Term Insurance 641 views December 24, 2020

A term insurance plan remains the best ally for your dependent family members when you are not with them anymore. It ensures financial protection by providing them the cover amount if you die during the policy term. But the word ‘Protection’ is not only about getting money upon such unfortunate events but also the ‘AMOUNT’ that your dependents will eventually receive from the insurance company.

That’s why choosing the best term insurance plan keeping in mind the cover amount is so important for you. But in a bid to get the maximum cover, you can’t afford to spend too much on premium and rue later!

Term Insurance

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So, you need to select a term insurance plan much wisely than you may think of. Don’t worry, we are here to help you select the BEST. Let’s read here the approach to choosing the best term insurance plan.

Things to Consider When Choosing the Best Term Insurance Plan

Broadly speaking, a term insurance plan gives your family members the cover amount for the premium you pay to the insurance company. But you should also look at a flexible premium payment term, riders, and even the claim settlement ratio of the company. A carefully chosen term plan based on these factors will help your dependents tide over the uncertain times successfully. Let’s discuss these factors in detail.

Choose the Sum Assured Amount Keeping in Mind the Inflation

Insurance companies promote term plans by quoting an XYZ cover amount for a nominal premium. The cover amount might sound big to you in today’s times, but will it help withstand the challenge of inflation that your dependents could face years down the line upon your unfortunate demise? The answer could be either YES or NO, depending on the cover quantum.

So, check the expenses you are doing for your dependents and estimate the hike keeping in mind the yearly inflation rate of 5-6%. Do the calculation for the time you wish to continue with the policy. Factor in the cost of child education and marriage too while estimating future expenses. See what number you come across with and find which insurer provides you that MAGICAL sum or even more.

Premium Payment Flexibility

When comparing term insurance plans, do check the flexibility as far as premium payment goes. You can pay the premium once, for a limited period, or throughout the policy term. As the name suggests, a one-time premium payment refers to a single premium that you pay to the insurance company. A limited pay means you will need to pay the premium for a limited period, but the policy coverage term will be for a longer tenure. For example, if the premium payment term is 15 years and the policy term is 20 years, the premium payment will stop after 15 years, but the coverage will go on till 20 years from now. In a regular pay, however, both premium payment term and policy term remain the same.

The one-time premium amount could be one big sum that not all can afford to pay. Whereas the premium amount for a limited pay option will be greater compared to a regular pay option. But that does not mean regular pay will result in lower premium payments overall. Mostly, the total premium payment with a limited pay comes lower than that of a regular pay option. So, see which one suits your budget the best and pick accordingly.

Check for Additional Coverage via Riders

A term life insurance comes into the picture when the life assured dies during the policy term. But if incidents like accidents and some critical illnesses take place, will a term plan help you? Yes, it will! But that will require you to add personal accident and critical illness riders to your plan. It will increase your premium by some. So, choose the riders carefully by checking how much extra sum assured you are getting and how much extra premium you need to pay in return.

Check the Claim Settlement Ratio of Insurers Too

Although a Claim Settlement Ratio is not a criterion to choose a term insurance plan, it does give an impression of the insurance company as far as its efficiency of settling claims. It is defined as the ratio of claims settled by an insurance company to the number of claims it receives in a financial year. A greater ratio creates a good impression of the insurance company.

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