Term life insurances are pure protection plans that come with no maturity benefit. We all know the importance of a term life insurance and how it helps us to secure the lives of our dependents. it is the simplest and the most effective tool to secure your family at affordable premium rates.
Even if you have accumulated a large sum of money, a critical illness or an accident is enough to destabilize your finances. Buying a term life insurance not only shields your dependents in case of your death but also provides coverage during a critical illness or an accident and covers the loss of income.
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As you are spoilt for choices, you must consider certain important factors while selecting a suitable term plan. Here are a few important factors you must keep in mind while purchasing a term insurance plan:
While purchasing the term plan the most critical step is to calculate the coverage amount. The coverage amount is the sum that your dependents will receive in the event of your death. As per the experts, the sum assured of your term insurance policy should be at least 8 to 10 times your annual income.
To calculate the amount of coverage you require, you must access factors like your age, liabilities, monthly expenses, lifestyle expense, and financial requirements of the family in future, your debts and inflation. If you have any loans, then the payout should be such that it will help your family meet their financial requirements as well as repay the debt. You can take the help of the human life calculator to understand the required coverage amount.
Make sure you are not underinsuring, as this will not serve the purpose of purchasing a life insurance plan and will lead your dependents to financial trouble.
See Also: Term Insurance For Indians
The main objective of purchasing a term plan is to leave your dependents a considerable sum of money. The money paid to the beneficiary is meant to replace the income of the life assured in case of his or her unfortunate demise.
It is important to buy term insurance early to gain maximum coverage. As such the age of entry is an important factor for deciding the coverage period. If you buy term insurance at 25 years then you can avail a maximum coverage of up to 65 years. But if you purchase a term plans at 45 or 55 years then the coverage period becomes comparatively lesser.
Therefore, life insurance must be availed for your entire service period. You can even opt for a longer coverage period if you intend to work beyond your retirement years. Buying term insurance at a young age is beneficial as you can enjoy longer coverage tenure at lower insurance premium. If you purchase a plan in your 50s then you will have to spend a good amount on the premiums.
See Also: Benefits of Buying Term Insurance Online
The claim settlement ratio is one of the key factors buyers must consider while purchasing a term insurance plan. The claim settlement ratio refers to the percentage of claims approved by the insurer divided by the total number of claims it has received. This ratio indicates the number of claims the company has settled. It becomes an important point while deciding which insurance company should be considered while purchasing the policy.
You should always go for an insurer who has a good market reputation of settling death claims. A claim settlement ratio ensures the insured that the insurance company is reliable and customer friendly. Each year the IRDAI issues a report that lists the claim settlement ratio of the insurance companies. It is recommended that you should opt for an insurance provider who has a high claim settlement ratio as the likelihood of the claim being settled by such insurer is greater.
Riders are a provision that adds benefits to the basic insurance policy. You can choose riders to modify your base insurance policy to enhance protection. There are several riders offered by the insurers that allow policyholders to make the necessary changes. Some examples of riders that are offered with term insurance plans are waiver of premium, critical illness rider, accidental death benefit, disability rider, income replacement rider and accelerated death benefits. You have to pay an additional amount when you avail these add-ons. The charges for each of these riders are different and so you must evaluate your requirements before availing the benefit of riders.
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