Firstly, congratulations for buying yourself a term insurance plan. You are one the rare few who have not just understood the emotional value of yourself in the family you love, but have taken steps to ensure that your financial contribution is protected for your family members. Once again, well done.
Your task is incomplete unless you ensure the following is also done.
1. Firstly, check the policy document for inclusions and exclusions.
2. Then, check your policy document for errors and omissions.
Know how to do these checks in detail.
Had this been any other kind of insurance policy, it is still fine to not do these kind of checks (although I would recommend it in all cases), but if it is a term insurance plan, these checks are surely in your best interest.
3. Inform your spouse (or nominee) that you have taken a term insurance plan.
Imagine if you were to really die and nobody knew that you had taken a term insurance plan!
The primary reason for taking a term plan is the ensure that in case a claim were to arise, the family members are able to reach out to the insurance company and request for the claim to be paid. How will the family members know about it unless you TELL them?!
4. Keep your policy document safely and in a place that your family members can easily access.
Again, to make the claim process easy, ensure that you tell your family members where the policy document is kept. In case the policy document is in electronic form (email or demat form) ensure that you take a printout of it and keep it in an accessible place. It would be good if you can actually HAND OVER the policy document (or its printout) to a responsible family member itself.
5. Find out the claim process and inform your family members.
There have been cases wherein family members have had to struggle to get relevant documents of the dead person to be able to make the claim. There could be differences in the documentation process of different companies for a making a life insurance claim. While some documents such as Death certificate and (in some cases) Autopsy Report and Police verification document can be procured only after death, do ensure that other documents such as proof of age, photograph, etc. are easily accessible. In fact you can keep it with the policy document itself!
Write down the claims contact number of the insurance company and keep it handy with the policy document.
6. Ensure that you keep your term insurance plan in force all the time.
i. To do this, you can set up an ECS (electronic clearance system) through your bank account that will ensure your monthly premium is paid every month automatically. Needless to say, you need to keep sufficient balance in your account, they best way to do it is to put the ECS through your main salary account. Hopefully that account will be full of money all the time J
ii. Most banks also offer a Direct Debit through your Internet Banking. So you can login there and set up your insurance company as a biller (like you may have set up your electricity bill or mobile bill).
iii. You can also set up a Credit Card standing instruction. This facility is offered by certain insurance companies only. Of course, ensure that your credit card is always active.
7. Schedule a ‘Protection Review’
The life insurance cover that you have bought now, may either too less or too much at a later stage of your life. This depends on the changes that happen in your life and how you need to adjust your life cover accordingly. e.g. you could have a better lifestyle, or have another child, or get married, or you could have paid off your loan and not need so much protection as you have.
A Protection Review is an assessment of your protection needs. I hope your agent (if you have one) does it, else you should do it yourself. It is very simple task should be done every 4-5 years.
But the problem is not knowing how to do the review, it is about remembering to do it. This could be done through a reminder of some type – use a website, use a Google calendar, you phone, etc. But whatever it is ensure that the reminder stays active for years.
8. Check premium rates each year
Term insurance Plan in India is still very new. There is huge variance in the rates offered between companies. But at the same time, every company has different policies and claims ratios.
With every passing year, your age keeps going up. However, in spite of that, with every passing year, it is possible that the rates for new term insurance plans could be lower than what you bought it for. Claims Ratios of companies will also keep changing.
Keep checking this (or use a website to keep intimating you of it) – if the differences is substantial, shifting to a new term policy from the same company or from another insurance company may make sense.
9. Ensure that your nominations are always the way you intend it to be
You buy a term plan mainly for your beneficiaries, i.e. nominees. At the time of buying the plan, you fill up some name(s) as nominees. However with time going by, situations may change and you may want to change the nomination. Don’t delay this at any cost. Ensure that you change the nominees if required so that just in case something were to happen, the claim amount goes to the person(s) you intend it for. Imagine your second (current) wife and children getting no money just because when you bought the term plan it was your first wife who was the nominee and you forgot to change it later! That can be depressing. 🙁 We hope you would have got the idea by now.
With the above 9 points taken care of, you are set to ensure the best protection for your loved ones for a long long time.