Buying a term insurance plan is easier than you think. Almost all insurers now offer online policies with different options and additional features. Each of these variants is useful in certain situations. While this profusion of choices is good news, it can also become a problem. Here are a few things to keep in mind when you go shopping.
The insurance cover should be able to replace your income and settle outstanding loans. The thumb rule is to be covered for at least 8-10 times your annual income plus any outstanding debts. A $133k cover may seem adequate right now but inflation will keep eroding its value. For this, some companies have designed plans that increase the cover every few years. The cover increases by 5-10% every few years, but there is a cap on the maximum increase.
Don’t avoid medical tests
Companies usually put buyers through extensive medical tests before issuing a term policy. However, in some cases a company may not insist on a medical test but merely ask the buyer to give a declaration of good health. Not going for a medical test may be convenient, but will be costlier. The premiums are lower if the medical test shows that the applicant is in good health. More importantly, once you go through the medical tests, the onus of spotting the pre-existing disease shifts to the company.
What do term plans offer
Features and premiums of $133k cover bought at 30 for 30 years.
Get the tenure right
The tenure of the policy is almost as important as the cover it offers. Don’t choose a tenure that is too short or too long. Ordinarily, the cover should be till the age of 60-65 years. Don’t buy a plan of 15-20 years which will end when you are in your 50s. The life insurance needs are highest at that stage of life. Buying a new insurance policy in your 50s will be very costly. You might even be denied the cover if you have developed a health condition.