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Types of term policies


Based on insurance amount, there are several types of term policies. Before taking a term policy, find out whether it suits our needs or not and choose a company that has good claim settlement history.

1. Level term insurance policy:
In this policy, the insurance amount stays the same throughout the policy period. For example, if a person takes 5000000 lakh for 20 years of a level term policy, the insurance amount will not change for the 20 year period. This is the basic term policy.

2. Increasing term policy:
In this policy, the insurance amount increases with time. for example if a person takes 5000000 policy for 20 years with 5% increasing term policy, the policy amount increases by 5% every year, which means the policy amount becomes 5500000 after 2 year. The income capacity is taken into account to determine the insurance amount at the time of purchase. But the earnings change with time and it is important to have insurance on par with the earnings. If an increasing term policy is bought, the insurance amount will increase with growth in your life thereby avoiding any additional policies. These types of policies are very beneficial for those in the beginning of their career.

3. Decreasing term policy:
In this policy, the policy sum decreases with time. for example if a person takes 5000000 policy for 20 years at 5% decrement, the policy amount diminishes by 5% every year, which means the policy amount becomes 42.5 (45) lakhs after 3 (2) years. Some responsibilities are done with time like children education, marriage, home, vehicle loan etc. Those who don’t think a large insurance is needed at this time cane take this policy.

4.Policy that pays back premium
This policy pays back the premium at maturity while providing the insurance for the time period. In case something happens to the insurer, family is paid the policy amount. In case the insurer lives through the policy period, the whole premium is paid back to the policy holder. The premium for these is a bit higher than other policies. This is a better option for those who think term policies are not so useful. While another option will be taking a simple term policy and investing the extra amount paid here in other modes.

5. Convertible term policy:
Though a term policy while charge, this type of policy allows to convert it into endowment or moneyback policy in the course of time. Explain family members the insurance policies you have and how to claim them. Inform them where you have stored all the policy documents. In case of online purchase, inform them user id and password.

Third party insurance:
According motor vehicle act, third party insurance is mandatory. Let us go in detail over the benefits of this.
Every one of us may have experienced traffic police stopping our bike an asking for licence, insurance, etc. Since at least third party insurance is mandatory per otor act, we taken insurance during purchase of a vehicle but we make no efforts to know the rationale and benefits of taking this. Insurance companies also do not propagate this that much. first lets go the necessity of a third party insurance.

Reasons behind road accidents
Though we may drive our vehicle properly, there are several reasons for accidents happening like busy roads, heavy traffic, lack of traffic monitoring, breaking of rules, bad roads and so on. Third party insurance is nothing but the insurance applicable to all other things except the driver. Though this provides no benefit to the driver, it insures the co-passengers as well as any damage or death if accident happens.

How damage is calculated
If a driver is faced with the situation of paying compensation to the victim of accident, it is very tough. Damages are calculated only from the aspect of the victim and it is an uphill task to pay per their demands.

Damage calculation by surveyor:
The insurance company sends in surveyor to calculate damage to third party from an accident. In case of injuries or death, there are no limits to claim made by them. However, third party is paid compensation only per laws governing it. It is very important to register FIR immediately after the accident. In order to the claim for the damages, FIR copy, report given by insurance surveyor, and the expenses incurred for treatment after the accident are to be submitted to the insurance company.

Observations made during claim:

Generally insurance is taken for the area limit of vehicle purchase. Third party is applicable only to this predefined perimeter. There is no other way to claim other than stated in the policy document. The beneficiary is claimed the insurance amount taking into account several aspects. Age of the beneficiary, income, dependents, the extent of injury determine this.

Two types:

Third party insurance is of two types. One is third party exclusively and the other is comprehensive type. In the second type, the policy covers the owner as well as third party. The premium of third party insurance is decided by IRDA.

Do you know that you can return a policy if you don’t like it.

The primary motive of an insurance policy is to provide assurance to the family if something happens to the policy holder. Always take advice from financial experts before taking a policy. But it is not feasible for all. So, nowadays most are going through websites and taking advices of friends for choosing a policy. However you may take it, don’t forget to read the policy document before signing else may be faced with problems during claim. So, let us go through the duties and rights of a policy holder here…

Duties of a policy holder

While taking a policy:

· Policy holder should read the policy document and fill it personally.
· Don’t leave any column blank and don’t sign a blank policy application for the agent.
· If we are signing on the policy document, it literally means we are assuring the statements in it are true.
· Always choose a policy based on requirements, financial status and income.
· Decide beforehand whether you want to pay the premium one time or in installments.
· Paying premium through ECS (electronic clearing system) can save a lot of time. this facilitates saving the records.
· See that no error is made while entering the name of the nominee.

After taking the policy
· The insurance company will contact the policy holder within 15 days of submitting the policy document. If this doesn’t happen, contact the company.
· Submit any additional documents needed immediately.
· If the company accepts the policy document, should hand over the bond within the stipulated time.
· Check whether you have taken the suitable policy after receiving the policy bond.
· Check whether the policy is per the description of the agent or office after going through the policy bond.
· Clarify any doubts about the policy with the insurance officer or agent.
· Go directly to the company office if needed.

During policy maintenance:

· Pay premium within actual period or grace period.

· Choose suitable payment mode and see that it is paid regularly.

· Inform of change in address to the company.

· Appoint nominee while taking the policy. Can change nominee after taking the policy.
· If minor is chosen as the nominee, you need to choose appointee also and appointee has to sign on the agreement.
In case of loss of policy bond
· Contact the insurance company immediately on loss of bond.
· Obtain the duplicate following rules and regulations.
· Can obtain benefits equal to original bond with the duplicate one.
Rights of the policy holder

· If you don’t like the policy, can surrender the policy within 15 days of receiving the policy document.
· Can surrender the policy citing the reasons for your dislike.
· Amount after deducting the premium for stay in the policy, any medical checkup expenses, and stamp duty is paid.

In case of ULIPS policy:
In case of ULIPS policy, there is provision to buy investment units again after cancellation of policy.
· Amount in these ULIPS can be withdrawn partially.
· Provision for surrendering the policy after the lock-in period is over.
· Can request any changes in the policy, which are premium payment mode, policy duration, increasing insurance amount, premium redirection, etc.
Policy holders have to abide by the duties the same way they can fight for their rights.