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5 things you should check in your insurance policy

5 things you should check in your insurance policy

5 things you should check in your insurance policy
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By CNBCTV18.com Contributor Jun 10, 2020 3:48:53 PM IST (Published)

Term insurance ensures financial stability in case of any unfortunate event and also gives you options to cover from critical illnesses if they ever strike.

Authored by Sanjay Tiwari

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This pandemic has got all of us thinking about worst-case scenarios and insecurities about the uncertainty of the future and losing our loved ones but most importantly it has taught us to be very careful and cautious to make not only plans but emphasize on appropriate financial planning for future.
It's better to be financially protected well in advance. While we are dealing with the lockdown and focused on hygiene and safety, it’s important to ensure that our family is fully protected and safe from all possible uncertainties that could bring any financial emergency.
One way to do this is by opting for a term insurance policy.
Term insurance is important at every life stage. It is a simple, good and affordable way to create financial security for not only yourself but also for your loved ones. It ensures financial stability in case of any unfortunate event and also gives you options to cover from critical illnesses if they ever strike.
These five simple steps will help and guide you when opting for insurance, especially in the current scenario of COVID-19.
Evaluate your financial needs
Term insurance covers one's financial needs. It’s important to take care of the financial needs of your family in your absence. You must take account of a few thinks like – income source, dependent family members, debts and liabilities, expenditure incurred to maintain the current lifestyle, money invested in financial goals like child’s schooling and education, marriage, retirement, etc.
Analyze and choose the right term insurance
It completely depends on your requirements and needs like what kind of safety net you wish to create for your family. The kind of situation we are facing in 2020 due to COVID-19, maximum term insurance cover should be opted with increasing monthly income, keeping in mind and considering the inflation/rise in prices. Whether you are making a purchase online or offline you will find these four types of term insurance; basic term plan, term plans with monthly income, term plans with increasing monthly income and term plans with return on premium.
Calculate the duration of cover
One should keep in mind and consider the important factors of age and duration while opting for a term insurance plan. It is better to opt for higher insurance cover or protection against future inflation to protect and avoid inflation disrupting your family’s lifestyle.
A thumb rule which is recommended is age (25 to 35 years.): 15 to 18 times of the current annual income plus add the outstanding loan. Similarly when you increase the age by 10 yrs. (35-45yrs.) reduce the annual income by 5 times (10-15 times) the rest remains the same.
Check the claim settlement ratio of the insurer
The higher the claim settlement ratio the better it is. It’s always beneficial to choose an insurer with a decent claim settlement ratio. Note that the claim settlement ratio is always expressed in percentage.
Increase your cover by attaching riders to the term plan
Riders help increase the level of protection of the insurance cover. There are numerous insurers out there in the market offering provisions of attaching the riders to the term plans. Riders like – critical illness, accident benefit, etc., can be picked when choosing a term insurance policy.
Term insurance cannot pay the irrecoverable loss of life but what it can offer is the most simple and affordable form of insurance. It offers financial protection to your loved ones (family) for a long time making sure to leave your dependents with sufficient money for their immediate and long-term expenses, including unforeseen costs and liabilities.
Sanjay Tiwari is Director, Strategy at Exide Life Insurance. Views are personal
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