Term Life Insurance – Do’s and Don’ts

Term Life Insurance is the oldest and simplest form of life insurance which provides the payment of the sum assured in case of death of the life insured during the tenure of the policy. Term Life Insurance is one of the most affordable forms of life insurance and can function as a risk cover plan which can help in minimizing the different financial risks. It can also take care of any liabilities which are due or unpaid because of the occurrence of an unprecedented incident.

By term life insurance, a lump sum is paid to your nominee in case of your death. There are provisions by which you can opt for receiving the benefits in the form of monthly payout or regular earning along with the lump sum amount. Moreover, you can attach riders to the base plan for providing benefits in the case of disability, critical illness or accidental death.

Benefits of term life insurance

Some of the major benefits which are provided by term life insurance can be summarized as below.

High Cover at a Reasonable Premium

This is a major benefit of the term life insurance. Term life insurance helps in providing high coverage at reasonable and affordable premium prices. The premium prices are even less if the term life insurance plan has been purchased at a low age.

Death Benefit

In case of your sudden and unexpected demise, your nominee can obtain the total sum assured in the form of the death benefit.

Riders

Term life insurance plans have the provision by which riders can be included along with the base plan by the payment of additional premium. These riders can help in enhancing the coverage provided by the term life insurance plan. Some of the common riders which can be included in the term life insurance plan are Critical illness rider benefit, Accident benefit rider, Waiver of premium rider, etc.

Maturity Benefit

In a real-time scenario, there is no maturity benefit associated with term life insurance. However, there are some specific categories of plans such as Term Return of Premium Plan (TROP) which can offer maturity benefits in the form of the return of premium.

Tax Benefit

The term life insurance plan can help you in availing tax benefits under the different sections of the Income Tax Act.

1. Under Section 80C of the Income Tax Act, 1961 you can avail tax benefit on the premium paid up to a maximum limit of Rs. 1.5 lakhs.
2. Under Section 10(10D) of the Income Tax Act, 1961 the maturity proceeds which is offered by TROP is eligible for tax exemption

Simplicity and Security

Term life insurance plans are the most simple and pure life cover plan. It has simple components of making premium payments and availing the life cover. Moreover, term life insurance plans help in providing security for your family and loved ones in case of your sudden demise.

Take Care of Your Liabilities

Usually, people tend to take a lot of liabilities during their lifetimes such as a house, a new car and many more. These liabilities need to be paid and cleared off over time and if there happens an unexpected incident, then the lump sum amount obtained by your family can be used for paying off the liabilities.

Do’s and Don’ts For Buying Term Life Insurance

There are some basic dos and don’ts which must be taken care of while purchasing a term life insurance.

Do’s While Purchasing Term Life Insurance

Know Your Requirements

In the first place, you must think and should be very sure about what are your major requirements, why you were buying the term life insurance plan and what are your expectations from the term life insurance plan.

Research And Proper Advice

You must seek advice about term life insurance carefully and must research all the term life insurance options properly. Also, you need to be very cautious and open-minded at the same time while you are seeking information about the term life insurance plans such as what are the premium payment options available, what are the riders available, etc.

Careful With the Proposal Form

The proposal form for the purchase of the term life insurance must be read carefully and then filled up. You should be careful that the proposal form is filled with correct details and all questions are understood properly and answered properly. Also, you should check out the terms and conditions mentioned in the policy document and do remember that there is a declaration about the effect of the policy in the proposal form.

Future Reference

You should ensure that you keep a copy of the signed proposal form and any other declarations which you have made in the proposal form. This is for your records and can be helpful for future references.

Collect important information

Also, another important to-do thing while purchasing term life insurance is if you are buying a ULIP (Unit Linked Insurance Plan) then you must have information about the below-mentioned pointers i.e.

1. Fund Options
2. Switching of funds
3. Charges levied on the plan
4. Other benefits that can be obtained such as Surrender benefit, discontinuity of the policy, and partial withdrawal of the funds, free look period, etc.

Image of The Insurance Provider

You should check the image and reputation of the insurance company whose term life insurance policy you are planning to purchase. You should avoid purchasing term life insurance of those companies who have low claim settlement ratio or are involved in too many disputes.

Don’ts While Purchasing Term Life Insurance

Avoid Misstating of Information

You should not mis-state any information while filling the proposal form for term life insurance. Any wrong information can lead to rejection of your claim at the time of need. Moreover, your paid premium would not be refunded and you will be in a state of distress.

Do Not Sign Blank Application

You should not sign any blank application forms as it can create problems in the future for you.

Avoid Leaving Forms Incomplete

You should fill up your proposal form for term insurance plan yourself and should avoid leaving any column blank in the proposal form.

Avoid Delay in Premium Payment

Moreover, you should avoid delaying premium payment for your term insurance plan as this can lead to the charging of late premium fees by the insurance provider.

In life, there is always a risk element or an element of concern which gives rise to the thought ‘What if’ in our minds. A term insurance plan is designed to provide solutions for this ‘What if’ scenarios of life. With its affordable life coverage and additional riders, term insurance cover is one of the best solutions to all the risk elements of life. However, it is necessary to choose your term life insurance carefully according to your requirements and only after doing proper research.