What Documents Are Required for Buying Term Insurance?

Life is a beautiful journey filled with cherished moments spent with loved ones but fate can have other plans for you. You never know when an unfortunate incident may arise. If you are the only breadwinner of the family, this becomes even more worrisome. What will your loved ones do if you aren’t around anymore? How will they manage to stay afloat in such choppy waters?

This is where term insurance comes to protect your family from unforeseen adversities. It acts like a buoy, saving them from any harm.

In the journey of life, term insurance plays a crucial role in giving your loved ones the love and protection they need. It’s a beacon of financial security that ensures your family’s well-being even in your absence. The plan renders funds for various purposes like paying off debts, replacing lost income, funding education expenses, maintaining the family’s living standards, etc.

But, before you invest in a term insurance plan, it is best to understand each step of buying it. Ensure that you follow all processes and submit all the required documents to avoid any hindrances or disputes later. So, let’s explore term insurance and the documents you need to buy it - to pave the way for a brighter tomorrow for your loved ones no matter what life brings.

Term insurance is one of the easiest and most affordable ways to protect your family’s financial future. It is a type of life insurance that provides a sum of money, known as the sum assured, to your family in the unfortunate event of your death during the policy duration. You just have to pay the premiums to keep the policy active, which is a small amount paid for the peace of mind and the protection it offers. The money your family will receive in case of an unfortunate contingency can replace your lost income and help them with their daily needs, long-term goals, and lifestyle maintenance.

Term insurance plans are highly customisable and can be tailored to perfectly fit your and your family’s needs. For instance,

• You can choose to pay the premiums in faster, bigger instalments. This will help you finish off the payment liability in a lesser number of years, but you will still be able to enjoy the coverage and benefits till the end of the policy duration.


• You can pick the claim payout option - lump sum, monthly, combination of both, etc. - depending on your nominee’s financial aptitude and obligations. For example, if you envision huge pending loans, you can opt for a lump sum payout to help them take care of these liabilities easily and quickly.


• You can go for the increasing cover option if you feel your financial responsibilities will increase in the future, like having children, buying a house, etc. The sum assured under your plan will increase by a certain percentage each year till it reaches the maximum limit specified. This will not only cover your growing responsibilities but will also inflation-proof the cover amount as well.

Another important thing to know about term insurance is that it’s a pure risk cover. So, if you survive the policy duration, you receive nothing.

Term insurance has many advantages. It gives you unwavering assurance that your loved ones will have a financial safety net should the worst happen. You should consider investing in it if you have

• Financial dependents
  Financial dependents are the people in your family who are dependent on your income to meet their short-term or long-term expenses, even partially. It’s crucial to safeguard their financial security with a term insurance policy.
  
  Example: Jim has a financially dependent wife and a 5-year-old daughter. They rely on his income for their short-term and long-term expenses, right from monthly bills to house rent to the child’s education. If Jim were to pass away, they will be left in a lurch and it will get pretty hard to fend for themselves. So, it would be a wise decision for Jim to buy a term insurance policy with a cover amount sufficient enough to take care of their needs comfortably - so they’re well-protected in his absence.


• Loans or liabilities
  If you have loans or liabilities such as a vehicle loan, business loan, home loan, etc., a term insurance plan can serve as a financial backup for you for your loved ones. Because if you pass away, the entire responsibility of paying off these loans will fall on their shoulders. If you have a term insurance plan, the cover amount will accommodate this burden. Your family members will not have to face any additional stress at an already hard time.


• Unfulfilled responsibilities
  If you have unfulfilled responsibilities towards your family’s long-term expenses, term insurance can provide them with the necessary protection to ensure that these responsibilities are met without creating any additional financial stress on them. For example, term insurance can be a good financial support for your child’s education or wedding. They will receive the best that life has to offer whether or not you are around.


• Insufficient wealth
  If you haven’t built enough wealth or a substantial corpus and use your income to support your family’s long-term needs, term insurance can bridge that gap. It can provide a financial cushion to your family, giving them the means to maintain their lifestyle and meet their financial goals if something unfortunate happens to you.

The journey to securing your family’s financial future with term insurance begins with some paperwork. The documents for term insurance required for purchase will differ from documents required for term insurance claim - and they may vary depending on the insurer, sum assured chosen, health declarations, nationality, etc.

Here is a list of some common documents needed for term insurance

• Proof of Identity:
  Voter ID card, passport, driving licence, Aadhaar card, an authority letter verifying your identity, etc.


• Proof of Age:
  Passport, driving licence, PAN card, birth certificate, etc.


• Proof of Address:
  Voter ID card, passport, telephone bill, ration card, electricity bill, pension order issued by the government, bank account statement, etc.


• Proof of Income:
  Form 16, CA’s certificate showing income of past 3 years, Income tax returns, salary slips, Income Tax assessment order, employer’s certificate (for PSUs), latest employment contract letter, etc.
  
  You may be required to submit standard income proof documents if you are self-employed or salaried.
  
  
  • Salaried individuals-
    bank statements and salary slips of the last 3-6 months.
  
  
  • Self-employed individuals-
    Income Tax Returns and Computation of the Income of the last 3 years.
  
  


• Other documents:
  Insurance companies may request other additional documents to support your term insurance application. For instance, if you have a pre-existing medical condition, you may be asked to submit relevant health reports.

Term insurance is an important financial tool that comes into action when you aren’t around. It will be a major source of support for your loved ones in your absence, which is why it is essential to submit correct and true documents when you purchase term insurance. This will make sure your loved ones’ claim gets processed without any hassles - if it ever were to arise.