5 THINGS TO DO AFTER YOU BUY A TERM INSURANCE PLAN
A term insurance plan is recommended for those looking for pure life coverage. As a policyholder, you can secure the future of your loved ones, preparing them for life’s unpredictability. Preferably bought at the start of one’s career, the policy acts as a financial cushion in tough times.
Before selecting a term policy, you might have performed adequate research and due diligence. From deciding between online term plans and offline plans to using a term plan calculator for estimating premium payments and the required coverage, you might have gone through comprehensive checklists. The goal was to choose a policy that will consider your financial goals, dependents, and income. However, the journey doesn’t end at selecting and buying the term insurance. To ensure that the policy serves its true purpose and meets the intended goal, there are a few necessary things to remember.
The following are five things you must do after buying a term policy:
1. Check the term policy
While the due diligence is done during the selection process, it is imperative to read and check the term insurance policy thoroughly on receipt. The fine print may hide details that you may have missed while purchasing. Check the inclusions and exclusions to ensure that you are aware and will not be denied the claim in the future. It is important to check for any errors or omissions as well. There could be errors in terms of the sum assured amount, the term of the policy, personal information, or typographical errors. Omissions related to certain inclusions or other details should be flagged off and reported when you receive the policy.
2. Inform the beneficiaries and safely secure the policy document
The purpose of the term policy is to safeguard the future of the beneficiary. This implies that it is imperative to inform your loved ones that you have bought the policy, and they should be taken in confidence about where the policy document is kept. The terms of the policy, namely, the inclusions, exclusions, the sum assured, the premium payments, and the duration of the policy, should be explained to them. They should also be informed about the claim process. If they need to initiate a claim, they will know exactly what is expected of them in terms of documents and procedure. The policy document should be kept in a safe and secure place. It is recommended to make photocopies of the policy and keep it at different locations. Also, maintain a digital copy, i.e., scan the policy and save it on a drive or cloud that can be easily accessed by you and your beneficiaries. This maintains the sanctity of the original document and will ease the beneficiaries’ burden when initiating the claim process.
3. Mark the premium payment dates
Mark the calendar and set a reminder for the premium payment dates to ensure that you do not miss a payment and it is made on time. Not renewing the existing term plan on schedule could cause the policy to lapse. Once lapsed, you may have to go through medical checkups to determine the present medical conditions, giving the insurance company grounds to reject the policy based on health issues newly discovered. To avoid this turn of events, you can opt for an auto-debit option. This means that the amount will automatically get deducted from the bank account of your choice on the date specified. Alternative ways to ensure that one does not miss this important date is to opt for direct debit via internet banking or set up standing instructions on a credit card.
4. Review the term policy and beneficiary
When buying a term policy, the parameters considered are your current income, financial goals, and dependents. With time, these parameters can evolve. Inflation can change your financial standing. Financial goals can be redefined. The number of dependents can increase from the time the policy was bought. It is possible that the existing coverage may not be sufficient to provide a secure future for your beneficiary. Therefore, it is important to review the term insurance policy periodically and monitor these parameters. If not enough, you can consider buying additional cover. Other than the coverage, another aspect that may require a change is the person nominated as the beneficiary. Over time, situations arise where you may feel differently about who the beneficiary should be. If there is a change of heart, you should call the insurance provider and request a nomination change.
5. Understand the claim process
In the unfortunate event of the policyholder’s death, the beneficiary should collect the sum assured amount from the insurance company. While every insurance company will have its unique claim process, the basic process is always the same. To initiate the claim process, the beneficiary will first need to inform the insurer and fill the claim form. Along with the form, the beneficiary will also have to submit the mandatory documents, such as the death certificate, autopsy report and police documents, and identity proof of the beneficiary, among other documents. Once the insurance company successfully verifies the documents, they will then pay the benefit payout.
The term insurance plan acts as a shield that protects loved ones in the event of something unfortunate happening to the policyholder. It helps the family with expenses and paying off debts, giving them an opportunity to start over. As a bonus, the term insurance plan gives tax benefits on the premiums paid under Section 80(C) of the Income Tax Act, 1961. Under Section 10(10)D, the death benefit amount is also exempt from tax*. If you do the due diligence on receiving the policy, communicate with your beneficiary with respect to the policy, periodically review the term policy to ensure it is aligned with your financial goals, do not miss out on premium payment dates, and you are aware of the claim process, your beneficiary should be able to claim the benefit payout without any complications if the need arises.