9 Tips for Buying the Best Term Life Insurance Plan
Opting For a Term Life Insurance Plan
If you are looking for an affordable insurance plan to financially secure or assist your dependants in the unfortunate event of your death or permanent disability, then a term life insurance plan is what you need.
A term life insurance plan is rather straightforward; it insures your life for a set amount of time (or term) and for a chosen pay-out amount. For example, you can choose to take out a 10-year term life plan to insure your life for a RM100,000 payout.
If anything untimely happens during the term, then you (if permanently disabled) or your beneficiaries (if you die) can claim the payout.
If you have decided on term life insurance, here are essential tips for buying a good plan for yourself and your family:
1. Look for a plan that is still affordable in the long run
Since life policies are meant to be long-term, standalone term plans especially; you should think about your affordability not just for now, but also for years to come.
Consider if you are able to keep up the payments on your policy five or ten years down the road. You wouldn’t want to lose out on coverage in the later years, if you are unable to pay your premiums.
Also, term policies do not have cash or surrender values attached. Thus, you can’t depend on a savings portion to cover your premiums when you are unable to make payments.
The affordability of premiums primarily depends on your pay-out sum, where the premium and benefits differ with providers and plans.
2. The sooner you buy, the better
Generally, the younger you are, the cheaper your entry premium.
This is because; the likelihood of you making a claim on the policy at age 25 is vastly different than at 55, for obvious reasons. Thus, lower risk equals lower premiums. A level-premium term life plan, makes sense for those who are younger.
Here, the premiums remain the same for a set duration – thus, you can lock in lower rates for better coverage and for a longer period of time.
So if you are thinking of waiting till you are middle-aged to buy a life plan, you’d best reconsider.
3. Find out about the exclusions
Exclusions represent events or situations that your policy will not cover. These terms are usually similar between life policies.
However, it’s still important to check through the plans you are interested in and more importantly, to fully understand the exclusions.
For life policies, basic exclusions include (but are not limited to) death by suicide, HIV or death while committing a crime.
4. Read your Product Disclosure Sheet (PDS)
To catch a glimpse of the goodies (and the not-so goodies) of term life plans that you are interested in, you’ll want to read through the PDS. This document contains important coverage information that is necessary when choosing an insurance plan.
The details are condensed into two to four pages, making it easier for you to digest the information.
Based on what you see in the PDS, you may come across terms that you don’t understand.
When this happens, be sure to note it down and check with your insurance agent or if buying online, send an enquiry (usually via email or web form) to gain clarity.
Also, once you’ve decided on a plan, read everything you can get your hands on, such as FAQ sheets, product jackets, etc.
5. Don’t be afraid to buy online
Some folks are nervous to purchase insurance online – and this can be a costly fear. Buying online can save you quite a bit of money as compared to buying with an agent. This is because you don’t have to pay commission fees.
Moreover, there are many other benefits to buying online. For one, you won’t have to feel obligated to purchase a plan suggested or ‘pushed’ by your insurance agent.
It is common to feel grateful or indebted to an agent who has done all the legwork such as sourcing plans for you, providing you a quote and answering all your questions.
It may be hard to turn them down.
However, by buying your policy online, you are free to choose from a whole range of plans, which may in fact, suit you better – and without a guilt trip.
| See also: What is the Right Age to Buy Life Insurance? |
6. Be honest on your policy application
Want to avoid your policy claims being rejected in the future? Then it’s best to tell the whole truth and nothing but on your application.
Know that if you have lied on your policy (and it is found out); when it comes time to claim, the insurance company may reject your claim.
You don’t have to volunteer additional information – just answer all questions honestly, to the best of your recollection.
7. Consider the riders
A term life insurance plan can be accompanied by a range of riders (add-ons to a policy) that provide added coverage for different incidents.
While some riders are automatic and complimentary, optional riders typically incur an additional premium charge. So do consider if it is worth it the extra costs.
These are some common term life insurance riders and their general definitions:
- Premium waiver rider
Ensures that your premium will be waived for the rest of the term if you suffer permanent disability or critical illness
- Critical illness rider
Pays out a portion of your benefit or all of your critical rider benefit if you are stricken with one of the 36 major critical illnesses
- Guaranteed insurability
Allows you to renew the plan when the current terms expire, without a medical check
- Death benefit
Pays out a portion or all of your death benefit if you are terminally ill
8. Note your free-look period
Not happy with your policy or found a better one?
Well, you can change your mind after buying a policy, cancel it and get back all (or almost all) of your money – if you do so within 15 days of receiving your policy.
Your money will be refunded, after medical check-up expenses (if any) are deducted.
9. Do your homework
You will need to do a little (or maybe a lot) of research when it comes to buying a life insurance plan.
Premiums, coverage and other terms differ between insurers and even between plans from the same insurer. And the bear truth is – some plans are better than others!
But don’t fret, research doesn’t have to be hard! If term life insurance is too much to fathom right now, perhaps an e-medic card is your solution to your needs.