How to Choose a Right Term Insurance Plan?

Deciding to purchase a life insurance policy is the first step in ensuring a financially secure future for your loved ones. You can choose a suitable policy among the multiple plan options offered by various insurance providers. Moreover, you can get them personalized according to your needs and requirements. The following article aims to help you choose the right term insurance policy for yourself and your family’s wants and wishes.

How to Choose a Right Term Insurance Plan?

You can consider the following factors while purchasing a right term insurance policy.

1. Estimation of the Sum Assured

The sum assured that would be offered to your family after your demise should be calculated after a careful assessment of your family’s future needs and goals so that the amount is sufficient in supporting your dependent’s future. It is advisable to keep it at least 15-20 times your current earnings.

2. Decide the Policy Duration

A term insurance policy is offered for a specific duration of time. The minimum period of a term insurance policy is 5 years, whereas the maximum duration can be around 65 years. It would help if you chose the tenure by estimating the years after which your dependents’ won’t need financial support. Moreover, it is advisable not to buy a term life insurance policy with either too long or too short a period.

3. Comparison Between Policies

There are multiple online websites and portals which help compare between different policies offered by various insurers. It is wise to understand the precise terms and conditions of the numerous policies to choose the best plan which suits your needs.

4. Necessary Riders Only

Many insurers offer additional rider options on policies to customize term insurance plans. However, it should be noted that these riders increase the cost of the policy; hence, only necessary riders should be purchased to keep the policy under your budget. Few of the options offered are critical illness benefit in the form of a lump sum if the life assured is diagnosed with a critical illness, waiver of premium in case of disability or diagnosis of a critical illness etc. 

5. Remember Policy Exclusions

One of the How to Choose a Right Term Insurance Plan?most common mistakes people make while choosing a life insurance policy is neglecting policy exclusions, i.e., some death-related situations that are not covered under a term insurance policy. Such cases include death by a terrorist attack, suicide, childbirth etc. 

6. Prefer a Online Term Life Insurance Plan

An online term insurance policy is cheaper, convenient, and flexible than an offline insurance plan that includes extensive paperwork, commission payments, and a middleman. Moreover, the amount saved on administration and service costs of the agents in an online mode is offered back to the policyholder as premium discounts on their plans. 

7. Credible Insurance Provider

Purchasing a term life insurance policy from an entrusted insurer with a high claim settlement (CSR) ratio decreases the chances of any fraud and claim rejection. A high CSR reflects the credibility in settling claims by the company. More metrics like the persistency ratio and solvency ratio can be considered while choosing the right insurance provider. The former tells about the percentage of renewed policies within a year, while the latter provides information about its ability to manage its liabilities and debts.

Endnotes

All the above-mentioned factors will surely help you choose the right term life insurance policy for yourself or your spouse or children. You can even consult a financial advisor or an insurance agent to assist in the process of making one of the most important financial decisions of your life.

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