It's a worrying scenario that a large proportion of people in India are uninsured. Even, highly educated class employed in the organized sector do not have coverage, beyond group term cover of around one time salary provided by their employers. Term insurance is a must have for all who have dependent family members or liabilities to pay off. This is the most basic and cheapest form of pure protection life insurance to protect the life style of dependent family members in the unfortunate event of demise of the breadwinner of family. Following points may help you to choose your cover wisely.
How much term assurance should you take
The rule of thumb is to take a cover of around 10 times annual salary plus any outstanding loans. This level of sum assured will help repay the outstanding loan and maintain lifestyle of the family members.
Should I take plain Vanilla term or a term assurance with Income Option
It is important to match your policy proceeds with your liability cash flow. Loan is likely to be settled immediately on claim event and therefore a lump sum amount equal to loan amount is appropriate. Balance sum assured can be taken as regular income or lump sum. If your spouse is financially educated and can make investment decisions, the claims amount can be taken as lump sum, else it can be taken as income over a period.
What rider should I take with term cover
Most insurance companies offer additional optional riders along with term product. It is better to enhance coverage by taking accidental death benefit, waiver of premium benefit and critical illness rider to make your policy more comprehensive. Critical illness coverage provides living benefits and protect against the risk of living with disabilities post covered dreaded diseases.
From where should I buy term
Almost all insurance companies would like to settle all genuine insurance claims. The claims which usually get rejected are fraudulent or result of non-disclosure of material facts about the health or income. Therefore, just looking at the claims settlement ratio may be misleading. It may be worth looking at the corporate governance records, violation of regulatory norms and solvency ratios.
Should I buy online or through agent or bank
It may not make a significant difference whether you buy online or thought distributor. If you are internet savvy and comfortable with transacting online, you may get some discount while buying online. However, while buying from distributor, you will get the comfort of face to face discussion and opportunity to raise your concerns with distributor. Choice between online and offline is more of personal choice and a matter of comfort with online transactions.
Sunil Sharma is appointed actuary and chief risk officer at Kotak Life Insurance