Seeking Guidance on Term Insurance: A 36-year-old Professional's Inquiry

Ans: Dear Praveen,

It’s great that you’re considering term insurance. A term insurance policy is essential for ensuring your family’s financial security. Let’s explore the key aspects you need to consider before purchasing a Rs. 1 crore term insurance policy.

Coverage Amount: Ensuring Adequate Protection
Choosing the Right Sum Assured: A Rs. 1 crore policy is a good starting point. However, assess your family’s future financial needs, including living expenses, loans, and your children’s education. This ensures that the coverage amount is adequate.

Inflation Impact: Consider inflation. Over time, the value of Rs. 1 crore may decrease. Ensure that the coverage amount is sufficient to meet future needs.

Income Replacement: Your term insurance should replace your income for at least 10-15 years. This will help your family maintain their current lifestyle without financial strain.

Policy Term: Matching Your Financial Goals
Align with Retirement Age: Ideally, your policy term should last until your retirement age, around 60-65 years. This ensures that your family is protected during your working years.

Long-Term Commitment: Choose a policy with a term that matches your financial goals. This ensures that your family is covered until your major financial responsibilities are fulfilled.

Premiums: Balancing Cost and Coverage
Affordable Premiums: While a higher sum assured provides better coverage, ensure that the premiums are affordable. Your premiums should not strain your current finances.

Premium Payment Options: Some policies offer flexible premium payment options, such as monthly, quarterly, or yearly payments. Choose the one that best fits your financial planning.

Fixed Premiums: Opt for a policy with fixed premiums throughout the term. This ensures that your payments remain consistent and predictable.

Riders: Enhancing Your Coverage
Accidental Death Benefit: Consider adding an accidental death benefit rider. This provides an additional payout if death occurs due to an accident.

Critical Illness Cover: A critical illness rider covers life-threatening diseases like cancer or heart attacks. It provides a lump sum payout on diagnosis, which can help with medical expenses.

Waiver of Premium: This rider ensures that your policy remains active even if you are unable to pay premiums due to disability or illness.

Income Benefit Rider: This rider provides a regular income to your family in addition to the sum assured. This can be crucial for meeting monthly expenses.

Claim Settlement Ratio: Ensuring Reliable Protection
High Claim Settlement Ratio: Choose an insurer with a high claim settlement ratio. This indicates the insurer’s reliability in paying out claims.

Transparent Process: Ensure that the insurer has a transparent and straightforward claim process. Your family should not face any difficulties when filing a claim.

Customer Reviews: Read customer reviews and testimonials. This gives you insight into the insurer’s service quality and claim processing efficiency.

Policy Terms and Conditions: Understanding the Fine Print
Exclusions: Understand the policy’s exclusions. Certain situations, like suicide within the first year, may not be covered.

Grace Period: Check the grace period for premium payments. This is the time allowed to pay overdue premiums without policy lapse.

Lapse and Revival: Know the process for reviving a lapsed policy. Some insurers allow you to revive your policy within a certain period.

Benefits of Buying Through a Certified Financial Planner
Expert Guidance: A Certified Financial Planner (CFP) provides expert guidance. They help you choose the best policy based on your financial goals and needs.

Customized Advice: A CFP can offer personalized advice, ensuring that your policy aligns with your overall financial plan.

Continued Support: Your relationship with a CFP doesn’t end after buying the policy. They offer continued support and advice throughout the policy term.

Final Insights
Praveen, purchasing a term insurance policy is a crucial step in safeguarding your family’s financial future. By considering factors like coverage amount, policy term, and riders, you can choose a policy that meets your needs. Also, working with a Certified Financial Planner ensures that you make an informed decision. Remember, term insurance is about more than just coverage—it's about providing peace of mind and security for your loved ones.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in