One of the simplest and the most effective insurance plan for an individual in India is term insurance. The importance of this plan can never be exaggerated enough. It is a protection plan, which has been designed to provide financial security to your family in case of an unforeseen incident were to occur.
Many people invest in term insurance but are not aware of some common facts like the four important ones elaborated below.
- The amount assured is 20 times your income
It is important to determine an appropriate amount for the security of your family in case an unfortunate event was to occur. You need to ensure that the sum assured covers the monthly expenses and it should be based on your annual income. When you decide the sum assured, you will also have to consider inflation. The amount should be anywhere between 15 to 20 times of your annual income. The maximum amount you can assure is 20 times your annual income.
- The cover is available up to 85 years
This is one of the biggest benefits of term insurance. You can buy a term insurance in your 20s, 30s, and as late as your 50s, and take the benefits until you are 85 years in age. However, buying a term insurance at a later age might not be cheap but it will still cover the risk. Many people continue to work after retirement and there are plans available, which provide coverage up to the age of 85 years. Considering the life expectancy in the country, you are covered for your whole life.
- A false disclosure can lead to the rejection of your claim
This is something you need to know about term insurance. If you hide important information about a pre-existing illness, you will end up with your claim being rejected. Many people avoid sharing important medical information to avoid higher premiums and at the time of settlement of the claims, the insurers will investigate your history. If they notice that the information shared by you is false, they will reject your claims.
- Increase the sum assured over the course of the policy
Another benefit of term insurance is that you can change the amount of sum assured through the course of the policy. The circumstances in your life change from time to time, and when you are in different phases of life, your overall spends and the requirement of money will vary. You can adjust the sum assured of your term insurance at different stages by making extra premium payments. There are three major milestones in every individual’s life, which include marriage, childbirth, and the birth of the second child. The sum assured can be increased by 50% in the case of the first milestone, followed by 25% for the next two milestones.
Term insurance is known for the lowest premium and a comprehensive cover. It is also an ideal investment for you if you wish to save tax. There is no alternative to term insurance and you have no excuse to avoid buying one. If you want to ensure the security and protection of your family in your absence, invest in a term insurance policy at the earliest.