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All about Term Insurance - Here's what you should know

Insurance

To begin with, we all enjoy making money in the stock market, whether through trading or investing. But, at the same time, we may also recognize that no event can be predicted with 100 percent certainty. Obviously, fundamental and technical analysis can help one invest or trade more effectively. And therefore, people go with the best performing stocks/ mutual funds to get better returns even during the times of volatility. Similarly, our life span is also unpredictable & that is when the term insurance comes into the play. Recently the premium rates for term insurance have been increased, so should the same be avoided or not? Let us see the same in detail -

Term insurance is a type of life insurance policy that covers you for a set amount of time, or for a set number of years. A death benefit will be paid if the insured dies during the time period specified in the policy and the policy is active, or in force. Also, the Premiums are set and paid for the duration of the policy. If the policyholder dies before the policy's expiration date, the insurance company will pay out the policy's face value. There will be no coverage or payout if the term expires and the person dies before the end of the term. Policyholders can, however, extend or renew their coverage; however, the new monthly premium will be determined by the person's age and health at the time of renewal. As a result, premiums for the renewed policy may be higher than for the original term policy taken out when the individual was younger.

Term life insurance is always a good idea to protect your loved ones when you pass away. Despite rising costs, term life insurance is a must-have for everyone. Although premiums are increasing, this should not deter you from purchasing financial protection for your family. The current epidemic situation in India is to blame for the sudden increase. To add in, Many factors are responsible for the change in term insurance premium rates & they are -

1. Type of a policy - In Term insurance, If your policy assures a high sum assured for a longer term; you may have to pay slightly lesser monthly premiums as compared to short term plans. These plans are usually longer-term and have lower premiums.

2. Occupation - If your job puts your life in danger on a regular basis, such as being a pilot, working with chemicals, or working with explosives, you will be charged more premium.

3. Hobbies - If you participate in adventure sports such as skydiving, car racing, bungee jumping, paragliding, and hang gliding, your insurance company will classify you as a high-risk customer, which will result in higher premiums.

4. Smokers - Nonsmokers can get term insurance at a lower cost than smokers, according to insurers. It is due to a number of serious health issues linked to smoking, which can drastically reduce the insured's life expectancy.

5. Weight - Term insurance premiums are higher for applicants who are classified as obese on the BMI scale. It's because obesity can lead to a variety of diseases, including heart failure.

6. Gender - Women are typically offered term insurance at lower rates than men, based on statistical data, because the insurer believes women have a longer life span than men.

7. Health - When filling out an application, most insurers require a thorough medical examination. Before proceeding, they also require a self-declaration of any pre-existing illnesses. The insurer may or may not offer you life insurance if the medical exam results reveal any acute diseases or life-threatening conditions.

8. Age - Our current age is a significant factor in determining the premium amount to be paid by the insurer. Premiums are generally lower if you are younger, and vice versa. Term insurance should be purchased as soon as possible because it is less expensive.

9. Alcoholic - Insurers will inquire about your drinking habits. You may have to pay higher premiums if you are an alcoholic. Drinking too much alcohol can lead to serious health problems in the future, shortening your life span.

Also, we can look into ways to lower term insurance premiums in order to choose an appropriate cover, and the factors to consider are listed below -

• When you reach a certain level of coverage, your premiums will drop. For example, if the premium for Rs 4.9 lakhs is Rs 5000, the premium for Rs 5 lakhs coverage may be Rs 4800. So, in order to lower the premium, look for such options.
  
• Calculate the current expenses of your dependents in the event of your death to determine the exact insurance coverage required and purchase a plan accordingly to reduce premiums.
• If you believe your monthly expenses will decrease after a certain period of time, such as when your home loan EMI is paid off or your children's safety is completed, you should reconsider the length of your term insurance.
• Stick to term insurance and resist the urge to purchase a whole life insurance policy as far as possible.
• Compare and contrast the various term insurance plans offered by insurers to find the best deal.
• Examine the term insurance plans for any hidden fees, negotiate with the insurer, and obtain a waiver.

Lastly, To sum this up; a term insurance can be a great bet to secure the future of your loved ones & even a better bet if you consider the same at a right age & factors while selecting an appropriate plan for yourself. With that, Team IFA wishes you a Happy New Year.

- TEAM IFA