Many people start saving some portion of their income, once they start earning. It’s a good money habit to have, but ignoring the other bitter yet true fact of life can be financially damaging as well. An untimely or unexpected death is one of the biggest risks in life and shouldn’t be ignored at any cost. Therefore, one of the very first things, even before you start saving for life goals, is to have an adequate life insurance cover. After all, managing the risk of an untimely/unfortunate event has to be dealt right at the initial stage.
As an earning adult with financial dependents, you save towards life goals such as children’s education or their marriage, and will never want these goals to be compromised. Term insurance can help you achieve just that, even if destiny doesn’t allow you to be part of their complete journey!
A term insurance plan is a protection plan and helps to ensure that in case of your untimely demise, your financial dependents are not left stranded for lack of financial support. Being the purest form of insurance, a term insurance plan, usually, has no maturity value, however there are a few term plans that have a return of premium feature as well and provides life cover (sum assured) to the nominees in case of death of the insured during the term of the policy.
There are three major aspects of life insurance to look at while buying life insurance. Let’s look at each of them and see how they impact us.
• How much of life cover is enough
• Eligibility parameters and
• How much premium you need to pay
How much of life cover is enough
How much of life insurance cover should you have? The answer will depend on several factors, primary among them being your age, income and financial liabilities and responsibilities. Also, the coverage amount is not a static figure and you need to keep reviewing it at regular intervals. The life insurance requirements keep changing at different life stages as new financial responsibilities add up in life.
While buying a term insurance plan, it is crucial to look at certain factors that impact your eligibility. Let us look at some of the key eligibility criteria.
Age and premium: The eligibility criteria for a term insurance plan varies according to the insurers, but in most cases, the minimum age of entry is 18 years and the maximum age limit is 70 years. If you are young, it is better to buy term insurance early. For the same sum assured and tenure, the premium at a younger age is lower compared to the premium at an older age.
Premium Payments: How much you pay as premium will also depend on the premium paying term and the frequency of payments. You may pay single premium or regular premium as annual, half -yearly, quarterly, or monthly payments. In addition, there are also limited pay options wherein you pay for a period like 5 years, 10 years, 12 years, and yet get coverage for the entire policy term.
Maximum age at maturity: Almost all term insurance plans, other than a whole life term plan, have a maximum cover ceasing age till which the insured gets the coverage. What this means is that your current age will determine the tenure of the term insurance policy that you can go for. The younger you are, the higher is the eligibility for a longer period of coverage. For example, if the cover ceasing age is 70, for someone who is 50, the coverage can be for another 20 years, but for a 30-year old, the coverage can be for a tenure of 40 years.
Income and life cover: Most term insurance plans keep a minimum sum assured limit that an individual can buy. In some plans, the minimum sum assured is Rs 50 lakh and you may be eligible for a higher cover as per the insurer’s approved underwriting guidelines. In other words, your current level of income also plays a role in determining the sum assured you could have in a term insurance.
How much premium one actually pays
Your habits matters: Your lifestyle also has a role to play in getting life cover at a lower cost. The amount of premium that you pay will also depend on whether you are a smoker or a non-smoker. As a non-smoker, you are eligible for a lower premium compared to those who smoke. Effectively, you end up not only saving on the premium cost and but also being able to maintain a healthy lifestyle.
Health conditions: Once you have decided on the amount of life insurance coverage based on the eligibility and apply for the insurance policy, the actual premium will also depend on your health conditions, among other factors. In many cases, the insurers make the buyer undergo medical tests before the policy is issued. If the results of the tests are adverse, the buyer may have to pay a higher premium through ‘loading’ or ‘extra premium’ or the policy is rejected.
What to do
It pays to be fit and healthy to get a term insurance plan at a low cost. You can make use of a term insurance calculator to determine the premium based on your age, term and sum assured. As far as claim settlement is concerned, the choice of the insurance company is equally important. Bajaj Allianz Life Insurance has a claim settlement ratio, which is the total number of claims approved by insurance company of the total number of claims received by them, of 98.02 for the financial year 2019-20. It is always a good idea to buy term insurance from an insurer with a high claim settlement ratio.
Bajaj Allianz Life Smart Protect Goal – A Non Linked, Non-Participating, Pure Life Term Insurance Plan is a comprehensive term insurance plan in line with your evolving needs. Explore it and get surprised to see how much it has to offer! It is usually preferred to keep the life insurance coverage till the life goals are met, which, typically, get accomplished by age 60. However, circumstances could be different for many people and there may be certain financial liabilities even later in life. Buying a term insurance plan early in life not only keeps the premium low, but also extends the coverage for a longer period for the benefit of your loved ones.
* Individual Claims Settlement Ratio for FY 2019-2020