Before buying,check your ideal term cover

As the head of your family,you need to fulfil your responsibilities towards your loved ones and to provide the comfort which they need

As the head of your family,you need to fulfil your responsibilities towards your loved ones and to provide the comfort which they need. However,life is full of uncertainties and it is a need of every individual to sustain the same lifestyle for their family even when s/he is not around. While there may be many ways to protect family against life’s uncertainties,none has the charm of term insurance products.

While the thumb rule states that one should look at life cover of 12 times annual income minus investment assets plus any liabilities there are also some other aspects that one should consider. The amount of cover required also depends on individual needs,along with current or expected circumstances. This would include whether one is single or married,has children,financial obligations such as personal loans,mortgage,school fees,current income,assets,life expenses,and not to mention,lifestyle. While most of these may pertain to our family,one needs to account for expenses that will immediately precede or follow ones death. These include medical bills,credit card bills or taxes. Add these increase as per your familys needs. 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.

Claims ratio is an important yardstick to measure the performance of an insurance company. There is sufficient regulatory governance around the claims handling process and there are defined guidelines for companies to follow. This makes it easy for the customers to access this information and make informed choices. While excellent claims performance record is an important criterion,claims repudiation ratio of an insurance company should also be looked at. One must select companies that have lower repudiation ratios.

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It is important on the part of the customers to make all the rightful disclosures. This is in their own interest to avoid any inconvenience at the time of making a claim. It is in the best interest of the consumers to go for medical tests as this will reduce any chances of the claims being denied,especially,since you have disclosed all facts. It is better to pay additional premium for a small health condition.

The premium you pay per month for life insurance today will in rupees terms be the same,but will be less money ten years from now due to inflation. An increasing term assurance policy may provide the flexibility to increase the sum assured (the cash amount that you receive upon your death) by 5-10 per cent each year to reflect the rate of inflation. Thus it will hedge against the rising cost of living with an option of increasing sum assured.

While aforementioned points are important criterions to be considered before buying a term plan,there are no straight answers to this. Hence certain guidelines mixed with some serious math and help from a professional financial planner will come handy to avail an ideal term plan.

Author is MD & CEO,Birla Sun Life Insurance