How to Choose Term Insurance?

Overview of How to Choose Term Insurance

 

When you shop around for term insurance, you will find different options available. Some plans offer inbuilt riders while others offer a return of premiums on maturity. Similarly, optional riders and whole-life coverage options are available in many plans.

Moreover, choosing the right sum assured, term and premium paying tenure is also important so that your plan fulfils the needs for which you bought it in the first place. When you have so many plan options and variable factors, how to choose a term insurance plan?

 

How to Identify the Right Term Insurance Plan for Yourself?

 

You can compare the available plans and then select the right one. Some tips for selecting the right term insurance plan are as follows -

1. Trustworthy company name

Choose an insurance company which is trusted and reputed with a good track record. Check the parentage of the company and see if it belongs to a renowned group.

2. Insurer’s Claim Settlement Ratio (CSR)

When comparing insurance companies on their identity and track record, also check their Claim Settlement Ratios (CSR). This ratio depicts the percentage of claims that the insurance company settled against the total claims that were made on it within the financial year. The higher the CSR the more trustworthy the insurance company can be considered as it shows that the company settled most of its claims.

3. Type of policy needed

There are different types of term insurance plans available in the market like –

• Level-term plans which offer a uniform sum assured throughout the policy tenure
• Increasing term plans wherein the sum assured rises every year
• Decreasing term plans wherein the sum assured reduces every year
• Term plans with return of premium feature wherein the premiums are refunded on maturity if the life insured survives the tenure

Assess which type of policy would be most suitable for your financial needs and make a choice.

4. Sum assured

Check the minimum and maximum sum assured levels offered by the available plans. Usually, term plans do not restrict the sum assured so that you can choose a coverage which best matches your financial needs. However, if you find a maximum sum assured limit, ensure that your financial needs can be met within the set limit or choose a plan where there is no maximum limit.

5. Tenure

The tenure offered under the available plans should be long. A long-term tenure can provide coverage up to the maximum possible age so that you can be adequately protected. Check for plans that offer a whole life coverage option so that you can enjoy coverage till 99 or 100 years of age.

6. Premium payment term

Next, check the premium payment term offered by the term insurance plan. A plan which offers flexible premium payments in the form of single, limited and regular premiums is a better alternative. It would allow you the flexibility of choosing a payment tenure that aligns with your budget.

7. Inbuilt and optional riders

As mentioned earlier, many new age term insurance plans offer inbuilt riders like terminal illness riders, accidental death benefit riders, etc. Look for these plans as you can get a comprehensive scope of protection under them.

Moreover, check the list of optional riders too. Choose a plan which offers a range of optional riders so that you can choose those that match your coverage needs and customise your policy.

8. Premium affordability

Check the premium rates and choose a plan which offers the best coverage features at the most competitive premium rates. Do not compare plans only on the basis of their premiums. Weigh in the coverage too and then compare the premiums vis-à-vis the coverage offered. Choose a premium which is affordable so that you can repay it on time and enjoy full coverage under the policy.

 

Factors to Consider While Selecting the Best Term Insurance Plan

After you use the aforementioned tips for selecting the right term plan, here are some factors that you should consider when finalising your coverage needs -

1. Needs of your family

Assess your family’s lifestyle costs and the major financial goals that you have. This would give you a rough estimate of the corpus needed to meet the day-to-day expenses as well as fulfil the identified goals. This, in turn, would help in understanding the right coverage for your term insurance plan.

2. Debts and liabilities in your name

Existing debts and liabilities increase the requirement of the sum assured. Your term insurance coverage should be optimal not only to meet the needs of your family but also the existing debts and liabilities that you have in your name. If it doesn’t, the liability burden would shift to your family who will face a financial crunch.

3. Inflation factor

Inflation increases the cost of living and also the corpus needed for goal fulfilment. Thus, you need to factor in inflation when calculating the sum assured for your term insurance policy. Remember, the family’s expenses and the corpus needed for your goals would increase with time. So, choose a sum assured which can provide for the increased expenses.

4. Existing investments and assets

If you have existing investments and assets, they can aid your family’s financial needs and goal fulfilment. As such, you can reduce their value from the sum assured assessed for the term insurance plan.

5. Existing life insurance policies

Existing life insurance policies also have a sum assured which is paid on premature demise during the policy tenure. As such, the coverage requirement would be reduced if you have existing plans in your name.

 

Conclusion

 

Use these tips for selecting the right term life insurance plan and find the best policy. Ensure that the policy matches your financial needs and will be able to provide your family with the desired financial assistance in your absence. The benefit would not only help your family meet their lifestyle expenses but also fulfil the financial goals which you leave behind. So, know how to choose term insurance plan, do your research and then buy the right policy.

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