Term insurance is quickly becoming the most preferred choice for life insurance policies globally. The main reason is the incredible value for money that term insurance covers provide to beneficiaries and policyholders alike. Term life insurance plans are not ideal for maximum coverage but they are also offered at extremely affordable prices. This explains why increasing numbers of people are choosing to buy term insurance policies.
However, not everyone needs to buy term insurance policies. It is also important to remember that every term insurance policy carries its own set of riders or conditions. So, to decide if term insurance is best for you, you need to ask certain questions.
In this article, we have covered every commonly asked question that may help you to make the right choice when planning to buy term insurance plans.
5 Must-ask Questions before Buying Term Insurance
Let’s take a quick look at some of the most important questions that experts recommend you should ask the insurance provider before deciding to buy term life insurance:
Q 1. Should I buy a term insurance plan?
The first and foremost question to ask before buying term insurance is whether you need one. This is extremely important as term insurance may not be the best option for many people. For example, if you are young with a good career and no financial dependents, then a term insurance plan may not be the best choice for you. For instance, if your job requires you to travel extensively, then an accidental insurance policy is the better option for you.
However, once you get married and have financial dependents in the form of a wife and children, then a term insurance plan becomes the best option. Besides, you may also need to buy a term insurance policy if you are unmarried but have financial dependents, such as parents or siblings. Term insurance is also advisable when you are planning to get married because it is the perfect way to ensure the financial security of your dependents in case of your untimely demise.
Q 2. When should I buy a term insurance plan?
Once you decide that you need a term insurance plan, the next question that arises is regarding when you should buy one. Financial experts advise buying a term insurance policy at the earliest to get the most out of the insurance policy. The reason is that the premium cost increases with advancing age. Hence, it is a smart decision to buy term insurance when you are around 25 to 30 years of age. Younger applicants are given priority over senior-aged applicants when it comes to buying term life insurance.
Q 3. Should I buy a Single Premium or Regular Premium term insurance policy?
Single-premium term insurance plans are extremely feasible if you find it convenient and affordable to make the one-time premium payment. However, this is not possible for many as a single premium term insurance plan may make a dent in their pockets. Additionally, a single premium policy also opens up the policyholder to the volatility of the market. However, buying regular premium insurance policies helps protect policyholders against fluctuations in the market.
It is also important to remember that both types of policies are tax exempted under Section 80C of the Income Tax Act 1961. A single premium policyholder will be able to get the tax benefit only once while a regular premium policyholder can continue to enjoy the tax cut throughout the term of the insurance policy.
Q 4. What are riders in term insurance?
Riders are additional services, or add-ons, that insurance providers offer with their plans. Riders are designed to expand the insurance coverage of the particular policy. Experts advise on being careful and analyzing your needs before choosing to buy add-on riders with your term insurance policy.
Some of the most common and popular riders with term insurance policies include:
- Accidental Death Benefit Rider – This benefit is provided over and above the basic assured sum. This rider becomes effective in case the policyholder dies by an accident during the policy term.
- Critical Illness Benefit Rider – This rider provides the policyholder with a lump sum in case a critical illness, such as cancer, stroke, heart problems, etc., which is defined in the policy terms and conditions, is detected after buying the policy but within the policy term.
Q 5. How much cover should I buy?
Financial experts highly recommend buying a term cover that is at least 20 times your annual income. Take into account current and future liabilities and decide the amount of cover accordingly.
Term insurance plans are excellent for the young. If you are looking to provide financial security to your loved ones and dependents in case of your untimely death, then it is highly recommended to buy term insurance. Make sure to keep your specific needs in mind before deciding to buy term life insurance from the top insurance service providers in the country.