We live in a time of uncertainties. If you are the breadwinner of your family, you need to have enough financial backing for them to sustain their lifestyle with ease, in case you ever lose your life. This is because losing an earning member of the family may cause unexpected financial pressure. To avoid such a situation in the future, having a term policy is a must. Term insurance is a type of life insurance where you get an immense sum covered with low premiums for a specific period.
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Several insurance companies are offering several term plans online as well as offline. With so many options available, choosing the best term plan can get confusing. Here are some tips to select the right term insurance provider and plan-
- Think about the current stage of your life
For selecting any type of life insurance, know that there is no one best type for all. Depending on what stage of life a person is in, their financial security and needs will vary. A young person with no dependents may not require the same cover as opposed to a parent with two children to look after. Also, you need to consider your liabilities while selecting a term plan. You need to ensure that your insurance coverage takes care of the debts so that your loved ones are not burdened by it after your demise.Depending upon your age, dependents, and liabilities, your insurance cover should be determined. Choose the tenure of your term plan, taking into consideration the age until which you need a cover. You need to assess your life, then choose a term plan accordingly. Also, you need to ensure that the premium amount you choose can be paid off with ease. Use a term plan calculator to know the premium you have to pay for your desired coverage.
- Analyze your current lifestyle and income
The purpose of a term policy is to ensure that your loved ones do not suffer any financial blow in case of your sudden demise. Hence, it is important to assess your current lifestyle and choose a plan accordingly. Also, take inflation into account while analyzing your standard of living. It will give you an estimate of the coverage needed to sustain the lifestyle needs of your loved ones.Most people struggle in deciding the amount of coverage they should choose that would suffice for their family. Using a term plan calculator will ensure that you get an estimate of the coverage and premium. Taking your income and different portions of financial duties of that income into consideration will help you in choosing the best term plan. Also, there are term insurance tax benefits which you can additionally avail of and save taxes.
- Check the claim settlement ratio
There are several companies these days fighting cut-throat to offer the best term insurance from a price point. However, insurance is a service industry where the reputation and the history of the company play a bigger differentiator than price. Check the claim settlement ratio of the insurance companies that you have shortlisted for buying a term plan. A claim settlement ratio reflects the ratio of the number of claims a company has received and how many of those claims have they settled. For example, if a company received 100 claims in a year and has settled 95, its claim settlement ratio is 95:100. A claim settlement ratio reflects the probability of your dependents receiving their coverage in case you are no more. Choose a company with a good claim settlement ratio and an overall reliable reputation.
- Consider adding riders
When you are buying a term policy, along with your basic term insurance, you can also add a rider that provides additional coverage at an additional premium. There are different riders available who serve different purposes. They are add-on perks to your existing insurance, and you can customize your term plan with the riders you want. You also get additional – for the additional premium that you are paying. Critical illness rider, a disability rider, waiver of premium rider, and accidental death rider are some of the common riders that one can add to their base policy. With these riders, you expand the coverage of your term policy.