We all have aspirations and long-term financial goals and we regularly make a contribution to building a corpus to achieve them. This allows you to save a certain amount of money, which will help you to be financially secure in the future. For this, you may have to make a down payment for your dream home or pay for your child’s higher education. But have you ever wondered what will happen to your family after you pass away before you can build this corpus? Since life is uncertain, it is advisable to prepare for it in advance.
A term insurance plan serves as a cushion for your family’s financial needs in the event of such a tragedy. It is a unique financial solution that allows the family to continue living as they currently are after you have passed away. Term insurance offers a wide range of benefits with bigger cover, extra riders, and a cheaper premium. However, you have to focus on a number of factors that will help you in choosing the right term plan. These factors include:
- Your coverage requirements
Before you start searching for the best term plan available, it is important to evaluate your current financial condition and evaluate the coverage you need. The first step is to calculate the amount of coverage required, which will depend on the number of dependents, their lifestyle, and future aspirations. You can also add inflation to this list as another factor.
- Premium
Term insurance are the cheapest form of life insurance and they offer pure life insurance. Therefore, you should opt for a cheaper term plan as it will let you enjoy a lesser premium value for the same cover. However, do not compromise on the amount of coverage you need for a lower premium. For example, if you buy a term plan with a sum insured of ₹ 1.5 crores, you would have to pay around ₹ 900 each month or around ₹ 11,000 each year in premiums.
Also, you have to decide whether you will buy a term plan online or offline. It is advantageous to purchase term plans through online channels after comparing different policies on key parameters.
- Critical illness riders
Other than death, other unfortunate events, such as accidents, disability, paralysis and critical illness, can jeopardize the financial stability of those who depend on you. Therefore, it is prudent to opt for term insurance with critical illness riders as an add-on. If you are diagnosed with any critical illness within the insurance provider’s pre-determined list, you will receive a payout for treatment.
- Claim settlement ratio
Claim settlement ratio (CSR) is the ratio of settled claims against total claims filed within a given period. The higher the ratio, the better the insurance company. Generally, more than 85-90% of CSR is considered good. This indicates that the company is doing well financially and is resolving most of the claims. You should look for a company that has a good claim settlement ratio and investigate the process of claims in the company before buying from them.
- Add-ons
Most good term insurance plans offer you accidental death protection among other benefits. You can also check for income benefits, in which your family members receive regular income from the plan rather than a lump sum to fulfil their financial obligations. You can visit an insurance provider’s website to know the range of add-ons that they offer.
- Solvency ratio
This is one of the most important factors to check for in an insurance company. Knowing the solvency ratio of a company will allow you to ensure that the company will survive in the long term. Moreover, a high solvency ratio indicates that a company can pay its claims on time and at any time you make them in your lifetime.
As simple as term insurance is, buying it can be confusing and tedious. To make sure you buy the right policy for you and your family, pay attention to the factors given above while purchasing a plan.