How To Choose Term Insurance
To choose the right term insurance plan for securing your family’s future, you need to consider many factors. It is important that you opt for the right term plan, since the life insurance cover can act as a financial safety net for your family. There is no telling what can happen in life. Uncertainties and emergencies may crop up when you least expect them. With the possibility of such contingencies being very real, it is only natural that you will want to safeguard your family from the troubles that follow such incidents.
Here is where term insurance can prove to be very valuable. With the right term plan, you can ensure that your spouse, children, parents, or other dependents are adequately provided for, even if you are no longer around.
Term insurance benefits are many and varied. The term insurance premium charged for your policy is generally much lower than the premium charged for other traditional life insurance plans. As a result, you can obtain a relatively higher insurance cover for relatively lower costs.
Factors you should consider while selecting term insurance for yourself
Before you buy term insurance for yourself, there are many factors that you need to consider. If you are wondering about how to choose term insurance that is just right for you, read on to find out.
• The needs of your family
Your family’s needs and life goals play an important role in determining your choice of a term plan. The needs of your dependents will evolve as they go through various life stages. Your aged parents may require financial support to meet their everyday expenses post-retirement. Your children’s life goals may include getting admittance into a good university. Therefore, when it comes to learning how to choose term insurance, one of the first things you should consider is the amount of sum assured that your family members will require to carry on in your absence. Ideally, to determine this, you must factor in the number of dependents in your family and their current and future needs.
• The debts and liabilities in your name
You may have opted for financing and taken a housing loan or a personal loan. In addition, you may now be repaying the loan with your income. However, in case anything untoward happens to you, your family may be unable to meet these obligations. The term insurance benefits they obtain from your policy can help them tide through these times.
Before you invest in a term policy, you need to consider all the debts and liabilities in your name. The plan you choose must provide adequate cover to help your family repay your debts in case you are not around. This way, you can ensure that the surviving members of your family do not have to suffer the burden of EMI repayments.
• The life insurer’s claim settlement ratio
The life insurer’s claim settlement ratio is another important factor to consider when you are learning how to choose term insurance. This number essentially indicates the number of insurance claims paid by the life insurance company in proportion to the total insurance claims they received. A higher claim settlement ratio is a good sign, since it means the insurer honours their end of the insurance contract. While you are at it, you could also look into the financial soundness of the insurer and their solvency ratio, so you can get a better idea of whether the insurer is likely to pay the benefits to your nominees promptly.
• The tenure of your plan
There are two main reasons to consider the tenure of your plan when you are selecting term insurance for yourself. Firstly, it helps you ensure that your family members can continue meeting their life goals even if you are not around. Secondly, it helps you make sure that you can pay the term insurance premiums regularly and on time.
If the tenure of your plan overlaps with the years during which you are earning a steady income, it becomes easier for you to pay your term insurance premiums. This, in turn, ensures that your policy does not lapse, so your dependents can reap the term insurance benefits as per the terms of the policy.
• The mode of purchase
To know more about how to choose term insurance, you should also consider the mode of purchase. Some plans may be available only offline, while others may be available for purchase online. In recent times, online term plans are being increasingly preferred, since they are more affordably priced. Buying term insurance online also makes it easier for your nominees to raise a claim in the event of your demise, since it can be done through online channels directly.
So, before you select a term plan, figure out if you are more comfortable buying online or offline, so you can choose your term insurance policy accordingly.
• The inflation factor
When you select a term insurance plan for yourself, you will need to determine the right amount of insurance cover. To do this, many people only factor in their family’s needs and requirements based on their life goals. However, you should not stop there, because if the inflation factor comes into play, an amount that may be adequate now may not be sufficient 10 or 20 years later.
By considering inflation, you can determine the right amount of coverage needed to protect your family’s future. This helps you select adequate sum assured for yourself and your dependents.
Choosing the right term insurance plan is important because it can help your family meet their life goals without any trouble. With term insurance premium being affordable, it is easy to purchase a plan even if you have only just begun your career. In fact, it is advisable to buy a term plan as early in life as possible, so you can safeguard the future of the dependent members in your family.
Now that you know more about how to choose term insurance, you can go ahead and compare different types of term insurance plans to find the right option. Ensure that you consider the factors discussed before selecting a term plan, so you can make an informed decision.
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