Have you ever wondered if you qualify for a term insurance plan? Understanding the qualifying requirements is critical for both Indian residents and NRIs. Let’s go over the fundamental prerequisites for purchasing a term insurance plan in India, as well as some important aspects to consider before making a selection.
Eligibility criteria for term insurance
Age
In India, the minimum age to apply for a term insurance plan is generally 18 years. The age limit can be different, but the majority of insurance companies establish it at the age of 65 years. However, the earlier you invest in term insurance, the lower your premiums will be. Your age determines whether you qualify for the policy and the amount you will be charged for the premium. This applies for term insurance for NRI too.
Nationality
Indian residents and Non-resident Indians can opt for term insurance plans. NRIs can purchase a term insurance plan while they are in India or can buy it from their country of residence. Nonetheless, NRIs may have to provide additional documentation in some cases and even medical tests, depending on the insurer.
Income
There is no compulsory income requirement for taking an insurance policy, but insurers base the sum assured on your income. The sum assured is often a multiple of your annual income. This makes sure that the coverage amount is enough to pay for your income in case you die early, making sure that your family is financially secure.
Medical history
Your medical history plays an important role in deciding whether you will qualify for a term insurance plan or not. Insurance companies need specific information about your past and present medical history. They can also lead to higher premiums or complete exclusion of coverage in some cases. This means that all medical information needs to be reported truthfully to ensure that the claim is not rejected in the future.
Occupation
Some professions may make you ineligible for term insurance depending on how risky they are. Occupations that are associated with high risk factors for instance mining, flying, or working in dangerous conditions may attract higher premiums. Some insurers may even eliminate coverage for certain occupations that are deemed to be very risky. One should review the insurer’s policy concerning occupation before applying.
Lifestyle choices
Lifestyle choices such as smoking, drinking, and participation in risky activities can impact your eligibility and premium rates. People who smoke and those who drink a lot are usually categorised as high-risk and can be charged higher premiums. Insurers may also ask questions regarding such activities as skydiving or scuba diving, which may affect the terms of the policy.
Factors to consider before availing a term insurance
Coverage amount
Decide on the coverage amount about the financial liabilities such as loans, children’s education, and other day-to-day expenses. The general advice is to choose an amount that is at least ten to fifteen times your salary. This will enable your family to sustain their standard of living and achieve future financial plans in your absence.
Policy term
Ideally, the policy term should coincide with the years when your financial obligations are the highest. For most people, this includes the years until their children are financially independent or until significant loans are paid off. Select a term that is appropriate for your long-term financial goals.
Premium affordability
While it’s essential to get adequate coverage, it’s equally important to ensure that the premiums are affordable. Compare various term insurance policies and select the one that provides the most coverage at a reasonable premium. As you know, failure to pay the premium will lead to policy cancellation and your family will not be covered.
Claim settlement ratio
The claim settlement ratio shows how many claims an insurer has processed in a given year. A higher claim settlement ratio is an excellent sign for the insurer. To be sure of receiving your claim amount without much hassle, compare the claim settlement ratio of different insurers.
Riders and add-ons
Riders are additional options that can be included in your term insurance policy to enhance its coverage. Some of the usual riders are critical illness cover, accidental death benefit, and waiver of premium. Consider your requirements and get the riders that will offer you maximum protection to make your term insurance plan more useful.
Policy exclusions
Know the limitations of your term insurance policy. These are circumstances under which the insurer will not honour the claim. Some of the typical exclusions include death by suicide in the first year of coverage, death in connection with any risky activities, and death from diseases that were not disclosed before applying for the policy.
Insurer’s reputation
Research the reputation of the insurer before purchasing a term insurance plan. It is recommended to look for reviews and ratings from other policyholders. It is better to choose an insurer with a good reputation for customer service, financial solvency, and quick claim processing.
Flexibility
Most term insurance policies allow policyholders to adjust the coverage amount based on important life events such as marriage, having a child, or buying a house. Select a plan that will enable you to scale up or down depending on the current financial obligations.
Tax benefits
Premiums paid on term insurance are allowed as deductions under Section 80C of the Income Tax Act and the amount received is tax-exempt under Section 10(10D). Although tax benefits are not the primary reason to buy a term insurance plan, they are a bonus.
Ease of purchase
The ease of purchasing a term insurance plan, including the application process and the requirement for medical tests, is an important consideration. Most insurance companies have developed online application forms which are fast and easy and enable the applicant to shop for policies from the comfort of their homes.
Ending note
Understanding the qualifying requirements for term insurance policies is the first step towards ensuring your family’s financial security. Whether you are an Indian resident or an NRI, following the minimum standards is essential. Furthermore, criteria such as coverage quantity, policy duration, premium affordability, claim settlement ratio, riders, policy exclusions, insurer reputation, flexibility, tax benefits, and convenience of purchasing can help you select the best term insurance plan. Making educated selections allows you to offer complete financial protection for your loved ones, delivering peace of mind and stability in unpredictable times.