would require; the standard multiplier being
Sum Assured = 10 times of the Annual Income.
But then please budget your capacity to pay annual premium too and decide on the cover amount.
Policy duration / tenure – Probability of getting infected with illnesses and diseases is high for older age groups and hence simply taking an insurance policy is not enough. One should try to cover himself/herself for the old age or at least till the age of 65 years. So try to take the maximum term available with the term insurance plan; nowadays companies offer policy term of up to 40 years
Additional benefits called Riders – It might be a good idea to attach some add-on covers to your term plan by paying slightly extra premium. The point is that if you were to take separate policies for such add-on covers then the total outflow of premium would be very high. But please be careful not to add too many riders and inflate the total insurance premium. The popular riders offered along with a term insurance plan are accidental death and disability cover, critical illness cover, flexibility to increase sum assured, etc
Mode of premium – In addition to calculating how much premium to pay, one should also know how often can you pay, before you deciding which plan to buy. Insurance companies offer various premium paying modes:
Single Premium – Pay once and do not take the trouble of paying again ever
Regular Premium – Pay every year till the end of the tenure. This mode has further options like -
Annual Mode
Semi-Annual Mode
Quarterly Mode
Monthly Mode (through ECS only)
The premium for pure term plans are on the lower side compared to other insurance policies and hence it makes sense to pay it on a yearly or annual basis. In other modes, like the quarterly payment mode, many people tend to delay making the payment and at times completely forget it.
There are many recently launched term plans that can be brought online, like, Aegon Religare iTerm and ICICI Prudential iProtect. The plans offer very low premiums and are selling like hot cakes. But getting an instant policy online should not be your only factor for purchasing a term insurance. In addition to the above key factors, you can also run through and tick off some of the below mentioned factors -
Premium amount: Since this is a pure protection plan with no investment factor, the cheaper the better. So for example if Insurance company A offers you a cover of Rs.10,00,000 at a premium of Rs.7,500 and Insurance company B offers you the same amount of cover for Rs.9,200 then there is no real value add with regards the product. Both are offering you the same benefit and the only reason you ought to pick the company with higher premium is for some other reason like brand, customer service history, distribution reach etc. Hence check maximum options available in the market before zeroing down on a plan.
Efficient Customer Support Team: In today’s world, time is a very important factor and everyone seems to be short of it. Thus it becomes important to choose an insurance company which has an effective customer service team to avoid any troubles later. A good insurer will have an easy-to-remember customer care number and a round-the-clock team of prompt and responsive agents to handle queries. Poor responsiveness of the customer service team reflects the importance the insurance company gives to its customer service and claims process.
Online premium paying options: Although most insurance companies have their branches spread across at key location, it is important that they are keeping up with technological advances. This would show their keenness to service the customers at all times. Today, people do not want to waste their time waiting in long queues or travelling distances to drop off a cheque. Paying the premium online is very convenient and ensures hassle-free payment process.
It is important to be very clear before making the insurance purchase and equally important to trust your insurer after making the purchase. You should be sure that the insurance purchase made by you is a right decision and you will continue to pay the premiums throughout the entire term of the policy.
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