Are you one of the millennials who understands the importance of term insurance, but is confused about picking the right one? Fret not! We’re here to help!
Thinking of buying a term plan? Good idea. But are you aware of what to factor in while selecting the term plan that’s right for you? Well, you’ve come to the right place! In this article, we’re making a subtle attempt to tell you the factors that help you select a good term plan.
Let’s start with the basics
A term plan can be defined as life insurance cover that offers financial coverage to the beneficiary of the insured person for a defined period of time. Buying a term plan ensures that your family stays financially secure, even when you’re not around to fend for them.
But what do I consider while choosing between various term plans?
Here’s a step by step guide to choosing the perfect term plan:
Analyse your needsThe first step is to analyse your needs. You must not buy a term plan of X amount, because ‘Sharmaji said so’. It’s extremely vital to analyse your individual needs and that of your family’s, given your current income and future expenses. Buy a term plan that fulfil all your needs instead of blindly following peer advice.
Compare various plans and companies
In this day and age, there is a plethora of term plans available in the insurance market. So don’t jump to the first option you come across. It is only wise to compare various companies and their term plans before you zero in on one. A smart way to do so is to compare certain features such as costs and benefits of these plans on an online broking website to make the right choice.
Decide on the cover you would requireEvery family has their own unique needs and there is hence, no ‘one size fits all’ formula for this. Hence, based on your current income, outstanding debts and future goals of your family, it is wise to choose a cover that is more than enough for your family to survive and fulfil their dreams.
A simple way to get the right cover is to know the calculation of the sum assured you would need. This can be arrived at with a simple formula-
Sum assured= ((Current annual expenses x 15 years) + Loans and liabilities + Family Goals) – Disposable assets or Total Savings till date + Current Insurance
Consider Inflation- We live in a world that’s constantly changing and so are our needs with it. And with changing needs, our daily expenses also tend to increase. Therefore, it is vital to factor in the rate of inflation when buying a term plan and consider a life cover that is sufficient to ensure the needs of your dependant are met at all times.
Claim settlement ratio- Simply put, claim settlement ratio is the proportion of settled claims with regards to every 100 claims raised with the company. Higher the claim settlement ratio, the better the term plan. This is because, in case you need to raise a claim with the company, a good ratio indicated that there are higher chances of your claim being settled.
Riders- An insurance rider is an add on benefit that you can add to your vanilla term insurance plan to ensure that you get more advantage over the subject of the policy, in case of certain contingencies. Hence, it is vital to analyse and compare plans on the riders they offer and choose the one that best suits your needs.
Summing it up
Now that we’ve got our parameters right, wait no more! Compare and choose a term plan that best suits your needs and ensures your dependants and family are financially secure, even in your absence.