The insurance sector has grown immensely in the past few years, resulting in many companies offering various options and policy benefits. Today, you can easily search, compare, and buy term insurance online with a few clicks.
However, knowing the fundamentals of term insurance is essential for a first-time buyer to make the right decisions. Whether you are recently married, a young parent, or just beginning your financial journey, term insurance provides inexpensive peace of mind.
Hence, if you consider getting life insurance online, read for more insights on this.
Things to Know Before Availing a Term Insurance for the First-Time
Before purchasing
term insurance online, knowing the important factors determining your policy's effectiveness, affordability, and suitability is essential. The following are essential factors every first-time buyer needs to know:
Select the Appropriate Coverage Amount
Calculate the sum assured according to your age, income, financial obligations, dependents' requirements, and long-term goals such as education or retirement. Use online calculators to calculate your needs and ensure that the coverage is sufficient to protect your family.
Choose the Policy Tenure Wisely
Choose a policy duration that coincides with your working life or up to retirement. Purchasing early guarantees longer coverage at lower costs. For example, if you buy term insurance online in your 20s, it provides coverage of 35–40 years, which is more valuable and comprehensive.
Go for a Reliable Insurance Company
Do not opt for the cheapest premium. Instead, the internet can be used to compare the insurance offers of various insurers alongside their customer service and reputation in the market. A trustworthy insurance provider will provide a hassle-free and seamless claim process for your family.
Look for Appropriate Riders
Add optional riders to your base policy, such as critical illness, accidental death, or waiver of premium. Choose only those riders that are applicable to your way of life and health risks to maintain premium levels while increasing protection.
Consider Inflation
Inflation may reduce the value of a fixed benefit over time. Look for increasing term plans or determine coverage using inflation-adjusted estimates to ensure your family's financial security in the future.
Understand Key Policy Features
Seek basic features such as death benefits, flexibility in the policy term, modes of payment of premiums, options to convert, terminal illness benefit, and return of premium. These characteristics influence the policy's overall worth and utility.
Check the Claim Settlement Ratio
A high settlement ratio of claims (over 95%) reflects a greater probability that your nominee's claim will be settled. Hence, do your research thoroughly and choose a reliable insurance provider.
Tie the Policy to Your Financial Objectives
Ensure the term plan covers your major goals—like debt repayment, children's education, or a spouse’s retirement. The coverage should act as a financial replacement tool to support your loved ones in your absence.
Assess Premium Affordability
Opt for a premium that comfortably falls within your budget without compromising on cover. Use payment flexibility (monthly, annually, etc.), steer clear of unnecessary riders, and consider the growth in income over time. Online term plans tend to have better rates.
Terminologies to Know Before Availing a Term Insurance for the First-Time
Here are the key terminologies in
life insurance that buyers need to understand while availing it for the first time:
- Policyholder: The individual who purchases the insurance policy and makes the premium payments. The policyholder may be different from the person who is insured.
- Life Assured: The person whose life is insured under the term insurance policy. If he or she dies within the policy's term, the nominee will receive the benefits.
- Nominee: The nominee is the person whom the policyholder chooses to receive the sum assured in case of the latter’s demise.
- Sum Assured: This is the guaranteed sum that the insurer promises to pay the nominee in case the insured dies. It is the plan's central financial cover.
- Policy Term: This refers to the tenure during which the insurance coverage is available, typically between 10 years and 40 years or until the individual becomes 99 years old.
- Premium: The premium refers to the amount the policyholder pays to keep the policy active. Payment frequencies are monthly, quarterly, annually, or a single payment at purchase.
- Payment Mode/Term: There are three modes of premium payment: Regular Pay (for the whole policy term), Limited Pay (for a specified tenure), and Single Pay (payment at purchase).
- Death Benefit: It is the sum paid to the nominee in case the policyholder passes away within the policy duration. It can grow with riders attached to the plan.
- Riders: It includes optional features such as accidental death, critical illness, and premium waiver that provide additional coverage at an additional expense.
- Claim: Claim refers to the official application made by the nominee to the insurer to be paid the policy proceeds upon the death of the insured.
- Free Look Period: It is a short duration (typically 15–30 days) during which the policyholder can cancel the policy without charges if not satisfied.
- Grace Period: The grace period is a period of another 15–30 days to pay lapsed premiums. If it is not paid within this interval, the policy will be terminated.
- Surrender Value: When a policyholder cancels the plan prior to maturity, they can get a part of the premium back (if any), known as the surrender value.
- Paid-up Value: If premiums are discontinued after several years, the policy can turn into a "paid-up" policy with benefits proportional to the paid premiums.
- Policy Lapse: A policy lapse occurs when the premiums are not paid after the grace period, and the policy becomes inactive. Some insurers provide reinstatement on certain terms.
Buying term insurance online is one of the most sensible decisions that a first-time buyer can take—easy, economical, and time-saving. With knowledge and a bit of research at hand, you can secure your loved ones from the uncertainty of life.
Remember that a life insurance policy is not a product but a necessity. So be patient, ask questions, and make a decision that will last long.
