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As we all know, investing in long-term plans has risen to the top of everyone’s list of priorities and financial plans. A term policy offers a variety of benefits that enhance your comfort, financial stability, and security while also providing confidence and assurance for the long-term well-being of your family.
A term plan is a type of life insurance policy that provides complete financial protection for a set period in exchange for a premium. It safeguards you from death. If the policyholder dies before the policy period ends, the insurance company pays the death benefit to the beneficiary. The policyholder, on the other hand, does not receive a survival benefit if the policy term is exceeded. When you purchase a term plan, just like any other type of insurance, you must complete the documentation process. Although the procedure varies depending on the insurer, most insurance companies require policyholders to submit certain documents.
What Are The Documents Required To Buy Health Insurance?
The documents you’ll have to submit when purchasing a term insurance policy will vary depending on the insurer, sum assured chosen, health declarations, and nationality. The following is a list of some common documents required when purchasing term insurance.
- Identity Proof– Aadhaar card, passport, voter ID card, driving license, authority letter verifying identity, and so on.
- Age Proof- PAN card, driver’s license, birth certificate, passport, and so on.
- Address Proof– Ration card, bank account statement, electricity bill, telephone bill, voter ID card, passport, government pension order, etc.
- Income Proof– Salary slips, bank account statements with salary credit, business account statements, current account statements, and ITR/Form 16 are all acceptable forms of income proof.
- Other Documents- Aside from the documents listed above, insurance companies may request additional documentation to support your application. For example, if you have a pre-existing medical condition, the insurer may request medical records.
Can Term Insurance Be Purchased Without Income Proof?
No, you cannot purchase a term insurance policy if you do not have proof of income. It is necessary for financial underwriting. Insurance companies determine how much life insurance they can offer in exchange for a certain premium amount based on the extent of the policy buyer’s income.
Why Is Income Proof Important?
Insurance companies require proof of income for financial underwriting. Insurers investigate these documents for the following reasons.
- Income proofs are used by the insurance company to determine the sum assured or total life coverage that can be provided to the applicant. It also aids them in determining the premium rates for the policy.
- The insurance company evaluates the risk and your ability to pay the premiums on time-based on the documents you present as proof of income.
- It eliminates the danger of over-insurance, which occurs when the insured purchases more coverage than the actual cash value of the property. This could put the insurance company at risk, and it could also lead to claim denial.
Why Do Insurers Ask For Income Proof Documents?
To avoid moral hazards, insurers determine your need/eligibility for term insurance based on your earned income. Income is one of the most important criteria used by insurers to determine whether or not to offer you term insurance. The maximum term insurance coverage you are eligible for is also affected by your income.
The maximum sum assured you can purchase is determined by your income and the age at which you purchase the policy. Typically, this is accomplished by multiplying your income by specific factors (based on your current age), such as 25X, 20X, or 15X. This factor will differ between insurance companies.