Life insurance is necessary to provide financial security to your family in case of an unforeseen event. An increasing number of people are opting for term insurance, as it is one of the most convenient ways to procure life cover.
A term insurance plan is a pure life policy and it pays the benefits to the nominees in your absence during the policy duration. Term policies do not offer any maturity benefits, which is why you can procure higher coverage at an affordable premium.
Some people avail of this policy to get the term insurance tax benefits. However, you must remember the following five factors before making your purchase decision:
- Company profile
Multiple insurance companies offer different types of term policies, which make the purchase decision confusing. It is essential to find a reliable insurer. You can compare different plans for various terms and conditions like term insurance age limit, limitations, and riders offered by insurers through online research. Moreover, you may seek quotes from different insurance companies to choose a plan that is economical and suits your requirements appropriately. While minimizing the premium is beneficial, you must buy the plan from a reliable insurer to ensure your nominees do not have any trouble in the future.
- Claim settlement ratio (CSR)
When looking for a term plan, checking the CSR is one of the key factors. This ratio calculates the number of claims that are settled when compared to the total claims received annually in percentage form. It is advisable to buy the policy from an insurer with a greater CSR, as it reduces the possibility of rejection. So, your family members need not face any inconveniencein your absence.
- Determining your requirements
Term insurance is a cost-effective way to financially secure your loved ones. However, you must evaluate and ascertain your needs before choosing the best plan. The different types of term insurance plans include:
- Level plans
These are the commonest types of term plans. The sum assured (SA) remains constant throughout the plan’s duration, and the insurer pays the benefit to your nominee if something untoward happens to you during the policy period.
- Term plans with return of premium (TROPs)
Most term insurance policies have no maturity benefits. However, some plans pay the total premium as a maturity value if you survive the policy duration.
- Increasing term plans
Your financial goals vary based on the various stages of your life. These term insurance policies provide an increase in the SA, while the premium remains constant.
- Additional rider benefits
You may increase the coverage of your basic plan by including riders. Some of these add-ons include waiver of premium, income replacement, accidental death, partial or total permanent disability, and critical illness riders. Although riders are beneficial in enhancing the coverage, you must remember that you need to pay extra premiums to avail of these benefits. Consider your requirements and select riders that are necessary for maximum benefits.
The primary benefit of a term insurance policy is to ensure the financial stability of your loved ones in case of your sudden absence. To calculate the adequate SA, you must consider your current lifestyle, future goals, present expenses, and liabilities. However, remember that your family’s financial requirements will increase with time. Therefore, the existing SA may be insufficient to meet your family’s future requirements. It is advisable to avail of approximately 12 times your annual income as the SA to combat future inflation.
Whether you are unmarried or married, have kids or dependent parents, life coverage is crucial, especially if you are the sole breadwinner of the family. Do not avail of this plan only for the term insurance tax benefits. Invest in it to ensure themonetary security of your dear ones.