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Key Factors to Consider Before Buying a Term Insurance Plan

Published On Sep 05, 2021

A term insurance plan plays a significant role in safeguarding the future of the family members of the policyholder financially after their untimely demise. Moreover, purchasing a term life insurance becomes even more significant in case you are the sole bread earner of the family. It offers a financial cover against the income loss that your family may have to deal with in your absence or in case the policyholder falls severely ill.
With the number of term insurance plans available in the market, it gets difficult to choose the one that is suitable for us from all aspects. Below are a few easy tips that one must keep in mind before purchasing a term insurance plan.

Decide the Insurance Coverage Required

The most important step before purchasing a term insurance plan is to calculate the total amount of coverage required by you. You must avoid the mistake of not insuring yourself adequately as it would not serve the objective behind buying the insurance plan. As suggested by the experts, an individual should purchase a plan with a death benefit of at least 8-10 times of his annual income.

Also read - Understanding Different Types of Life Insurance Policies Available in India

Choose the Right Insurance Company

It is another important factor to be considered before zeroing on a particular term insurance plan. This decision can be made based on the following:

1. Claim Settlement Ratio: It reflects the ratio between the total number of claims settled by an insurance provider out of the total number of claims received by them from the customers. For instance, Having a claim settlement ratio of 60% means that 60 claims have been settled out of the total 100 claims received. The insurance company with the highest claimsetllemnet ratio is more trustworthy.
2. Solvency Ratio: This ratio depicts the picture of the ability of an insurance company to handle its debts. One can expect to fetch good returns from an insurance provider who is capable enough of meeting both its short term as well as long term liabilities.

Carefully Analyze Your Needs and Budget

At the time of evaluating various available options, one must also take into consideration if the sum assured opted by them would be able to fulfill the future requirements of their family members. Moreover, also remember that the amount that is sufficient for you today may not be enough for you in future. Therefore, it is significant to keep a check on inflation rate at the time of analyzing your different needs. One can also make use of a term insurance calculator in order to calculate the premium payable by you.

With the availability of various plans in the market, it is always considered wise to analyze different options before zeroing on a particular plan. There are a lot of things that an individual must keep in mind before buying a term plan, the afore-mentioned points are surely going to help you in making a good decision with respect to purchasing an ideal term plan.

You may also like to read - When to Purchase a Term Insurance Plan?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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