So recently I set out to buy a new term insurance plan for myself. A term insurance is necessary to protect ones dependents in case of death. You do not want to transfer your financial burdens on your dependents.
A term insurance is a very simple insurance where a person is insured for a "term" (say 30 years). You are required to pay the premium for this duration. During the term if you pass away, then your nominee received the covered sum. However if at the end of the term if you are still alive, you don't get back anything. The premiums of these insurance policies are lower if you purchase them at a relatively young age. The premiums are fixed throughout the term of the policy, so it makes sense to buy these when young.
There are some people with another school of thought who say that you should get a term insurance only after you have dependents. This is also okay, but I personally would recommend getting one as soon as possible.
Now why term insurance is the right insurance for most people and how keeping your investments and insurances separate is the right thing to do is a discussion for a separate article. If you proceed to read further I assume you know why a term insurance is better than a ULIP. If not, you should check out this article on [[Why should you keep investments separate from insurance]].
In this article I will talk about how I purchased my term insurance and what are the things one needs to look out for.
Step 1 - Plan
It is usually recommended that the policy cover should be 10-20x your annual salary. I personally agree with this, the rational behind this is that in the event of your death your family must be able to maintain their current lifestyle for the next 10-20 years. We also need to understand what "term" we want our insurance for. The idea is simple, we want the insurance till the time we are earning and we have dependents. So for most people I believe that would be the age of 58-60. By then most people would retire and their children would be self sufficient. There is no point of having an insurance if you aren't working and don't have any dependents.
Insurance plans also come with a load of riders like, Critical Illness Rider and Accidental Death Rider and a few others. In my opinion one should opt for a vanilla insurance as most of these riders are useless. Because we should have a separate health insurance for these things anyway.
Step 2 - Research
For this, I just used policybazaar.com. It gives an easy way to look at the estimated premiums and claim settlement ratios etc on a single page. You can filter and sort based on the parameters important to you. While buying my policy I observed that most of the companies have claim settlement ratios etc greater than 97-98%. But one thing to keep in mind is that these claim settlement ratios are for all their insurance policies, which include ULIPs etc which are usually for low amounts. An insurance company can very easily approve 99 ULIPs with a cover of 5 lakh and reject 1 term insurance with a cover of 20 crore. As. of now there really is no published data to look into this.
But the bottom line is that you can go with any major insurance company as you don't want your nominee to go through trouble if they ever need to file for a claim. In my case I chose ICICI Prudential.I choose my term of 38 years and looked at the premium and other policy details. Policy bazaar said that there would be a "Tele medical" before this policy was issued.
I had seen many reviews of policy bazaar saying that it was taking longer time to issue a policy through policy bazaar than buying directly from the company. So I decided to purchase directly from ICICI Pru.
Step 3 - Buying the policy
I created an account on the insurer's website, filled the required details. Needless to say, don't lie on your forms as your claim might get rejected. It is fine to pay some extra premium but don't hide any medical history. For the insurance I would recommend just paying the premiums annually, against opting for any kind of limited pay. I paid the premium online. Yes, I paid the premium before the medical was done. It is possible that if there are some issues in the medical report, you might have to pay the extra premium. At this stage I was told that tele medical is not available so there will be a physical medical and sample will be collected from home.
Step 4 - Medical Tests
I received a message from the medical partners of ICICI where I was asked to choose a time slot for the medical test. Here when I input my address I was prompted that home collection is not available in this area. This was very weird because I live in a very well known locality in North Bangalore. Since I had already paid the premium, I decided to go ahead with the medical. The lab was just 5 minutes from my house.
I went in at the selected time, everything was very smooth. I gave all my samples.
Within 48 hours, ICICI sent me the reports which is a great things, because I've heard that many insurers don't send the medical reports back to the customers.
Step 5 - Issuance of the policy
Within 2 days after receiving my medical reports, I was issued the policy. I received the policy documents over email on the same day. And within 14 days I received the physical policy documents. I was able to login to their website using my email and could verify that all the details were correct.
All in all the process was not very difficult, having said that, it wasn't the easiest. Tele medical or home sample collection would've been great. If you don't have a term insurance yet, I'd suggest you get one sooner rather than later.
Everything mentioned i this article is my opinion and is from personal experience, your mileage may vary.
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