NEW DELHI: It is said that life is an uncertain journey. From accidents to numerous health risks, many factors can disrupt the flow of life. If you are a middleclass, working professional, you may find term insurance policy a good tool to financially support your family in case something happens to you. Santosh Agarwal, head of life insurance at Policybazaar.com, says, “Term insurance is a must have product for a person with dependents.
It acts like a financial safeguard to protect your family in case of any mishap or death of an earning member. If you have liabilities and want to cover the risk of death, it is a best available option.” Thanks to its nature, term insurance is designed to ensure that in the event of the policyholder’s death, the family gets the sum assured, cheaper premiums and qualifies for deduction under Section 80C of the Income Tax Act. However, there are certain factors one should consider before taking the time-bound policy, says Agarwal. Before buying any term plan, one must take into consideration the extended features or riders attached to the policy.
“These riders may come at an extra cost but you can extend the protection element in your policy at a nominal cost. The most recommended riders in a term plan are critical illness, personal accident cover and waiver of premium,” she says. Even if one dies just after the policy term expires, there is no benefit. It is also not suitable for everyone, especially the ones who are single with no dependants. Another benefit is that it provides multiple options to settle the future claim. Though it might look luring, choosing the right option shouldn’t be taken lightly.
If the nominee opts for lumpsum payment without keeping in mind the long-term financial needs of the family, it might become a poor choice. Similarly, the option for regular income for family, where the insurer promises to pay the sum assured in equal installments over a stipulated period of time, won’t be able to cover large loan such as outstanding home loan or a business loan.
According to Agarwal, if the nominee is able to manage such a big amount in the absence of an earning member, then one should opt for a lump-sum payout. “In case there are children as dependents and there is a liability in the form of their education, one should look for lump-sum plus monthly payout. This will help in getting immediate financial support and regular flow of income. If nominees can’t manage this amount, then think of increasing the monthly payout,” she adds.
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