Key Points to Consider While Purchasing a Term Insurance Plan
Updated On Sep 12, 2021
Table of Contents
A term insurance plan is one of the most popular tools for financial planning. The main reasons behind the popularity of a term insurance cover is its ability to offer life coverage, policy customization according to your requirements and it can provide you with the much needed financial support in future. Under a term insurance plan, the nominee receives a sum assured after the unfortunate demise of the policyholder in order to meet the financial obligations and pay for their day to day expenses.
Things to Remember when Purchasing a Term Insurance Policy
Some of the key points that one must keep in mind while buying a term insurance plan are as follows:
Consider the Lifestyle and Needs of Your Family
Before purchasing a term insurance plan, make sure to analyze the present needs of your family and their overall lifestyle expenses, once you are done with it assess how costly it would get in the future, and that should be the total estimated sum assured amount. Also, remember to consider the future possibilities and plan for the financial responsibilities that can certainly arise in future.
Select Riders for Maximum Benefit
Other than offering death benefits, some insurers provide additional coverage in the form of insurance riders. Some of the commonly availed riders are disability cover, loss of employment cover, waiver of premium cover, etc, which is included in the base term plan by paying an additional premium amount. Although, adding these riders can prove to be beneficial for you yet including too many riders can be expensive, thus, opt for insurance riders wisely.
Carefully Calculate Plan Tenure
After deciding the amount of insurance coverage you would need, it is significant to know till what time you would need the plan for. Generally, it is said that a term insurance plan must be purchased till the time one wants to work. People usually look forward to getting retired by 60 years of age, however, it can differ based upon the individual life goals of every person. But, considering this scenario, it is advised to go for a life cover for at least 65 years in age.
Check Claim Settlement Ratio
It is significant to take into account the claim settlement ratio of an insurance company before deciding to buy a term insurance plan from them. A claim settlement ratio tells about the total number of claims settled by an insurance company against the total number of claims received by them. For instance, in case an insurance provider receives overall 100 claims out of which they settle only 90 claims, then the total claim settlement ratio would be 90%. The higher the ratio, the better and trustworthy an insurance company is.
Due to the effect of inflation, the cost of products would start to increase, this is the reason why it would cause a drop in the rupee value. To avoid the effects of inflation, ensure that your insurance provider is giving you a gradual increase in the sum assured of your insurance plan.
A term insurance plan would provide you with life cover for a long time period and it would offer security to your family financially in your absence. While opting for a right term insurance plan, make sure to consider the afore-mentioned important factors.
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.