Are you one of those people who takes their lives for granted? Do you believe that an unfortunate event can never occur in your life? An unforeseen incident can happen without any warning, and it would be wise to ensure that your family does not suffer any financial distress in your sudden absence.
A term plan can be of great assistance to achieve this objective. It is an economical way to provide your loved ones with maximum monetary stability. Term plans are pure life covers with no survival benefits. The insurer pays the death benefit to your nominees in case of your untimely absence during the policy duration.
With many insurers offering term life insurance, selecting the most suitable and cost-effective policy is not an easy task. Here are five steps to aid you in making the right choice:
- Be clear about the plan’s period
Ideally, the term plan should provide coverage at least until you will continue to work. Life expectancy is higher, and because a term plan acts as an income replacement tool, opt for a longer duration to ensure that your family is financially protected when you are not there.
It is advisable that you buy a term plan when you are younger, as you will get it at a cost-effective premium. Typically, insurers will offer coverage at a lower premium when you are healthy as compared to if you buy insurance later in life. You can use a term insurance plan calculator to know the approximate premium for the chosen sum assured (SA) and its tenure.
- Buy the policy online
It is easier to compare different plans offered by various insurers online. Additionally, insurance companies decrease their administrative costs for online policies and save agents’ commissions. This helps in reducing the premium. So, it is recommended that you buy an online term life insurance plan to save money in the long run.
- Research on the premium for the basic cover and riders
The insurer pays the benefits of your base term plan to your nominees if a tragic event results in your absence during the policy period. You can enhance the coverage with riders, such as critical illness cover, accidental permanent disability, and waiver of premium. These are available at an extra premium, and you can use an online term insurance plan calculator to know the impact on your cost for these additional covers.
- Check the claim settlement ratio (CSR)
CSR is an important thing that you should consider while comparing different insurers. It is the percentage of the number of settled claims and total claims received during a particular year. Generally, a higher CSR reduces the possibility of your nominees’ claim being rejected in the future.
- Inquire about the solvency ratio
While looking for the best term plan, you should also take the solvency ratio into account. This ratio indicates the economic ability of the insurance company to meet its various obligations. For example, in a natural calamity, the insurer may receive a large number of claims, and if the company is not financially stable, your nominees may face long delays in receiving the policy benefits. Therefore, it is suggested that you buy a term insurance policy from an insurer that has a high solvency ratio between 1.5 to 2.5.
Term plans are the simplest types of life insurance covers. They offer a reasonable and convenient way to financially secure your family in your sudden absence. The policy benefits ensure that your dear ones can sustain their present lifestyles and achieve future life goals without facing any liquidity crisis.
However, when opting for the best term plan, it is important to consider the long-term requirements and invest in a policy that will meet all the needs of your family. Moreover, understand what is term plan, its features, SA, and other conditions to make the correct decision.