Simplifying Life Insurance in India
12 Tips to Choose the Best Term Insurance Plan
Selecting the right policy is essential to provide appropriate financial coverage during emergencies. However, due to the availability of numerous insurance plans in the market, selecting the right one can be confusing. So keep reading to learn some vital tips on how to choose a term insurance plan.
Before getting into it, let us take a quick look at who needs to buy a term insurance policy.
Top 12 Tips on Choosing Term Insurance Plan
1. Calculate Your Monthly Income
The most crucial factor to consider while selecting the right coverage amount is your monthly income. It is essential because if you opt for higher coverage, the premiums will also be substantial. This will cause an additional financial burden and result in disruption of your monthly budget. In such cases, it will become challenging for you to pay the premiums on time.2. Analyse Your Current Lifestyle
You must critically analyse the current and future requirements of your family. You also need to consider their current living standards and spending habits while deciding the coverage amount. This will ensure that they won’t have to compromise on their lifestyle in your absence.3. Consider Your Age
Your age plays an important role in selecting the right term insurance policy. This is so because it will help you decide on suitable policy duration and appropriate coverage. For instance, if you are in your 20s or 30s, you will have to go for a term insurance policy with a longer duration.4. Evaluate the Number of Dependants
If there are about 3 to 4 members in your family, you can opt for a lower coverage compared to having 6 to 7 members. This is so because the financial requirements will increase significantly with an increase in the number of members.5. Compare the Policy Premiums
There are several companies in the market offering term insurance policies at different rates. So it is essential to perform extensive research on the premiums that you need to pay for each before finalising one. This way, you can choose the most affordable premiums to ensure maximum savings and avoid disrupting your monthly budget.6. Add Essential Riders to Your Plan
You can customise your term insurance policy by adding riders specific to your need. For instance, you can choose a critical illness rider if you are suffering from one. You can also choose an accidental death benefit rider to opt for substantial coverage on unfortunate deaths during an accident.7. Find out the Claim Settlement Ratio of Insurer
Claim settlement ratio refers to the percentage of claims settled against applications received. Again, you can easily access this information from the official website of your insurer. You must always go for an insurance company that has a high claim settlement ratio.8. Calculate Present Liabilities
If you have taken any loan for financial assistance or for fulfilling your goals, then it is vital to keep them in mind while deciding the coverage amount. For instance, if you have taken a home loan for the construction of your house, you must consider its EMIs while deciding the coverage amount.9. Select An Appropriate Cover
Once you have considered all the factors, you must select an appropriate cover for your insurance policy. For this, you can go through offers from various insurance providers to check the policies available. This helps you in selecting an appropriate cover for your term insurance policy.10. Reveal Necessary Information to the Insurer
You must refrain from hiding critical information about your lifestyle from your insurance provider. These might include your frequent trips to outstation, work-related travel, unhealthy habits like drinking and smoking, and so on.11. Go for Online Purchase of Term Insurance Policy
There are both online and offline options for purchasing a term insurance policy. However, the online mode offers several advantages over the offline one. Online applications rule out the involvement of an agent, thus eliminating additional charges of their commission. Also, the process is hassle-free, and you can apply for it from the comfort of your home.
Read More: Online vs Offline Term Insurance
12. Find out the Solvency Ratio of an Insurer
Solvency ratio indicates the availability of cash with the insurer so that they can settle the claim when you raise it. Every insurer must have at least a 1.5 solvency ratio according to the Insurance Regulatory and Development Authority of India (IRDAI) rules.
Now that you know how to choose a term insurance plan, you can proceed to buy one to offer financial protection to your family in your absence. Remember to stay away from the pitfalls when selecting the right insurance plan for you.
Who Needs a Term Insurance Plan?
It will be prudent for everyone to stay financially prepared for untoward situations. Therefore, anyone who wants to secure their family’s future financially should purchase a term insurance policy. They can belong to any age group and can be either salaried or self-employed individuals. However, it is most crucial for people who are the sole breadwinner of their families.
There are a lot of term insurance policies available in the market. If you are wondering how to select term insurance that suits your need, the following are some tips that you can consider.
FAQs About Choosing the Best Term Insurance Plan:
Why is it important to choose a term insurance plan carefully?
Can you purchase two life insurance policies?
What is the maximum and minimum age for purchasing a term insurance policy?
When should you avoid purchasing a term insurance policy?
You do not need to purchase a term insurance policy under the following scenarios:
- In case you do not have any dependents.
- With the intention of getting tax benefits on premiums.
- You have substantial assets for financial coverage during tough times.
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Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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