A standard term life insurance policy is similar across insurers
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I want to buy a life insurance policy. What basic features should I look for in a life insurance policy? What important things should I keep in mind before buying one?
—Name withheld on request
A standard term life insurance policy is similar across insurers. This is the first, most important life insurance to buy. Term plans cover death for any reason and exclude suicide in the first year. Such plans offer a lump sum to the nominee in case of the insured’s death. For most cases, this standard term plan is recommended. A few regular term plans offer terminal illness as a built-in feature.
There are several variants of a term plan that is designed on the base of these core features. Such variants can be chosen based on the specific needs of the policyholder. For example, if the nominee is not financially savvy, then the death benefit can be availed over monthly instalments rather than a lump sum. A few plans deliver higher cost efficiency through different premium paying options. These include return of premium, or limited premium payment term options. To understand the cost benefit of these options, it is best to consult with a financial adviser. These can be the traditional endowment plans or the Ulips (unit-linked insurance policies). In the traditional endowment, you should look at historical returns delivered by the insurer. Such returns should be looked at in IRR terms. For Ulips also, fund performance is an important criterion.
Can I buy two term life insurance policies and make separate nominees in them? So that in the case of an unfortunate event, both nominees will get the payment? In one policy, I will make my spouse as nominee and another policy, my mother.
Yes, you can buy two separate plans and nominate different individuals under each plan. The claim process of both plans will work completely independently. Both nominees will have to submit separate claim documents.
The same objective can be achieved under one plan as well. Within the same term plan, you can nominate two individuals and define their respective share. There would be only a single claim that would need to be filed. Insurers will discharge claim proceeds as defined in the policy to the respective bank accounts of the nominees.
Abhishek Bondia is principal officer and managing director, SecureNow.in.