Term insurance is a type of life insurance that provides financial protection to the policyholder for a defined period. In the tragic event that the policyholder dies during the policy term, the firm pays the death benefit to their beneficiary. Term insurance is an important part of complete financial planning. Several reasons underline the significance of term insurance and why one must be familiar with the claim process before purchasing it.
- Financial security
Term insurance plans are intended to offer you high coverage at reasonable premiums, which your family receives, to provide a significant amount of financial support in the event of your untimely death. This payout will allow your family to sustain their living standard, pay for daily needs and make their dreams come true, even if you are not there to support them. In its essence, it protects the financial security of your family so that it is not jeopardised.
- Debt repayment
Many of us have different debts such as mortgages, car loans, and personal loans, among others. In the unfortunate event of your death, these liabilities would not cease but pass on to your family. The death benefit of term insurance can help in the repayment of these debts, which will free your family from the burden of debt repayment while they are mourning the loss of a loved one.
- Income replacement
If you are the only earner in your family, your absence may result in a significant income loss for your dependents. The death benefit from term insurance functions as a form of income substitute, bridging the gap in your family’s finances and sustaining their standard of living.
- Education expenses
As a parent, you will strive to make sure that your child’s education is not disrupted by any unexpected eventualities. Term insurance death benefit could be allocated toward paying for your children’s college education, therefore allowing them to realise their educational dreams and secure their future.
- Savings and investment
Besides protection, many term insurance plans also provide the ability to invest. They have an extra feature that lets you invest in different funds per your risk tolerance. This feature ensures that there is wealth accumulation during the policy term thus making term insurance a tool for short-term investment.
- Peace of mind
The key objective of any insurance is to give peace of mind to the insured and term insurance is not an exception. The fact that your family will be in a good financial situation when you are gone will give you a lot of peace of mind. It gives your family the financial ability to take care of their life, even without you.
Understanding the claim process is as essential as buying term insurance. It ensures a smooth transition of financial benefits to your nominees. Here’s what you need to know about the claim process –
- Intimation of claim
Inform the insurance company about the death of the policyholder immediately. The notification should include information such as policy number, date, time, and cause of death.
- Document submission
To file a claim, the nominee is required to submit the claim form along with relevant documents such as a death certificate, policy document and ID proof. Note that the company may request other documents if needed.
- Claim assessment
Upon obtaining the documents, the insurance company will start the claim evaluation. It determines the way of death and the accuracy of the claim.
- Investigation
If there is any ambiguity about the claim, the insurance company can make a probe. This is to make the claim authentic.
- Decision
After the verification and assessment process, the insurer decides whether to approve the claim or not.
- Claim settlement
If the insurance company agrees to pay the claim, the amount will be paid to the nominee.
- Claim rejection
In case the claim is established fraudulent or the reason for death is not included in the policy the insurer may reject the claim.
- Claim settlement ratio
This is a very crucial aspect which should be taken into consideration when selecting an insurer. A higher ratio signifies that the company has a reputation for settling claims effectively.
- Disclosure of information
The full disclosure of all health and lifestyle habits during the purchase of the policy is very important to prevent the later rejection of the claim.
- Policy exclusions
Knowing the policy exclusions makes the claims process smooth. Such are cases or conditions that the policy deals with.
- Regular premium payment
Make sure to pay the premiums regularly to prevent the policy from lapsing. A lapsed policy as a result of non-payment of premiums may end up with a claim rejection.
- Policy Nominee
The nominee should be well aware of all the policy details for the convenient claim process.
- Understanding terms and conditions
Reading and understanding the policy terms and conditions carefully enough is a must. This will eliminate any unpleasant circumstances when the time comes to settle the claim.
- Claim within the stipulated time
Insurers have a defined period within which the claim must be filed. Do not forget to file the claim within this period.
- Legal heir certificate
If the deceased nominee is not mentioned or deceased, the legal heir certificate may be required during the claim process. It is issued by local authorities and establishes the deceased person and the claimant.
Ending note
To sum up, term insurance is an important financial instrument used to maintain your family’s financial well-being in the event of your death. Nevertheless, the understanding of the claims process is equally vital so that the benefits reach your family members without any problems. As a policyholder, it is your responsibility to ascertain that your nominee is knowledgeable about your policy details and the process of claim. Remember that insurance is not only an investment but a security for your loved ones. Also, you may consider using online term insurance plan calculator for accurate financial planning.
Also Read: Guide 101 for NRI on Choosing Life Insurance Policy
