Term insurance is a life insurance product that has been specifically designed to give your loved ones the financial stability in case of an unfortunate event.
But when you are looking at term insurance plans, it is essential to evaluate your financial goals as well as your requirements. It is only after you understand the various factors that contribute to your buying decision should you plan to get one.
Why is Term Insurance Plan Crucial?
Did you know that unlike other life insurance policies, the term insurance premium is wholly used to cover the life of your insured? Since all your investment is used to cover risks and no part of the premium is diverted towards investments, it is a simple insurance plan that delivers a large amount of death benefit to your dependents in case of your unfortunate passing.
However, what happens if you survive the policy term? Some insurance companies also offer survival benefits to their policyholders, rewarding their loyalty by returning the premium amounts once the policy matures!
So, if you want to supplement your financial portfolio with this instrument, then you need to use the following tips to choose the best term plan:
Plan to Buy Early
An insurance policy is best bought as early as possible. Not only many early investors know this, but the sooner you invest in term insurance, the lesser you pay to the insurance provider. You know why? Because you are a low-risk insurable asset for the insurer with fewer health complications. However, buying a term plan later in life may cost you more and pay you less at the time of maturity or death benefit.
Calculate the Premium
When calculating your premium, you need to make a checklist of all the financial goals and needs that you want the term insurance to cover. You can use the premium calculator to see if the sum assured you want to take affordable for you. If you are investing at a young age, then you can start with a small cover and gradually expand your policy coverage when you reach certain life stages.
Another essential thing to note when calculating premiums is to keep factors like debts and liabilities, future financial needs, and lifestyle habits in mind. A general rule is to choose at least 15-20 times your existing annual income as the sum assured. Premium amount should be something that you can afford throughout the policy term with ease.
Add Rider Coverage to Your Term Insurance
Riders may seem to be an additional expense. However, they are beneficial add-ons that can expand the scope of your policy cover and make it more comprehensive. For instance, if you add accidental death cover to your term insurance, your dependents can claim the death benefit in case the demise happened due to an accident. This amount will be over and above the sum assured that your loved ones would receive anyway.
Additionally, you can also look at other covers such as critical illness, waiver of premium, and loss of employment, amongst others, to cover certain risks and make your policy more customized.Â
Ensure that your Cover is Substantial
When calculating the cover, you need to ensure that you are neither over insured nor underinsured. In case you choose a large cover, the policy premiums may be too high for you to afford in the long run that can lead to missed payments and policy relapse after some time.
Underinsured term insurance, on the other hand, will not be enough to provide adequate financial support to your family in your absence. Thus, it becomes crucial that you choose a substantial cover amount.
Check the Claim Settlement Ratio
Claim Settlement Ratio is an industry indicator that speaks about the insurance provider’s commitment towards honouring the claim. This ratio is calculated by taking the total number of solved claims against the number of claims raised in a given year.
A Claim Settlement Ratio of 95 per cent and above is a sign that the insurance company has the credibility of paying most of the claims filed promptly, one all the required documents have been successfully submitted. Never transact with an insurer with ridiculously low premiums or one that has a low Claim Settlement Ratio!
Look for an Insurance Plan Online
There are many benefits to purchasing your term insurance plans online. Apart from offering you cheaper premiums, it also allows you to compare different policies and make the purchase at your convenience. You can not only use the online calculator to calculate the premiums in real-time but also read customer reviews as well as assess the policy features before investing.
Now that you are ready to make the lifetime commitment towards a term insurance plan, it is advisable to compare different policies online before investing. Online term insurance plans from reputable insurers such as Max Life Insurance let you compare, review, and select the right policy after careful assessment of policy features. These plans offer optimum benefits at low-cost premiums to protect your family against life’s uncertain events.