Things to know before buying a term plan

What is Term Insurance

Imagine a world where you could potentially buy a product that could replace you. Okay, not you precisely, because that would be a bit silly. But what if you had a replica version of yourself that could earn like you and make money like you. Wouldn’t you jump on that opportunity? Or maybe pay an annual fee just so you could hold on to this person? You probably would. And a term insurance product does just that. It is your financial replica and it comes alive when you die.

Let me explain. When you buy a term insurance product, you pay a small fee every year to protect your downside. And in the event of your passing, the insurance company pays out a large sum of money to your family or your loved ones. Think — 1 Crore or 5 Crore or even 10 Crore. Ideally, this money should replace you financially. It should support your family when you’re no longer the breadwinner. And unless you’ve deliberately misled your insurer whilst buying the policy, they will pay out the full amount the moment you die. Hell, even if you do mislead them, they have 3 years to uncover the fraud. If they don’t do it by then, they are mandated to pay out, no questions asked. So unless you commit suicide within one year of buying the policy or you died while committing a crime, your loved ones will get this money.

And while the base product is simple enough to understand, we’ll address some of the key factors affecting a term insurance purchase in the next section.

What is an ideal cover for your Term policy?

The first question should be obvious by now — How much money do you need to replace yourself financially?

It’s a tough question and let’s be honest — It is a bit subjective as well. But there are a few key things you have to remember here. For starters, your expenses. If your lifestyle demands a certain level of spending you will need to keep it up if you don’t want your absence to be felt. So if you’re spending 50,000 every month, your term insurance product should replace this income.

Understanding Term Insurance

Imagine having a financial safety net that ensures your loved ones are well taken care of even after you're gone. Term insurance serves precisely that purpose—it provides a substantial payout to your beneficiaries upon your demise, effectively replacing your income.

Here's how it works

You pay annual premiums to mitigate financial risks. In the event of your death, the insurance company disburses a significant sum—such as 1 Crore, 5 Crore, or even 10 Crore—to your designated beneficiaries. This financial provision is intended to support your family and cover expenses in your absence. Unless there's deliberate misinformation during policy acquisition, insurers commit to honoring claims promptly. Even in cases requiring investigation, insurers have three years to settle claims, with exceptions for suicide within the first policy year or death during criminal activities Determining Your Ideal Coverage

The pivotal question is: How much financial support does your family need in your absence?

Consider your monthly expenses—for instance, 50,000 rupees—which a policy of 1 Crore could adequately cover. Choosing the Right Policy Duration Selecting the appropriate policy duration is crucial. Premiums are paid until death or policy lapse, necessitating careful consideration during initial selection. Optimal policy duration typically ranges between 60 and 70 years, aligning with life expectancy and evolving financial responsibilities. Enhance Your Coverage Explore optional add-ons, such as life stage benefits, to further enhance your financial security and ensure comprehensive protection for your loved ones.