Skip to main content

Things to Keep in Mind when You Buy a Term Insurance

Invest Mutual Funds Online

Call 0 94 8300 8300 (India)

More and more consumers are looking to buy term insurance thanks to the often repeated advice in the media on keeping insurance and investment needs separate. If you are sure that you should buy term insurance to provide cover to your life against pre-mature death, read on to know how to buy and which product to buy.


Before you decide from where to buy, you should decide how much life cover you should buy. Life insurance is needed in case you are earning with your own effort (which means that the income comes in because of efforts on your part and will stop if you die) and have dependent family members. In case you don't have either of them, then you don't need life insurance. Hence, young unmarried earning members with no dependents, children, homemakers and retired people don't need life insurance. You also don't need life insurance if the only source of income is investment income or rent income, both of which will survive you.

THE COVER YOU SHOULD TAKE:

If you want a rule of the thumb, you should look at a life cover of around 12 times your annual income minus your investment assets plus any liabilities.

IDEAL TENURE OF THE POLICY:

The ideal tenure of your policy would be your retirement age minus your present age. This means that if you are 35 today and you wish to retire at 60, then the term of the policy should be 60-35, which is 25 years.

GO ONLINE AND BUY PRODUCTS:

Term insurance products are being sold online and these products are much cheaper (sometimes by as much as 30%) compared with the products sold through brokers or agents. Selling these products over the Internet does away with the agents' commission, thus bringing down the overall cost of the policy.

THE RIGHT PRODUCT:

When you try to compare the premiums of term insurance plans of various providers in India, then you will see a huge difference in the premiums of these products. Ideally, you should buy the cheapest option available for your life insurance needs. If you have a brand preference you can go for it provided it is not too expensive when compared with the cheapest available policy. The death benefit of all the products is the same and there are no maturity benefits.

DON'T BE DISTRACTED BY RIDERS:

Additional covers for accidental death and disability arising from accidents are available on standalone as well, so don't choose an expensive term plan just because some of them have riders available.


DISCLOSE EVERYTHING: Disclose everything to the best of your knowledge in the form provided to you (online or offline) while buying the term insurance policy, including your existing health conditions, family history and all existing and proposed insurance, including details of any insurance policies refused or provided at higher than normal premium in the past.

TAKE MEDICAL TESTS:

It will always be good for you to go for medical tests as this will reduce any chances of the claim being denied especially since you have disclosed all facts. It is better to pay additional premium for a small health condition (say obesity) rather than the family facing problems with the claim on the grounds that all facts were not disclosed.

REVIEW YOUR NEEDS REGULARLY:

Once you have bought a term insurance policy, you should review it every 3 to 5 years. Over this period your personal circumstances, income, assets and liabilities would have gone through certain changes. So it's always good to review your requirements after 3 to 5 years.

BUY POLICIES IN BLOCKS:

If you need a cover of . 1 crore, take, for instance, two policies of . 50 lakh each, as it imparts flexibility to discontinue one policy while continuing with the other should your insurance needs reduce over time. Of course, this may mean a slight additional premium as insurance companies provide discounts for a single policy with sum assured of around . 1 crore but the flexibility makes the additional cost worth it. Indeed these pointers will help you in getting the right term plan, but ideally you should take help from a financial planner to judge how much life insurance you actually need.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver Mutual  Funds  Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

 

Popular posts from this blog

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...
Read more

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...
Read more

Stock Dividend Yields

During a bull run, it’s very easy to ignore stocks with high dividend yields. After all, what could be more enticing than a growth stock? But in times of crisis, these boring ones tend to be the most sought after. The reason being that not only do dividends provide a cushion when the market is in the doldrums but such stocks also tend to fall less. The lure of dividend yield stocks is not easy to ignore. These stocks offer capital appreciation as well as cash payments. But logically, any company that pays a substantial portion of its earnings in dividends is reinvesting less and, therefore, would grow at a slower pace. So the trade-off is between higher dividend yields for lower earnings growth. On the other hand, companies with high growth potential and volatile earnings tend to pay less by way of dividends, if at all. Such companies would rather reinvest their earnings to sustain their growth. The capital appreciation of growth stocks is obviously higher than in dividend yield ones. ...
Read more

Women need to plan for Retirement

Plan for Retirement Online       Higher life expectancy, lower pay and fewer work years necessitate thorough planning.   Women have raced ahead of men in various fields but, when it comes to retirement planning, they tend to lag behind. Despite saving a higher proportion of their salary, compared to men, women generally do not take retirement planning seriously. Below are some of the reasons why they should: According to the United Nations Department of Economic and Social Affairs, in India, the life expectancy of women is 69 years and, of men, it's 66 years. Due to this, a woman will need an additional `55 lakh to manage her living expenses (see table).Besides, usually, women work fewer years compared to men to take care of children and family.Further, a recent study by Korn Ferry Hay Group shows that women in India earn 18.8% less than men. Not to mention, a higher life expectancy can also mean higher medical expenses as the likelihood of health ailments such as diabetes, high...
Read more

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now