Life comes with its fair share of uncertainties, and while many of us do not know what lies ahead, we can certainly plan in advance for the same. This is where term insurance comes in. It is that safety net or cushion that ensures financial stability for your family in case of your untimely demise. But what is the right time to get it? We’ll address that question, plus share with you what some of the common exclusions and limitations of these plans are.
When to Buy Term Insurance: A Timeline for Your Financial Planning
Early Days of Your Career
One of the best decisions is to purchase term insurance at a much earlier stage of your career. Those who are healthy at a younger stage in life will naturally get lower premiums for their policies. Locking in the same for the chosen policy term will make the policy much more cost-effective down the line. A person who is 25 years of age will have a lower premium for the same coverage than someone who is around 35-40.
When You Start a Family
Marriage or the planning for children brings new financial obligations. As the primary earner, financial planning with term insurance is very important. Your term plan will help your family maintain the same lifestyle while paying for education, household costs, and other essential needs, even if you are not around anymore.
If you’re choosing coverage in this stage of life, think about the evolving needs of your family down the line. This will include college or school fees, outstanding debts like home loans, etc. As you take on bigger responsibilities, you may consider purchasing additional policies or riders to ensure adequate coverage.
Mid-Life Stage
If you have entered your 40s without a term plan, don’t worry. Even if the premiums could be higher than before, it is better to get a term insurance policy late than never. Many insurers now offer policies with no medical examinations for lower coverage amounts, but health check-ups are likely required for higher coverage.
Term Insurance Exclusions
- Term insurance offers you assured financial protection, but you need to be aware of its limitations. Here are some of the more common exclusions:
- Suicide: In the initial period, most policies do not cover death by suicide for the first year. According to IRDAI regulations, insurers may process suicide-related claims after 12 months, depending on their
- Undisclosed Medical Conditions: If you don’t declare pre-existing conditions at the time of purchasing the policy, any claims related to them may be rejected. Insurers consider such nondisclosure a material factor that could affect the policy terms.
- High-Risk Activities: Death resulting from high-risk activities, including extreme sports or dangerous professions, is typically not covered unless you opt for specific riders, which may come with their own exclusions.
- Criminal Activity: Death in the course of committing a crime isn’t covered.
- Policy Lapse: The policy will lapse if you do not make the premium payments in a timely manner and that your family will not receive any Most insurers offer a grace period (e.g., 30 days) to allow for late payments, after which the policy lapses if dues are unpaid.
Final Thoughts
If you are still wondering whether to purchase term insurance or not, then the answer will be that you should buy it as early as you can. Also, irrespective of when you buy it, know everything in detail beforehand. Compare policies, check the claim settlement ratio of the insurer, and understand the exclusions and riders. This is because term plans are not just simple policies but a financial safety net for your entire family.
