Choosing term life insurance: Basic plan, add-on riders and other key things to consider

Term life insurance: Term life insurance stands as one of the simplest and most fundamental forms of insurance available. Unlike other life insurance plans, the premium of term insurance is cheaper and focuses solely on providing coverage, without any additional investment or money-back components.

Here are some important factors to bear in mind when considering a term life insurance policy:

Opt for basic coverageTerm insurance pays a lump sum when the insured passes away. It's advisable to choose the basic version, allowing the individual to invest the remaining funds in other options like mutual funds for growth and capital appreciation.

Evaluate add-on ridersThere are different riders available, each covering a specific risk. For example, an accidental death rider offers extra coverage for death resulting from an accident. Choose riders carefully as they increase the premium cost.

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Provide accurate health informationAlways provide accurate health details, including whether you smoke, have significant health conditions, or have had surgeries. It's crucial to also accurately disclose family health history. Hiding or providing incorrect information during policy purchase is a major reason for claim rejection.

Select a reliable insurerSelect a well-established insurance company with a long-standing presence in the market and a strong track record of settling claims efficiently.

Inform family membersThe insured should inform their family members and chosen nominee about the term policy and where to find the policy documents.

Consider premium costs

• Premiums are lower at a younger age, so consider getting life cover once you start earning to secure maximum coverage.
• Be cautious of advertisements promising low daily premiums for substantial coverage, as these may only apply to younger age groups.

With inputs from Centre for Investment Education and Learning content which appeared in Economic Times