May 19, 2024

What Are the Steps You Must Take to Zero in On a Prudent Term Insurance Plan?

Life is filled with uncertainties. Thus, holding a term insurance policy can serve as a cushion in times of misfortunate death for your family members and dependents. However, owing to the availability of an extensive range of such policies in the market, selecting the correct plan can always come across as a herculean task. For choosing the best term insurance plan in India as per your preference and needs, there are specific aspects that you must ensure to note. Most insurers often are confused regarding the policy term, life covers to go for, type of plan to purchase, etc. To assist you make an informed decision, discussed here in elaboration are some of the important tips you must consider factoring in when choosing an appropriate term insurance policy. 

Go for a higher cover –

As the purest form of protection, term insurance is known to provide the highest coverage than other life insurance options. The term insurance not just offers coverage as death benefits to your dependents and family members but also comes with rider benefits to offer higher benefits in the same policy plan. Thus, according to the fundamental thumb rule, it is recommended to select the cover that is ten to fifteen times your annual income. So, in a term policy, you can buy a life cover of as high as Rs 1 crore with a premium starting at just Rs 500 a month provided you begin investing at an early age. Thus, keeping the future inflation rate in mind, you must select a term insurance policy with a higher assured amount. 

Compare the investment plans – 

All of you must know term policy is the most affordable insurance product available in the market. However, to save some premium amount, many often tend to make the error of purchasing an incorrect investment product. Thus, it is important for you to compare different term insurance policies on the online platform. By striking a comparison on the insurance quotes of distinct term plans, and using an online term plan calculator, you can select the most prudent plan at the lowest premium amount. 

Ensure you review the CSR (claim settlement ratio) of the insurer – 

CSR is one of the crucial parameters you must consider while buying an ideal term policy for your family.  The CSR of the insurer is the overall number of settled claims per financial year by the overall claims filed in a financial year. It is recommended to select an insurance company offering a higher CSR as they are highly reliable. 

Beware of the riders available in the term plan – 

The prudent term insurance policy is the one that ensures to cover all aspects. One of the ways to ensure this is by opting for riders. So, riders are add-on covers provided by term policy to enhance the coverage of the insurance. Riders can be bought by paying an additional premium alongside the basic cover of the term policy. Before opting for a specific plan, you must ensure to check out the riders offered in the term policy with its exclusions and inclusion. There may be five distinct kinds of riders or add-on features offered on most term insurance policies. These include – 

  • Disability rider and accidental death
  • Waiver on premium rider
  • Income replacement rider
  • Critical illness rider
  • Accidental death benefit

Factor in inflation

The term coverage of say Rs 50 lakh that you may purchase today may not be sufficient for your family members or dependents ten years down the line. This is owing to inflation. Inflation may cause the price of goods and services to increase, which may lead to a fall in the rupee value. To cater for this need, insurers tend to offer term policies with the choice of increasing the life coverage where the assured amount may enhance by 5 to 10 per cent every year. Such periodic increments in life cover can assist you to deal with rising inflation levels. 

Purchase policy through the online mode

In comparison to offline modes, there are various advantages of buying the policy through the online mode. The online mode to purchase a term insurance policy is not just simple but even hassle-free and saves a lot of money and precious time. Additionally, to select the best term insurance policy, you must directly ensure to approach the website of the insurer and check out its plan brochure to get all details. Additionally, as there is zero involvement of any agent in between, you save on the agent’s charge. Many insurers even provide premiums at a discount if purchased through online mode. So, while buying your term insurance policy, ensure to look out for such deals and accordingly decide. 

So, term policy provides adequate cover at a lower premium provided if you begin investing in such plans early in your work career. However, before you choose any term insurance plan, it is important for you to first review your needs, and preferences and then factor in parameters like your coverage, age, family’s future needs, etc. Once you have accounted for such parameters, select the plan that best matches your needs and suitability. For this, as mentioned above, you can also take the help of an online term plan calculator

Some frequently asked questions (FAQs) – 

What’s the claim settlement ratio?

This is the ratio of insurers that allows you to know the overall number of settled claims by the insurer by the overall number of filed claims in a year. So, always ensure to go for the insurer who has a high claim settlement ratio. 

What are the parameters that impact the premium of your term insurance policy?

There are numerous parameters that impact the premium of your term insurance. A few of these parameters include your age, gender, income, health history, smoking habits, occupation, and others. You may consider comparing the insurers through an online financial platform to know the insurers who may be willing to offer you term insurance depending on your existing factors and your needs.

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