As the world faces the coronavirus pandemic, we realize the importance of having a life insurance policy that can prepare us for such uncertainties. People are now increasingly aware of the importance of a good life insurance product to safeguard their family’s life as well as future.
A life insurance’s objective is to provide optimum cover for the insured person and also provide financial safety for the policyholder’s family. However, with the ever-evolving life insurance sector, there has been a wide range of products added to the repository. As such, one may feel confused and overwhelmed when choosing the right product.
If you are a beginner and only want the most basic protection, then you must consider a term life insurance policy. These policies are pure life insurance instruments that provide the widest coverage at an affordable price.
For the purpose of this article, we will tell you what a term life insurance policy is, the benefits of term insurance comparison, and how to choose the right one.
What is Term Insurance, and How Does it Work?
As mentioned above, a term life insurance policy is the purest and the most affordable of life insurance products. It pays a sum assured to the beneficiary if something happens to the policyholder during the policy terms.
The coverage of a term life insurance policy is only valid for a predetermined time period, known as the policy duration. If the insured person survives this period, the insurer is not liable to pay any benefits. But if you want to get maturity benefit from your term plan, then you can consider investing in a term plan with a return of premium that pays you back the premiums if the policyholder outlives this term.
Things to Consider When Buying Term Life Insurance
If you are prepared to invest in a term life insurance policy, here are some things you need to keep in mind:
Assess how much coverage you need
The sum assured is the death benefit that the beneficiaries will receive after the insured person’s death. This sum should be chosen carefully as it is meant to act as an income replacement after losing the family’s breadwinner. Therefore, you must assess the needs of your dependents, account for all the long-term financial goals, outstanding liabilities, as well as inflation when choosing this sum.
Choose the right tenure
A policy term is the number of years for which the policyholder will be covered by the term life insurance policy. You should choose the tenure on the basis of your income, age, and duration of financial liabilities.
Check the insurance provider’s claim settlement ratio
The best way to determine the reliability of an insurer is to check the claim settlement ratio. This ratio will show you the percentage of claims settled by the insurer against the number of claims raised in a given year. Look for a provider whose claim settlement ratio is more than 90%.
Choose the riders
You can increase the scope of your policy by supplementing it with riders. These add-on benefits will cover you for additional risks that can be availed for a nominal payment. You can choose from a wide range of riders, such as critical illness, accidental death, disability, etc.
How much cover do you need?
According to financial experts, the ideal sum assured is at least 15-20 times your current annual income. So if you are earning Rs. 5 Lakhs per annum today, then your term insurance should be at least Rs. 75 Lakhs to 1 Crore. However, you should be able to expand this coverage in case you take on more liabilities in life. Therefore, your term life insurance policy should also be able to pay off outstanding loans in addition to the other day-to-day expenses and long-term goals.
Tips to Buy a Term Plan
You can buy a term plan either online or offline with the help of an insurance agent. Here are some steps to follow if you choose to buy your policy online:
Calculate the accurate sum assured by using term insurance calculators provided by most insurance providers these
- Find the plan that suits your budget and your needs accurately.
- Read the fine print to understand the inclusions and exclusions of your term life insurance policy.
- Browse the plans online and compare the policies against features, benefits, and premium costs before making an investment. The term plan comparison tool gives you an objective view to help you make an informed choice.
- Choose the type of coverage you need, the riders most suitable to your requirements, premium payment method, payout method, etc. These considerations will help you customize the plan as per your requirements.
- Declare all the details about yourself and your lifestyle accurately. Not doing so will lead to claim rejection if the insurer finds a discrepancy.
- Upload all the documents as required by the insurance provider
Term life insurance policy is an important investment to secure your loved ones against uncertainties. Consider buying one today if you haven’t done that already.