Why you need Term Insurance?

If you are a breadwinner having dependants and large liabilities on your head, this is an Insurance policy which will help you cover your dependants from any financial instability.

What does Term Insurance cover?

Term Insurance, also called Pure Risk Insurance is one of the cheapest ways to cover a large liability for a specific duration. The policy undertakes to pay the full sum assured to the nominee in case of death during the specific term. In case the person survives, then there is no maturity benefit payable. Though, there are ‘Return of Premium” options available, but these don’t turnout be cost-effective.

How to calculate how much Term Insurance you need?:

1.  
   1. Take a total of all personal liabilities that you have – Personal, Car, Home Loans etc. Remember to add amounts where you have stood as a personal guarantor also.
   2. Multiply your monthly salary by 100. So if your monthly salary is Rs. 50000 – the ideal cover you must have is Rs. 50 Lakhs.
   3. Add A and B and subtract any current Insurance you may have.

What is the general procedure/documents required for applying for a Life Insurance?

1.  
   1. Filled in Proposal form
   2. Identification, Residence Proof and Correspondence Address Proof
   3. Income Proof – Income Tax Returns, Form 16, Salary Slips etc.
   4. Photographs
   5. Medical Tests – minimum, fitness test would be mandatory.

Points to note:

1. The higher duration of the cover the better, since as you grow older the risk increases.
2. Term Insurance cover needs regular upgrades as per your new income and inflation.