Many insurance companies in India offer a wide variety of term insurance plans to suit different needs of different people. Although you can compare different plans online and check its features and benefits, buying the right plan can be challenging. This is especially true if you are a first-time insurance buyer.
So, to help you purchase the best term plan, we list down a few critical factors that you must consider.
Assess your needs and choose the right sum assured
The sum assured is the amount that the insurance companies pay to the policyholder’s family in the event of their demise during the policy period. The sum assured amount you choose must be large enough to help your family take care of their everyday needs for a few years. It should last at least until the dependent children can stand on their feet.
So, when choosing the sum assured amount, you should take your time to review your current and future expenses. For example, if you have any liability like a home loan or business loan, the sum assured must be large enough to cover the liabilities so that your family can repay the same.
Also, you must factor in your family’s lifestyle and inflation. Choose an amount that is big enough for your family to sustain themselves in your absence.
Riders, also commonly known as add-ons, are additional coverage options that you can purchase by paying an additional premium. Riders extend the scope of your term insurance policy’s coverage and cover specific risks that are not covered under the regular term plan.
For example, if you work in a high-risk environment, you may be prone to accidents. To get protection from any untoward incident, you can purchase an accidental death benefit rider. It allows you to get coverage against death due to an accident. If you have a rider, the family will get additional benefits along with the sum assured.
Other popular term insurance riders include critical illness rider, an accidental disability rider, waiver of premium rider, income benefit rider, etc.
Be careful with the policy tenure
When you buy a term plan, you must choose the policy duration carefully. It should protect your family for the maximum period. Typically, most people buy term insurance for 15-30 years. You must decide the duration based on the age when you purchase the policy.
For example, if you buy the policy in your 30’s, you may have about 25-30 years before retirement. In such a situation, it is better to buy a long-term policy. If you purchase a policy in your 40s or 50s, you can buy a short-term plan.
Don’t overlook the insurer’s claim settlement ratio
This is another critical aspect that you must consider while you buy term insurance. The claim settlement ratio of an insurance company indicates their ability to pay the death benefit when the claim is raised.
The ratio is calculated by assessing the number of claims the insurer has successfully settled in a year against the number of claims they received in the same period. If the insurer has a high claim ratio of over 80, you can be assured that your family will get the policy benefits without any hassles.
Keep the above factors in mind while purchasing the best term plan to suit your needs.