Tips while taking term Insurance
We will today discuss some of the best practices and must do things while taking a Term Insurance.Click here to read what is Term Insurance and its Importance
1. Take a policy just before your Birthday .
Term Insurance premium depends on your Age . So if possible try to avoid taking the policy just after your Birth date . What i mean by this is that try taking it before you turn +1 year in age . If your Date of birth is 10/11/1983 , and you take the policy on or before 10/11/2008 , you will be considered of age 24 . But if you do a delay of 2 days ... and you take a policy on 12/11/2008 . You will be considered 25 yrs old and hence your premium will increase by 4-5% .
Note : It does not mean that if your birthday just passed by and now you want to take Insurance , then you should wait for another year . thats not what i am saying :)
For a male with DOB on 10/11/1983 (24 yrs old), the premium for Rs 50,00,000 cover with tenure of 25 yrs , is 10157 , if the policy is taken on 09/11/2008 (just 1 day before the birthday) . Where as if he takes the policy on 12/11/2008 , the premium will shoot up to 10647 (Rs 490 more) .. though 490 is a small amount , but if we can avoid it by taking the policy little early .. always try to do it .
Even a small amount like 490 saved over 25 yrs in a PPF would give 45,000 and in mutual fund with 12% return will give 77,000 .
Note : The gist of the point is that try to see this small point while taking the Term insurance , it does not mean that you wait for 8-9 months just to take the policy before a birthday .
2. Try to diversify your Policy
If possible try to diversify your policy amount over different Insurance companies . If you want to take an Insurance of 50,00,000 , it would be better if you take 2 polices , rather than 1 single policy .
How it helps ?
- If you hold a single policy and the company does not honour the claim , dependents wont get anything , but if there are 2 parts , then there are less chances that both the companies with not honour the policy .
- If your liabilities come down or you have less dependents after a couple of years and ultimately you need to bring down your Life insurance cover , you can simply stop one of the policies and continue the other one .
- It helps in diversifying the risks involved with the Insurance company.
3. Buy a policy early in life and for longer Tenure .
Its always recommended to buy a Term Insurance early in life and for maximum tenure possible . In your early life you are more healthy and hence your premium will be lowest . Also by taking insurance for a large tenure you are making sure that you are covered for a large period , but the premium will be marginally more .
For example : For a cover of 50,00,000
You can see here that you have to pay marginally more for an extra cover of 5 yrs . So for example , a person with age 25 will pay 14,000 more than the 30 yrs old , but he will be insured for 5 additional years . So it always pays in long term .
Also taking a 30 years term insurance once will be very cost efficient than taking a 20 yrs term insurance now and then taking a term insurance of 10 additional years after 20 yrs . Because after 20 yrs , the premium you will pay for that 10 yrs tenure term insurance will depend on your Age that time and health that time .
Note : Premiums are from Aegon Religare Life Insurance .
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