Term insurance is a type of life insurance policy that offers financial protection to the policyholder’s family in the event of their death. So, choosing a term insurance policy is regarded as an important financial decision to secure the future of those near and dear to you. Here are nine tips to help you choose the best term insurance plan in India.
1. Consider the dependants and your current life stage
Factors like your age and financial conditions influence the terms of the policy. That said, this step involves evaluating your current life stage; for example, you could be in your early 30s, who has just started their family; or you could be someone in your early 50s, wherein your children are on the verge of obtaining their financial independence. Based on your family’s current and future financial needs, you determine what you choose the insurance policy that can best satisfy their needs.
2. Evaluate your lifestyle habits
At the same time, it is also equally necessary to evaluate your lifestyle habits. In the event the insurance has to be claimed, you would want a cover amount, which would be sufficient to provide for your family ,without altering their lifestyle significantly. If necessary, this step can also help you make alterations to your current lifestyle
3. Your income assessment
If you have no experience with term insurance, you surely may wonder what amount will be sufficient to provide for your family in case something happens to you. By evaluating your current income, you will get an idea of an optimal coverage amount. If you are unable to analyse your income and spending, you can approach a qualified financial planner for help.
4. Consider debts
Considering your liabilities and debts is also an essential step, before you start searching for a term policy. People generally take loans to achieve life goals; for example, education loans to study abroad, home loans to buy a house. Ensure that you find a term insurance policy that is able to repay your debts on time. So, you would want to choose a term insurance policy that considers your debts since you don’t want additional burdens on your family.
5. Choose the best coverage
Insurance cover, in simple terms, is the amount that the insurance company agrees to provide to your family in the event the insurance is claimed. This amount depends on the factors discussed above. However, by assessing those factors—your age, annual income, and debts and obligations—you can determine what amount would be sufficient to meet expenses if the policy is to be claimed. That said, this coverage amount should be at least 10-15 times your current annual salary; some may argue it should be at least 15-20 times your current annual salary. The point is, you do your due diligence and choose the policy that offers the best coverage.
6. Consider adding riders to your term plan
In simple words, riders can be simply thought of as additional benefits provided by the insurance company that enhances the coverage of the policy. To add riders, however, you will have to pay an extra premium over the base plan of your insurance policy. Some of the well-known riders include the waiver of premium rider, critical illness rider, and accident death and disability rider.
7. Assess the claim settlement ratio if the insurance company
The claim settlement ratio (CSR) of the insurance company is the percentage of claims successfully paid insurance claims divided by the total number of claims received during the fiscal. The CSR indicates how reliable the insurance company is when it comes to delivering financial support. That said, it is worth noting that you won’t find an insurance company with a 100% record since at times there are complications.Nonetheless, you are looking for a high CSR.
8. Disclose all the necessary details about yourself
Do not hide any information from the insurance company while purchasing the insurance policy. For example, if you’re suffering from a disease or having drinking or smoking issues, it is best if you inform the company. The company will eventually do its due diligence, and if it comes to light that you have hidden crucial details, the claim will be rejected.
9. Choosing between online and offline
Do your research to know whether you would want to purchase your term insurance policy online and offline. It’s worth noting that online plans are generally cheaper and offer more convenience, On the other hand, offline plans may be more personalised.
