Tips to choose the ideal term insurance policy for yourself
Life is unpredictable, you never know what will happen next. Hence, you should be prepared with a back-up plan to face the worse and safeguard your family in your absence. And term insurance plan is one such inexpensive back-up plan that secure your family from financial worries during such time.
Talking about term insurance policy, it’s a pure protection with high life cover at a low premium. There are plenty of term insurance policies easily available online, offered by various insurance providers. But choosing the right term insurance plan gets a bit tricky. As there are several factors like your income, liabilities, health etc, that you should consider before choosing the right one for yourself.
Hence, in order to make your task of selecting the right term insurance plan easy, we have listed some of the important factors to keep in mind. Read through to know the factors in detail.
- Human life value (HLV): The prime reason to buy a term insurance policy is to safeguard your family’s future in your absence. The term insurance policy should provide adequate financial coverage to the dependants; so, that they live stress-free and happily. To ensure this, you must choose such term life insurance which covers Human life value (HLV) or all your financial requirements or. Human life value refers to an individual’s income along with the liabilities like loans. Therefore, it’s very important that you choose such a life insurance plan that covers at least your HLV.
- Focus on your needs not what others have chosen: When you choose a term insurance plan for yourself, make sure it is based on your needs and not of others. Don’t get influenced by what your friend or any other family member has purchased. Their term life insurance policy might have low premium but that is based on their requirement, not yours. Focus on your requirements and choose the best term life insurance ensuring a safe future for your family.
- Higher cover: Term insurance plan offers a feature of increasing life cover during certain important scenarios in your life. Such as, an insurance company might allow you to increase your life cover by 50 percent at the time of your marriage and 25 percent when you become a parent. This allows you to start your policy with a reasonable cover and then increase it, as your responsibilities increases as well as your ability to pay the higher premium.
- Riders: Choose a term plan that gives coverage for your add-on requirements. For this, you can add riders to your primary policy, which offer benefits over and above your term insurance policy. For instance, if you have taken a critical illness rider, then you are entitled to receive the assured amount if diagnosed with such illness. Along with critical illness, there are other riders as well such as loss of employment cover, disability cover, waiver of premium cover amongst others. However, you must select riders based on needs, so that they can add substantial value to your term insurance plan.
- Buying policies online: Online medium has made the process of buying term insurance policies online easy for everyone. You can freely compare various term insurance plans, calculate the premium, life cover, based on your income and make an unbiased decision. Also, if you buy a term plan online, it will cost you much less because you don’t have to pay the agent cost.
- Medical tests: Insurance companies usually asks the applicants to take medical tests before issuing the term insurance plan. However, there are several companies which do not insist on their applicants for medical test and ask them to give a declaration of their health. This might be a convenient option but a costlier one. The medical test identifies your health condition, based on which your term insurance plan is customised by the insurance company. If you get a better rate after having the medical test, then why opt for a costlier insurance by not taking the tests. Also, medical examinations lower the risk of claim rejection due to pre-notification of existing disease.
- Tenure of the term plan: This is yet another factor to look through while selecting a term insurance policy. The tenure of your term insurance should be till the age you want to work. Earlier it used to be 60 but now with the change in lifestyle, people usually keep working beyond the age of 65 years. Ideally, the difference between your assumed age of retirement and your current age should the term of your policy. Also, it is advised to buy a term insurance plan at an early age to get the best of it.
- Choosing an insurer: Usually, all term plan policies promise to protect your family. However, you need to take special care while choosing the insurer as well, along with the right term life insurance. Make sure you choose a credible insurance company who has a record of fulfilling the promises made in the policy. The easiest way to find out this is by looking at the Claim Settlement Ratio of the insurer, as mentioned by IRDAI. The other factors to consider while selecting the insurer are solvency ratio, corporate governance record, IRDAI norms violation instances and assets under management (AUM).
Term insurance policy is important but choosing the right one is more important. Beware of the false and dubious claims and be a smart buyer as it’s a matter of your family’s future. Don’t forget to look through and consider all the above-mentioned factors to make a sound decision about choosing and then buying the right term plan. It’s always better to be cautious and plan at an initial stage rather than regretting at the later stage about your purchase.