Everyone must buy a term plan, as it gives your family financial protection against your untimely death. But, to get most of the policy, it is vital to choose the right plan. Read on to know the tips for selecting the best term insurance.
In India, term insurance is one of the most popular types of life insurance policies. It is the cheapest and probably the most efficient way to secure your family’s financial future. Today, as the awareness about the importance of a term plan is rising, many people prefer buying this insurance cover over other traditional plans.
A term insurance policy, commonly referred to as a pure protection policy, is one of the simplest life insurance policies available in the market. Under a term plan, the insurance company pays the death benefit (equal to the sum assured) to the beneficiary in the event of the policyholder’s untimely demise during the policy period. However, if the policyholder survives the term, there is no survival pay-out.
Today, as most reputed insurance companies offer online services, buying a term plan is easier than ever. But, many people fail to choose the right policy for their family. So, if you are looking to buy term insurance, you must consider a few important things for getting the right plan.
Choose the right coverage amount
The number of family members who are financially dependent on you may vary at different stages of your life. When you are single, you may not have too many financial responsibilities, but you would have additional responsibilities if you are married and have children.
So, when you choose the coverage amount of your term plan, you must consider the number of family members who are financially dependent on you. The amount should be big enough to meet their expenses even in your absence. Also, you must not forget about future costs and increase financial responsibilities.
Consider the family’s lifestyle
Another critical fact to consider while choosing the right term insurance cover is your family’s current lifestyle. You must assess the funds your family may need to sustain their lifestyle while you are not around. Don’t forget to consider the inflation and choose the right cover accordingly.
Typically, most experts suggest following the rule of thumb to determine the right term insurance coverage. The sum insured must be 15 to 20 times your annual income.
Consider the liabilities
As an earning member of the family, you may be responsible for managing the liabilities like repaying the home loan, personal loan, and other outstanding payments. To prevent the burden of the EMI falling on your family members, you must include the outstanding amount to the life cover and choose the sum insured accordingly.
Consider the insurer’s claim settlement ratio
Many insurance buyers overlook the insurer’s claim settlement ratio. However, it is a critical factor that you must consider while choosing the right term insurance plan. The claim settlement ratio (CSR) represents the claim settlement percentage of the insurer. It indicates the number of the claims successfully settled by the insurer against the number of claims they received in that financial year.
Higher CSR indicates the efficient underwriting procedure of the insurer. It also means that your family will have a better chance of getting the claim approved without hassles.
Now that you are aware of the critical factors to consider for getting the right term insurance cover make sure that you do your due diligence and get the right cover for your family.