If term insurance cover is so important and everyone should have one before starting investments to cover all the liabilities, why do most people have negative opinions regarding insurance companies and their policies? Are these policies very difficult to understand? Do companies try to hide important details by using too much technical jargon, so that common man doesn't end up clarifying them? Or are the claims process very cumbersome and there will always be some ways via which the company denies the sum assured? What important things needs to be checked while taking a term insurance? What important details to ask for and what sections to specifically read properly in the policy document?
-Gaurav Singh
The importance of term insurance cover cannot be overstated. You can buy a large insurance cover (adequate enough to cover your liabilities and take care of your depends' financial needs) by paying a small premium only through the term insurance products. All other insurance products - endowment, Unit Linked, etc -- are costly. You can only buy a nominal life insurance cover if you opt for them.
Negative perceptions about term cover is mainly due to an old mindset. Most individuals can't grasp the idea of paying a premium regularly and not getting anything in return if they outlive the policy. They overlook the fact that the basic idea behind buying a life cover is to take care of the financial needs of your dependents after you are gone. Term plans take care of this aspect very well with the small premium you pay for the cover. Most people prefer to buy a plan that would pay something at the end of the term. They don't pay attention to the fact that they are paying a higher premium and they are only getting a small insurance cover and below average returns from the investment part. Most people are very happy that the insurance plan would pay "something" at the end of the term. It doesn't matter even if the returns fails to beat inflation. Term plans are also not very popular because most insurance advisors don't push them due to low commissions. They would rather recommend costly plans that would pay them higher commissions.
Term plans are very simple and easy to understand. They are transparent and the claim process is also very simple. All you have to look for while buying a term plan is the premium and the claim settlement ratio of the insurance company. It is always better to go for a very long term tenure (till your retirement) as getting another cover later would be a costly affair. If you are young and tech savvy, you should try to buy an online term insurance plan directly from the company. Make use of the free-look period (15 day for offline policies/ 30 day for online policies) to read and fully understand the terms and conditions of the policy.
This article was originally published on March 09, 2016.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
