Making financial mistakes can be bewildering in the distant future. And a critical financial blunder that people usually make is to hurry and make their last-minute tax-saving investments. They not only overlook the risk cover ,but also miscalculate the insurance requirements.
The prime goal of purchasing the insurance policy certainly changes. They only rush out on availing tax benefits, which the premium payments apparently fetch them. Here’s your guide to understanding the facts and facets before you buy term insurance.
Term Insurance Isn’t a Market Gimmick
When you Buy Term Plans, ensure that you have a positive notion towards its concept. Unlike other life insurance policies, money back, or endowment plans (the primarily investment-linked), term insurance is a pure form of life insurance.
It’s coves life adequately & is assured support for the family financially in case of uncertain deaths. If you intend to purchase life insurance for all the right reasons (protection purpose or social security), a term plan becomes an appropriate choice.
Some Policies Have Limitations to 20X of Your Annual Salary
Determining a considerable amount of coverage is critical. The ideal sum assured is always based on the annual income as well as monthly expenses. When you are deciding the sum assured, it is integral to consider inflation as one primary commandment.
It must be anywhere from 15 to 20 times the annual income. Based on this factor, insurers can cap the sum assured to around 20 times the annual salary. Suppose you earn Rs. 5 lakhs annually, so the term plan should be above Rs. 1 crore cover.
Increasing Sum Assured during the Course is Possible
In life, change is a constant factor. And when life changes for a policyholder, so does his spending pattern! This will result in a change in his overall spending. These shifts demand adjustments made in the person’s lifestyle.
For this reason, anyone can increase the sum assured during the most significant three milestones of life. One can increase the sum assured during the time of marriage, first-child birth, and second-child birth.
False Statements Contribute to Claim’s Rejection
Sharing misleading information or hiding (if any) about your pre existing illness or lifestyle can lead to further complications later on! Usually, people make this common practice only to avoid high premiums. But would it be fairer from your end when your family receives a denial of the claim because you were the one sharing false disclosures with the insurance company?
Whenever you decide on settling claims, don’t dig your own grave as falsification of facts would straightaway lead to the claim’s rejection.
All this while, the guides you read (or the surveys you did) got you informed that a term insurance policy must be purchased as early as in mid-20. But did you know that it should be bought as late as in late 50s?
It may not be cost-effective at an older age but it still covers some potential risks. As people tend to work even after their retirement, it’s better to be on a safer side and enjoy the good thing about buying a term plan!