4 Factors to Consider Before Buying a Term Insurance Plan

Updated On Aug 15, 2021

4 Factors to Consider Before Purchasing a Term Insurance Plan
Conclusion

In today’s time, with the increase in cost of living, not having adequate financial safety in order to safeguard your family members can turn out to be a huge mistake from your end. A popular tool suggested by experts in order to tackle such a situation is a term insurance plan. It is a type of life insurance plan that offers coverage for a specific time period at a fixed payment rate. A term insurance plan offers a higher sum assured at a very nominal cost.

4 Factors to Consider Before Purchasing a Term Insurance Plan

Here is a list of 4 factors that you must consider in order to purchase a right term insurance plan:

Sum Assured

This is the amount that your family would receive in case of your demise during the insurance policy tenure. To know the amount of coverage that you would require, it is important for you to assess and consider things such as your age, basic expenses, financial responsibilities, future financial requirements of your family, loans to be paid and inflation. Generally, the younger a person is, the higher should be your sum assured. Generally, it is advised for an individual to choose a coverage amount that is around 10 to 15 times their present salary.

Claim Settlement Ratio of Insurance Provider

A claim settlement ratio is the total number of claims approved by an insurance provider divided by the total number of claims received by them. As the ratio indicates the claims settled by an insurance company, it forms a key consideration at the time of deciding which insurance company to avail the insurance plan from. IRDAI each year releases a report giving the claim settlement ratio of insurance companies in India. It is always ideal to choose an insurance company who holds a high claim settlement ratio to know regarding its credibility.

Policy Duration

The key purpose of buying a term insurance plan is replacing the regular income of life assured in the event of their untimely demise. Thus, it is significant to get covered for the entire time period that you intend to keep working, say till 55 or 65 years of age. You can also decide to go for long policy durations as there are various plans available in the the market providing insurance coverage till 100 years of age. Purchasing a term insurance plan at an early age is always considered to be a wise idea as you can receive benefits from lower premiums.

Insurance Riders

These are the additional covers that can be included to the standard term insurance plan in order to extend the coverage. Some of the riders that can be included with a term insurance plan include critical illness benefit, waiver of premium, accidental death benefit, accelerated death benefit and disability income. You are required to pay an additional premium amount at the time of purchasing add-ons with the base term insurance plan. This is the reason why it is important to analyze the risk and take decisions accordingly whether you wish to avail riders' benefit.

Conclusion

Now that you are aware of the important things to be kept in mind at the time of buying a term insurance plan, do not delay your decision as you can put the future of your family members at a stake by doing so. There are several insurance options available in the market, carefully analyze the plans on the basis of afore-mentioned points before deciding which insurance plan to buy.