Term insurance plans have become a crucial means of financial planning as more individuals openly recognize their role in safeguarding their financial future. The term insurance plans typically help individuals to secure the financial future of their loved ones and empower them to achieve financial independence by lending financial support in the event of the policyholder’s untimely death. This is why it is vital to select the best-suited plan with comprehensive coverage to maximize its benefits. However, choosing the best term insurance plan is often considered to be daunting and many individuals tend to focus their attention on just the premium cost. This narrow focus leads to inadequate research in terms of the viability of the policy’s scope. One must assess key factors, such as the sum assured, policy term, and the claim settlement ratio to judge the merit of the policy features and associated benefits. In this article, we will find out about the features and their merits in detail.
What’s a Term Insurance Plan
Term insurance plan serves as a financial safety net for the policy buyer’s family. The plan offers comprehensive financial protection during the active policy term against a fixed premium payment. In exchange for the premium, the policy provider offers a guaranteed sum assured or death benefit, which is credited to the designated beneficiaries of the policyholder in case of their untimely demise. This insurance plan typically aims to protect the policyholder’s dependents from financial hardship and help them meet financial obligations in the insured’s absence without straining their limited budget. The term insurance plan helps cover immediate and future obligations with ease, ensuring the financial independence of the loved ones. Typically, a term insurance plan can be categorized as –
- Pure Life cover
- Life insurance cover featuring both savings or investment components
How to Compare A Term Insurance Plan Effectively?
Individuals should keep these factors in mind to compare term insurance plans effectively –
- Cover Amount: The sum assured or the amount of money guaranteed under the term plan, is a crucial factor that helps compare different term insurance options. Notably, a high sum assured empowers the policyholder’s beneficiaries to meet their current and future financial commitments and maintain their current lifestyle even in the event of the insured’s untimely death. This makes it important to select suitable coverage that will be adequate to safeguard the financial future of the policyholder’s loved ones. Intending policy buyers should carefully evaluate their immediate and future financial obligations, to determine the required life cover accurately. They may use a term plan calculator for a more accurate estimate.
- Critical Illness Cover: While term plan insurance acts as the primary financial shield for an individual’s family in the event of the insured’s passing, the burden of critical illnesses and the associated medical costs can disrupt their financial stability significantly. This is why critical illness coverage is a valuable means to mitigate the burden of associated medical expenses, ensuring that policyholder’s loved ones can maintain their current living standard without burdening their financial standing or budget. This type of coverage plan extends substantial financial aid to help the insured or their family cover the cost of treatment. Similarly, insurance premiums paid to avail a critical illness cover are entitled to tax benefits under Section 80D of the Indian Income Tax Act, allowing individuals to save on tax money.
- Claim Settlement Ratio: The claim settlement ratio is essentially a vital benchmark to evaluate an insurance company’s track in handling and resolving insurance claims. The ratio is computed by dividing the total claims settled against the total claims received in a given year. Notably, a high ratio, over 90%, signifies that the insurer is adept at approving and settling insurance policy claims. One can find the current CSR on the term insurance company’s official website. Experts suggest picking an insurance company with a high settlement record to ensure the beneficiaries of the policy can claim benefits readily without any delays.
- Additional Covers: A term insurance plan extends a life cover, but individuals can increase the accompanying financial protection by including Riders or add-ons to the existing insurance plan. Typically, riders are tailored to help meet certain needs be it related to illness, policy premium, or more. However, these add-ons come at an added cost that increases the premium amount. By carefully evaluating the importance of each Rider and how they can enhance one’s coverage, individuals can decide whether the same would enhance the policy’s effectiveness or not. Some of the most popular Riders today include – waiver of premium, income benefit Rider, and accidental benefit.
- Premium Cost: To carefully analyze the term insurance plans, it is vital to ensure a balanced blend of the premium and depth of features. While life insurance quotes play a crucial role in deciding whether to buy a policy or not, it must not be the only factor. It is important to ensure the plan they choose comes with comprehensive coverage that aligns with their financial goals and objectives. Notably, a high premium can increase one’s financial burden and jeopardize the habit of ensuring timely policy payments. To avoid such financial challenges, it is advised to use an online term plan insurance calculator to find the maximum premium amount they can afford in a given month and make a decision accordingly.
Besides these, individuals should consider getting an insurance policy early in life. This is because the insurance premium amount tends to increase with age as insurance companies associate a higher degree of risk with older adults.
Hence, picking the best-suited term insurance plan is vital to ensure the overall financial safety of the dependents. To ensure this one needs to check and compare factors like premium, coverage, claim settlement ratio, rider benefits, and more. Once all the features are compared, individuals can understand whether the same suits their needs or requirements or not. They can also use tools like a premium calculator to decide the plan’s suitability and align their purchase accordingly.