Term insurance, the most basic insurance product on the market, quickly obtains customer trust when it comes to ensuring their family’s future. However, as a consumer, you must understand that purchasing a term insurance policy entails more than just paying the cost and expecting your family to remain protected. Before buying a policy, you should thoroughly understand the product and, more significantly, examine a few elements to make an informed decision.
This article will discuss the most significant factors when selecting a term insurance plan.
Determine the Tenure of Your Plan
Once you have established the coverage you need, it’s essential to consider the appropriate duration for your term life insurance policy. This duration should strike a balance: it shouldn’t be too short, as that might lead to the policy lapsing before your financial obligations are met, and it shouldn’t be excessively long, as it could result in higher premium payments due to the extended term.
To estimate the ideal term for your term life insurance plan, you should identify the point at which your liquid net worth aligns with the coverage you calculated earlier. This means that after deducting your liabilities, the total value of your investments in assets such as mutual funds, provident funds, stocks, and more should surpass the coverage amount. The age at which these two figures coincide should be when you require coverage, ensuring that your assets will be sufficient to provide for your family in case of your absence.
Assess Your Needs and Budget
Consider if the promised amount can support your family’s future needs while weighing your selections. When evaluating your demands, it’s essential to consider the inflation rate because you never know when you’ll have enough money to meet your expenses. The term insurance calculator may also determine the premium you must pay. For example, a thirty-year-old nonsmoker would pay a premium of Rs 515 each month for a Rs 1 crore cover.
Don’t Buy Single Premium Policies
Sometimes, while buying a life insurance policy, you must decide between regular and single premiums. Many believe paying a one-time premium makes sense because they can afford to, but this is untrue.
It is not wise to pay a one-time premium (single premium) when purchasing a term plan, with a few exceptions. The annual premium is the finest choice that will suit most users. Therefore, don’t listen to your agent if they try to convince you that making a one-time payment will save money.
The Company’s Claim Settlement Ratio
The majority of individuals ignore this small yet important information. When you file a legitimate claim, the claim settlement ratio informs you of your compensation chances. Each insurance provider shows their % claim settlement ratio on their website. The percentage shows how many claims they resolved about all the requests for claims that were received. Choose an insurance company that has a more excellent ratio of claims settled.
Add Suitable Riders, If Needed
Selecting appropriate riders is an extra advantage, giving you more coverage in a term insurance policy. In addition to the advantages of the basic life insurance plan, these riders may offer further benefits. The riders listed below are selectable based on your needs.
Accidental Mortality Benefit Rider
In the unfortunate event of the policyholder’s accidental demise, this rider ensures an additional payout to the nominee or beneficiary.
Critical Illness Term Plan Riders
If the policyholder is diagnosed with a specific critical illness, this rider provides a lump sum payment to the beneficiaries without any restrictions or sub-limits. Here’s all you need to know about the advantages of critical illness benefits within life insurance policies.
Income Benefit Term Plan Rider
Family members of the deceased policyholder who opt for this rider will receive additional annual income for five to ten years. The most significant advantage of this rider is that it supplements the initial guaranteed sum.
Choose the Right Insurance Provider
Selecting the right insurance provider is a crucial factor to contemplate before buying a term insurance policy. It is vital to assess various factors, including the insurance company’s history, customer feedback, claim settlement track record, and financial stability. Additionally, it would help if you gave greater importance to the client-focused approach of an insurance company in terms of sales, premium payment options, and support.
Features of the Plan
Examine the attributes of the plans that appeal to you to ensure they align with your needs. The policy should offer flexibility, allowing you to customize the policy term, the sum assured, and the frequency of premium payments, whether annually or semi-annually. Additionally, check if the policy includes any supplementary benefits related to the death benefit.
Since term insurance is a long-term commitment, it’s essential to ensure that you feel at ease with the annual premium amount. Calculate the amount you can comfortably allocate to the plan each year. Make sure to make commitments that may become challenging to meet in the future, as they could become a financial burden and hinder your ability to fulfil various other responsibilities.
A long-term agreement between you and your insurer, term life insurance will provide for your family’s needs in the event of your death. It is in your best advantage to take into account each of the six considerations covered in this article when selecting the plan that is ideal for your family.