First term plan: here’s all you need to know

First term plan

A term insurance plan is said to be the essence of life insurance as it covers the risk of premature death. If the insured dies during the policy tenure, a lump sum amount is paid to the family to compensate for the financial loss suffered. The plan, therefore, helps individuals create financial security for themselves and also for their families in their absence.

 

There is no right time to invest in a term insurance plan. The sooner you buy the better. However, when buying your first term insurance plan, there are some things which you should know. These include the following –

 

  • Choosing the right plan

 

When it comes to choosing the term plan, you should compare the available plans and then buy the plan which offers the best coverage features at the lowest premium rates. Though comparing is recommended, you should avoid overanalysing your choice. There are scores of term plans available and if you analyse each one in detail, you would soon feel confused and clueless. So, go basic. You can always buy another plan with advanced features when you are more familiar with the characteristics of your first purchase. So, buy a good plan from a reputed company and don’t worry about other plans being better.

 

  • Choosing the right coverage level

 

Having a sufficient level of sum assured is necessary so that your family’s financial needs could be properly taken care of in your absence. That is why you should try and choose the highest possible sum assured which you can afford and which suits your financial requirements. Since it is your first plan, affordability should be the key in choosing the sum assured. Thereafter, you can opt for a higher coverage later on when you have the finances at your disposal. Also, there are various ways of choosing the ideal sum assured. One simple rule of the thumb is that your sum assured should be at least 10-12 times your annual income. So, use this rule to estimate the coverage that you need.

 

  • Disclosing your medical history

 

When buying a term plan, you would be required to fill up a proposal form stating your personal and medical details. You should state your medical details accurately. If you have any type of ailments or if you smoke and/or drink you should mention about it in the proposal form. Similarly, if there is any adverse health history in your family, state that in the form. By stating the medical details correctly in the form you inform the insurance company about the risk that it is underwriting. Thereafter, when there is a claim, your claim is paid. If you hide anything or lie about it in the form, your claim might get rejected. So, always fill the form honestly.

 

  • Documents required

 

When buying a term insurance plan you would have to submit your KYC (Know Your Customer) documents and other documents to the insurance company. These documents would include your photograph, identity proof, address proof and bank details. Moreover, your age proof would also be required. If you are buying a high value plan, your income proofs would have to be submitted as well. So, keep your documents handy so that you can complete the application process easily.

 

  • Buying the plan

 

The next thing is to know how to buy the term insurance plan. Term plans are available online as well as offline. Buying online is the best mode since you can compare the policies and buy quickly. The online medium cuts down on the unnecessary hassles of buying physically and allows you paperless transactions. You can also pay the premiums online which is quick and simple.

 

  • Renewing the plan

 

Just buying the term plan is not enough if you don’t renew the plan regularly. Term plans are long term plans wherein you promise to pay the premiums regularly to continue coverage. If you don’t renew the plan timely, the policy lapses and you lose all coverage benefits. Moreover, there is no concept of paid-up value in a term insurance plan and a lapse would result in the loss of all the premiums that you paid for the plan. So, always renew the plan timely so that you can enjoy uninterrupted coverage and retain the financial security which you ensured through the plan.

 

Buying your first term insurance plan is a step in the right direction. You should, however, know about these aspects when buying the plan so that you make an informed purchase and reap the benefits which the plan offers.

 

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