A term insurance plan is critical in securing your family’s future. In case you’re unfamiliar with what a term insurance policy is and what exactly it does, here’s a quick explanation.
After you take out a policy, you need to pay a monthly premium, which is easily done online these days. If you keep up with these payments, a sum of money is given to the family and other named beneficiaries if the policyholder passes away within the duration of the policy. As a result, financial stability is regained even if the sole earner in the family faces an unforeseen accident.
A number of people don’t think insurance policies are necessary because they don’t foresee anything untoward will happen to them, but life doesn’t pick favorites. It’s always better to be covered by a term insurance policy to ensure the financial safety of your family.
A term insurance policy is one of the best forms of insurance as it provides expansive coverage at low costs. But, before you sign up for one, take a few minutes to understand the terms and conditions that come with term insurance policies.
Here are six major points you need to take note of before finalizing the deal with the insurance firm of your choice.
1. Amount of Insurance Required
Sure, a life insurance policy will provide your family with funds if the policyholder passes away. But, how much income would the surviving members of a family require?
Well, this amount varies from family to family, depending on their lifestyle, future goals, and outstanding loans. You must consider expenses, such as your children’s education and their weddings before opting for a plan that will ensure financial security without compromising their lifestyle even if you’re not around.
2. Tenure of the Insurance Policy
The tenure of the policy should cover you at least till the age of retirement, which is usually 60. So, the younger you are, the longer your insurance should last you. Insurance firms offer a variety of options, ranging from 1-30 years, and sometimes even more.
Individuals who marry late and bear children at higher ages may want to look for policies that go up to the age of 65 years. If you’re in your early forties, don’t take an insurance that ends in 15 years, because you’ll be insurance-free in your late fifties.
Getting a new policy then will be much more expensive. Additionally, since your health may deteriorate, you might even be declined the coverage you want.
3. Tackling Inflation
People often forget to factor in inflation when buying aterm insurance policy. A coverage of INR 50 lakh may seem more than sufficient today, but the average inflation rate in India is projected to be 6-6.5%. So, two decades from now, prices will rise, and INR 50 lakh won’t have its current value.
An optimum choice of insurance policy would be one with rising coverages every year. Go for plans that offer an annual increase of about 10%, and never choose a policy in which the rising coverage rate is less than the projected inflation rate.
4. Claims Settlement Ratio
Claims settlement ratio is the relationship between the number of claims the insurance firm has received to the number that they have settled and paid out. A higher number means that they pay out a larger portion of the claims they receive. So, a higher claims settlement ratio indicates a better chance that they will pay up when you put in your claim.
Always take a thorough look at the settlement process. Choose a firm that has a quick, easy, and hassle-free process for a policy that covers injuries, disabilities, and terminal illnesses.
5. Online or Offline
Getting insurance no longer means dealing with multiple insurance agents to try and get the best deal. You now have the option to choose term plan online since many insurance firms have gone online.
Browse through a range of firms and policies, and then pick one that suits your needs. You also save money in the process since policies are cheaper because you don’t have to pay any brokerage fees.
Most insurance policies come with renewability clauses.
Usually, a renewal leads to an increase in the premium. Some firms may have terms which state that the client can lose their right to renewal after crossing a certain age limit. They may also refuse to renew a policy if you have developed a new health condition since you took out the policy. This is why it’s critical to check and understand every line of the terms and conditions.
If you’re planning on getting term insurance, remember to keep these six points in mind. You will also be happy to know that term plans are affordable, and they protect you and your family if you face a life-threatening illness or become permanently disabled.