Here's a look at the most important questions you need to ask before getting a term policy.
Deciding to opt for a term insurance policy is only the start. There are a host of decisions to be taken after that, right from getting the appropriate coverage to choosing the insurance riders. With that being said, given below are the most important questions you need to ask before getting a term policy.
1. Do you need a term insurance cover?
Start by asking yourself whether you need a term plan at all or not. Basically, the answer depends on your life situation. Say you are single and have just started working but have your parents as financial dependents. Getting a term plan would be a good idea in that case. If you get married and have children, you have all the more reasons to get the policy.
2. Will the premium undergo any future changes?
Typically, the insurance premium for a term policy remains the same throughout the time-period, unless anything is mentioned otherwise in the policy. If you do not have any major lifestyle changes, you can expect the term premium to remain the same for the entire duration. It does not increase suddenly or even gradually when you age.
3. Is a single premium policy better than a regular premium one?
On paper, a single premium policy sounds like a great idea because you just make one payment and forget about any more premiums. However, you need to have a sufficient amount with you to make that single premium payment, which is not going to be a small amount.
Additionally, consider the fact that a regular premium policy also continues to help you earn tax benefits throughout the plan. You only get the tax benefit once in case of a single premium policy.
4. What happens if you start smoking or drinking after buying the policy?
If you develop a smoking or drinking habit a couple of years after taking the policy, you need to duly inform your insurance company about it. Failing to report this lifestyle change in time might even make the company cancel your policy or decline the claim. Such lifestyle changes reduce your life expectancy, which makes you seem a greater risk to the insurer. Thus, they will increase your premium in this case.
5. Is it a good idea to purchase riders?
Riders increase your insurance premium but at the same time, they offer a wider protection to you and your beneficiaries. Of course, you do not have to get as many riders as possible. You can assess your needs and budget and get a few riders accordingly.
6. What is a good cover for a term policy?
It is difficult to mention an exact amount as a good term cover. However, it is better to take a cover that is at least twenty times of the annual income.
The bottom line
If you find the appropriate answers to the six questions mentioned above, you will find it easier to choose the right term cover and riders. So, carefully assess your current financial situation and talk to your bank before taking a decision.
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