You may heard about Term Insurance plan but, do you know how to evaluate a suitable plan for you? This article intend to discuss important points to consider prior to subscribe a term insurance plan. At the end of reading this article, I am sure, you will get all necessary information to evaluate any term plan and its suitability to you. If you are on the queue to subscribe a term plan for life, this is a must read for you.
A little about term plan; Term Insurance Plan generally have low premium with huge insurance cover. Unlike any other policy, term insurance plan never give the paid premium back, if the subscriber survives the term years. A subscriber required to pay the same premium till the end of duration and there will not be any timely increase or decrease in it.
Here are 4 major points required your attention when evaluating a term plan to subscribe:
Age of a Subscriber:
Joining age is very important for a term insurance plan. Premium amount of the term insurance policy highly depends on the age of a subscriber. As your age increases, your premium for the term insurance policy also increases. It tells that, age at the time of term insurance can decide increase or decrease in premium amount. To simplify this point, here is an example: If you start a term insurance policy at the age of 20, you will have to pay considerable low premium amount than a person subscribing the same plan at his age of 35 or 40.
Policy Term:
It is a commonsense factor. Always select maximum available term while subscribing a term insurance plan. Here our first point above, is a visible reason for the same. Never commit a mistake of selecting less term considering reductions in premium. Remember, less term required to pay less premium because company doesn’t have a risk from a person getting aged. As said above, age of a subscriber has important role in term insurance plan premium. In the similar way, policy duration also have role in the increase of decrease of premium.
Insurance Cover:
I have read a lot and heard a general doubt on term insurance plan is, deciding the insurance cover. To crack this doubt, one can opt an insured sum of 6 to 7 times of his annual salary. If you are subscribing a term insurance plan now then, never do the mistake of selecting 6 or 7 times of your ‘present annual salary’ but, consider your possible future salary and designation hike for next five years from today.
For example, if your present annual salary is $50000, you can select $50000×6 = $300,000 as your Term Insurance cover. Wait a minute. Just think your possible salary for next 5 or 10 years. It may be $200000 per annual. So which will be better? So you should consider this future and select $1200000 as your insurance cover. At the end of 10 years, you will be happy by seeing you have selected the right insurance cover to meet the life standard of your family in case of your untimely death. How do you feel about this insurance coverage idea? Can you tell me whether you have heard this or not from anywhere other than this article?
Rider Benefits:
There are various riders available with term insurance plan depends on your country and regulations. Accidental Death Benefit, Critical Illness Cover and Permanent Disability Cover are some of them available in my place, can be selected by paying additional premium. Select your required riders wisely. If you have separate critical illness cover, you may not need to select that rider with your term insurance plan. If you don’t have your own vehicle and you are not traveling lot, you can even avoid accidental death benefit too. Remember, accidental death not happening only from vehicles but even a death by falling in a pit can also be considered as accidental death. In my opinion, select accidental death benefit considering its very low premium.Selection of additional riders depends on individual to individual. Depends on your status, have option to select or not select riders. You can even consider the increase and decrease of premium when selecting each riders. For me, a well planned term plan without any additional riders would be sufficient.
You have option to clear your doubts directly from me. If you have any doubt, just post here as a comment or contact me using above contact form. You can even visit this article to know the guidelines to select worthy insurance policies.
Sherin Dev is the founder and editor if Investinternals.com Blog. Learn more about him here. Follow him on Twitter @Moneyhacker or be in touch with him at Facebook
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