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Keeping your family protected against unfortunate events is everyone’s first preference. If you have a stable income source, then you can make a good financial plan that helps you to do the same. The primary step while buying a plan is to understand how to choose the best term plan for your family members. You can protect their future by making an informed and wise decision of buying a term insurance policy.
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Note: Know more about what is term insurance first before reading this article.
Let’s discuss some of the key tips to understand how to select the best term insurance policy in India:
Term Plans
If you are a newcomer in investments, then you may think about choosing the right term insurance plan in India to use your money effectively. One of the important keys to a stable future for you and your family members is making efficient financial decisions. So, here are a few term insurance tips that will help you in making an informed choice:
Consider the stage of your life and dependents/ family members
The first step in understanding how to choose the best term insurance plan is to determine your life stages when purchasing insurance. At the time of securing your life cover, the age, and the financial condition impacts the policy term and therefore, the life cover amount that is more suitable.
In addition to this, each individual has different financial responsibilities. If you are the only sole earner in your family, they may be dependent on you for a long time period to meet their life objectives. On the contrary, an unmarried individual may not have various dependents. Thus, you should consider life cover carefully for them.
Assess your current lifestyle habits
It is important to understand that term insurance should be selected on the basis of your lifestyle requirements which include some of your spending habits, or a general living standard. When you get a clear idea of your lifestyle requirements, you can protect your family members and they will not have to face any financial difficulty in maintaining their living standards even in case of your absence.
Evaluate your Income
A common question among various individuals is how to decide a term amount that will be sufficient for their loved ones. It is suggested to analyze your income to get a clear understanding of it. Everyone has some financial responsibilities that need some parts of the income. If you analyze your income limitations, you can invest in a good way possible. So, it is important to compute the financial needs of your family members so that you don’t have to over-estimate the sum assured. If your earnings are not enough to meet the premium, you can overburden yourself financially.
Check For Existing Liabilities
It is another factor that should be considered while choosing the best term plan. Most individuals take loans to achieve their goals. In case of your absence, if your policy term does not cover the repayment time or if the amount is not enough then it can be a financially difficult situation for your dependents. Thus, it is very important to choose a term insurance plan that considers your debts and liabilities in life.
Add Riders to your Term Plan
Riders are additional term insurance benefits provided by the insurance company that enhances the coverage of an insurance plan. They can be added to a base term plan at the time of purchasing the plan by paying an extra amount of premium.
Few of the riders available with term insurance plans are waiver of premium rider, critical illness rider, and accidental death and disability rider. You can increase the scope of the term plan by knowing about riders.
Check the Claim Settlement Ratio of the insurance company
The CSR is the % of claims paid successfully by an insurer divided by the total number of claims which are received in a fiscal year. It indicates the reliability of an insurer to keep their promise of offering financial support in unfortunate times.
Do not hide information from the Insurance company
Do not conceal any information from the insurer at the time of claim. If you smoke and drink on a regular basis, then it is suggested to inform the insurance company about it. Hiding details can result in rejecting your claim
Choose the right amount of cover
You should know how much coverage you will require. There are a number of term insurance calculator which you find online that help determine the cover amount suitable for you. The thumb rule says that the sum assured amount must be 15 to 20X your annual income. However, as discussed it also depends on your annual income and also on other factors such as financial liabilities, current age, the age at which you are expecting retirement, etc.
Purchase term insurance online
You can buy term plans online and offline. It’s better to buy term plans online without any interference of the agent. The procedure is quick and hassle-free and it offers you discounts as well in some cases. You can compare different plans online and compute the premium you will have to pay. Also, the offline option allows you directly interact with the advisor and immediately get your doubts clear.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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