Insurance is the best tool to provide safety cover to family in your absence but term insurance is best among them. Being a Bread earner of the family, you should have a focus on not only protecting them when you are around but also when you will not be there for the family. Term Insurance is one such beautiful way to provide protection for the family in your absence. Family is the one institution for which we keep on earning so that this institution runs comfortably and it should run with and without you being with them as well.
We are being caretakers of the garden of the family have to support it in every situation and the earnings we make is like a feed to the plant saplings. For a large garden to sustain, you must have a storage tank for water to meet unforeseen circumstances and in the same way, savings or investment component of salary is used for family.
To protect your family while you are away, insurance is a product available in the market which provides protection in terms of monetary help to them when required.
But to engage with the insurance industry and to protect family, you have to pay your part of earning to them. You can understand the importance of Insurance by an analogy of a tree planted by you when you are available. You have to water and feed the sapling planted with nutrients on a regular basis to let the plant grow. When the plant is fully grown, it starts giving fruit whether you are there with the plant or not.
So to make a plant grow, it needs regular supplies of nutrients in the form of water and other resources. In the same way Protection to your family in terms of Insurance needs regular payments to be made to the companies. But how to proceed further for the protection of family? And the answer lies with Life Insurance.
Life Insurance is discussed in detail in my other blog on life insurance and there are many market tools are available which provide insurance. Insurance in nutshell is like you pay a company for a pre-decided period and if anything happens to you, your family will be protected and supplied with pre-approved financial assistance. You will get numerous life insurance options available in the market, but not all of them are providing complete protection.
Basically you will find the maximum out of them having components of Investment and protection component both associated within a single policy document. And one thing you can verify that any policy having an investment component within it i.e where you will get some money for your policy payment will have a larger premium as compared to one having no investment component.
Term Insurance – Ultimate protection to life
So if you really want to go for a complete protection part and nothing else, which is the very basic need of having insurance then you must go for Term Insurance. Because Term Insurance is the only available tool that provides you true protection and fulfills the basic necessity of having insurance.
Term Insurance is a mechanism in which you have to pay regular premiums for a mutually pre-decided term and in return, the company will provide coverage until that term. After completion of the term, if all goes fine and nothing happens to you then you will not get anything in return. And at all anything mishap with the policyholder then your family will be provided with decided financial assistance.
The important part here to consider that Term Insurance will not return money after completion of the period, and here we Indians start applying unnecessary logic. Because we are grown in such a way that we give undue importance to finance when compared with life protection. As this insurance doesn’t return the money, so we generally tend to resist this very basic idea of protection and go for other life insurance.
Life Insurance V/s Term Insurance:
Both types of insurances you can find in the market but there are some must-know differences to choose the right protection for you and your family:
⇒ Life insurance offer returns on the death of policyholder as well as on the maturity of the plan. Whereas term insurance only covers death benefits.
⇒ Life Insurance has Investment and protection while Term Insurance has only the Protection component.
⇒ If you are searching for saving tools then Life insurance is best because some returns are provided on maturity of plans but it can not be possible in case of term insurance.
⇒ The premium for Life Insurance will be much larger than the premium of Term Insurance for the same coverage.
⇒ Surrendering a term insurance policy is quite easy as compared to the life insurance policy.
⇒ As and when you stopped paying the premium in term insurance, your insurance contract breaks but in case of life insurance you will get all maturity benefits only when you have paid all premiums.
⇒ You can avail income tax benefits in both the case of term insurance and life insurance as well.
How to choose amount of coverage
Now when you have decided to go for Term Insurance, the first and prime question that needs to be asked is how much insurance coverage you should go far? For selecting the amount of coverage some points to be considered which you must think about by assuming the unforeseen conditions when you will not be there for your family to earn, and then ask from yourself some good questions like:
⇒ How much amount is sufficient for the smooth running of your family in your absence?
⇒ How much is the expenditure born by your family?
⇒ How much to be used for the education of your children?
⇒ Is your family having sufficient finance to meet any emergency in life?
⇒ Is there any type of loan outstanding and has to be paid by your family after you?
You can add many more questions to this questionnaire which totally depends on you. Now after you recorded all the finance needed in the future by your family in your absence, you should ask some questions from your spouse as well.
We Indians are framed in such a way by an upbringing that nobody tries to think the time when we will not be there with family, and so you will encounter many emotional issues with spouse when asking these questions. But you must ask them about it because ultimately it is for their benefits and of nobody else.
Finally done with the questionnaire part, no you are ready to choose the amount of insurance coverage:
⇒ If you are already in possession of any insurances go and fetch the policy documents.
⇒ Collect all insurances and list down coverage amount by them
⇒ Check whether the coverage by these insurances can meet your questions or not
⇒ Decide the best insurance for your need
⇒ If you find any type of insurance having heavy premium with less coverage, immediately stop it
⇒ If you don’t involve in numbers go for term insurance, because if you compare the premium for the same insurance cover in both Life Insurance and Term Insurance then you will find the premium for Term Insurance is like peanuts.
⇒ Find best term insurance and invest the remaining part of the premium you were earlier using for insurance in investment.
Important Features for Term Insurance:
⇒ You can pay the Premiums for it monthly, quarterly, half-yearly, or on yearly basis.
⇒ Insurance can be bought both online or offline through agents. But I would recommend going online as it will save your premium by reducing brokerage costs of agents.
⇒ You can cancel the policy within the first 15 days of purchase, in case you are not satisfied with any part of it.
⇒ The premium for the term insurance depends on your age when purchasing the term insurance. Premium is less for lower age and it will keep on increasing as age increases. But the important thing to note here is the amount of premium will be the same throughout the term of insurance once purchase. That simply means once you purchase the policy, you have to pay the same premium throughout your life and it will not increase. It clearly suggests that you should purchase term insurance with minimum possible age, it will save in your premium.
Things to consider for buying Term Insurance
Before buying a Term Insurance, there are some important points you must go through. These points may be useful at a later stage for your spouse when there is an actual requirement of insurance felt. Some of them are:
Add a Nominee to your policy:
Nominee in your policy must be one, to whom all the benefits of your policy will be transferred in case something happens to you. Ideally, your wife or your children must be your nominee so that in case of mishaps, all the benefits will be provided to them. The importance of adding the name of the nominee in an insurance policy can be understood if you have any outstanding loan against your name. In case of an outstanding loan, the banks or creditors are liable to receive claim benefits of your insurance first. So if you made a nominee to your wife/ children, then benefits will be transferred to them and not to the creditors of loan i.e banks.
Provide your information Correctly:
You should furnish all related and asked information correctly to the insurer. Because if not, it can be a point for insurers to reject your insurance claims. Important health-related information like Smoking, Drinking, Previous pre-existing diseases, Pre hospitalization for disease or age. If at a later stage, the insurance company detects that cause of your health is the medical conditions that were not disclosed by you at the start, the company will simply reject your claims.
Rider to the Term Insurance
A rider is the additional facilities which you can use for a minimal premium extra in existing insurance premium and facilities can be availed. Some of the riders are:
Critical illness rider where the company will pay in lump sum amount if the consumer is detected with any particular illness or disease.
Accidental Death benefits Rider where the company will pay to additional amount to the nominee of the customer in case of an accident of customer or policyholder.
Income Benefit Rider where Living members after the death of policyholder will get extra income for a mutually pre-decided number of years.
Waivers of premium riders become most beneficial when the policyholder is not able to pay a regular premium due to any unforeseen circumstances. So in actual policy should be terminated in case of nonreceipt of premium, but with this rider policy still remains active and nominee are still liable to receive maturity benefits of insurance.
Things not covered under Term Insurance:
⇒ Death due to pre-existing disease which is not disclosed by consumers with insurer during the issuance of the policy. That is the reason I am stressing upon providing correct information to the insurer.
⇒ If death due to participation in hazardous activities like sky diving, paragliding, river rafting, and other adventurous sports, etc.
⇒ Suicidal death of the policyholder in the first year of the policy is also excluded and generally maximum policy insurers cover suicidal of customer after the second year onwards.
⇒ Death of policyholder during deleivery in pregnancy is also excluded.
⇒ If death to the policyholder occurs because of natural disasters like earthquakes, Floods, in those cases insurer can reject claims.
⇒ If the death of policyholders is because of part of criminal conspiracy or murder, claims are liable to be rejected.
⇒ The policyholder is asked about habits of smoking and drinking before issuing a policy , so if provided with wrong information and death occurs due to these, claims will be rejected straightway.
Finally what to choose
To have complete protection for the family you must have insurance with you, and it totally depends on your financial planning whether you want to adopt only protection or also want to add investment in it. Accordingly, you can select among two i.e term and life insurance.
But i must suggest you that please
Dont mix Emotions with finance
while planning your money and never ever consider Insurance as an investment avenue. because These products will never be fruitful as an investment and can be considered as a bad investment choice.
Last thing you must keep in mind while planning for insurance that you must read all Terms and conditions for particular insurances carefully. Some important benefits are delivered by the company to consumers or not? Rules and regulations are decided by the government and all companies must adhere to these rules made by the IRDAI, and you can also go through the official website of IRDAI fo information like companies engaged in this business and all.
Before buying any insurance you must cross-check some points like Claim settlement process, Renewal of policy, the surrender of the policy, Maturity or Death benefits, etc.