When a family loses its bread winner unexpectedly the family is forced to confront with unanticipated financial crisis. Various plans of managing the family related to education of the children, marriage, house loan and above all the standard of living that has been enjoyed by the family will get affected due to that unforeseen circumstance. Further, this can completely thwart the normal functioning of the families belonging especially to the financially middle class sections of the society. Term Plan in life insurance is a ready hand holder extending its support to the people facing such a crisis in their family.
With Term Plan we will not be able to get the money back we have paid as premium at the normal circumstances. There are some Term Insurance Schemes that provide us the premium amount that we have paid. But, the premium amount for those plans would be higher. So, it is better to avoid such schemes where the premium amount is given back to us.
But there are other Term Policies where the premium amount is lesser. The premium is only Rs 12,050 for 34 years for a man of 31 years with a coverage of 1 crore. Similarly, the premium is only Rs 22,161 for a 26 years combined policy for the 39-year-old husband and 33-year-old wife together.
These premiums are for those healthy men with no smoking habits. The amount can slightly vary based on the insurance companies. There is a possibility to have lesser premium if taken online.
It will be mind boggling if we know the premium amount they had paid for endowment policies and money back policies. We can appreciate the extent of more coverage at lower premium only when we compare the Term Plans with those other older policies.
Let us know how Term Plans are offered.
Right age should be provided when applying for the Term Plan as the premium is calculated only based on the age of a person. It will be lesser for youngsters and more for the older ages. Further, one should declare whether the person has a smoking habit. This is because for those who have no smoking habit will have 30% lesser premium than the regular amount.
Medical Check-up is Compulsory
Medical check-up is compulsory for the person taking the Term Plan. Along with the regular diagnostic testing there will be an additional test to check smoking habit of a person. The nicotine present in the urine sample will reveal whether the person has the habit.
The application will be reviewed by two types. One is based on the medical aspect of a person and the second is based on the financial aspect (Medical and Financial Underwritings).
Physical examination is to verify the health condition of a person to ensure whether the person will remain healthy throughout the period of insurance applied for. Financial examination is to find out whether the person is qualified to have the coverage amount applied for. It is also to verify if at all the person expires whether the person’s family is going to face the loss that is equal to the amount applied for.
A friend has applied for a life insurance coverage of Rs 50 lakhs based on the income tax return of 5 lacs income per annum. He is 45 years old. When asked about the person’s source of income it is revealed that 4 lakhs income from rent and the balance of Rs 1 lakh from interests and dividends.
The basis of insurance is to make up the losses a family would face as the bread winner of the family dies who used to fend for the family. In the above case what would be the loss for the family if the insured person dies? There will not be any kind of loss if the person dies because the rent amount will continue to support the family. I made him understand that the insurance company will not accept his application and provide him the policy.
This is the way an application is scrutinized, gather the medical and financial aspects of the person applied for the policy and it will require at least ten days to arrive at the decision. Income proof is essential to apply for Term Plans.
Problems arising from medical check up
Only after the medical check-up many applicants come to know about their illness. There are many examples that could be cited. The blood test results can reveal the diabetic condition or the condition of high or low blood pressure of a person.
If there are problems in regard to the medical reports of a person, the companies will take three types of decisions.
Asking for higher amount of premium
Insurance will be delayed for six months. One can rectify the medical condition and then apply after a period of six months.
Rejecting the application.
There will be time delay in assuring the insurance as the Term Plan involves many crores of amount as compensation and therefore delay cannot be avoidable. We should understand that it is better to have time delay and the medical examinations at the time of application so that there will not be delay any at the time of claiming the amount and get the amount at the earliest. When we prove that we are healthy at the time of getting insured so that there will not be any problem in claiming the amount at the earliest.
In India, there are about 24 insurance companies in operation. You can get the policy from any of those companies whom you trust. But before applying to the chosen company ,verify the percentage of claim settlement through web browsing.
It is better if the claim settlemnt ratio is more than 90% which means that more than 90 percent of the claims have been settled. Similarly, avoid taking Term Plan insurance without any medical examination. Do not accept such an offer.
But, this is the kind of insurance that is fundamental for us and also essential to us. Try to realize that it is the responsibility of the head of the family to get such type of Term Plan.
The non-resident Indians (NRI) can also get this Term Plan subject to certain terms and conditions. It is essential for a person to have Term Insurance 15 times the total annual income.
Those who need them and those who are eligible should take the Term Insurance without delay.
(This article written in Tamil by C Kesavan, Senior Agency Manager, Aditya Birla Capital for Naanayam Vikatan magazine dt 12/8/18, has been reproduced in English by V Amalan Stanley)