Purchasing a term life plan is a guarantee that your family will remain financially secure, in case of an early demise. If you are the sole breadwinner of the family, then a term life plan is a must. A term life plan helps your family’s finances stay on track and settle debts on an early demise.
A term life policy is easy to understand and provides maximum coverage vis-a-vis any other insurance policy. It’s high cover at low premiums. A term plan helps dependents maintain lifestyle even on the early demise of the breadwinner of the family.
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The nominee is entitled to receive the death benefit which can be the spouse, children or dependent parents of the policyholder. However, there are some important factors you must consider, before purchasing a term insurance plan:
1. Choose The Right Amount of Coverage: While buying term insurance, it is important to evaluate the amount of cover you need. The coverage helps stabilize finances of your family, in your absence. Your term policy takes care of various financial requirements like home loan EMIs, kid’s education, the responsibility of dependent parents and so on.
Various websites help calculate the amount of life insurance you need. Ideally, the sum assured in term plans must be 15 to 20 times, annual income. However, the sum assured depends not only on your monthly income but also on your age, financial liabilities and years left for retirement.
See Also: What is a Term Life Insurance Policy?
2. Choose the Right Type of Term Insurance Plan: Insurers offer various types of term insurance plans which help avail a policy according to needs. You can either purchase normal term insurance or opt for an income replacement term policy.
A normal term life policy pays a lump sum in case of death of the policyholder, within the policy term. An income replacement term policy pays a fraction of the sum assured as death benefit, and the remaining as regular monthly income over a period of time.
Therefore, you have to decide the type of policy that is best suited to your family lifestyle. If you think that regular income is necessary to take care of family, or a lump sum amount is ideal, choose term life plan accordingly. Regular term insurance is suitable if your nominee is aware of the various investment tools. Else, an income replacement policy is best for dependents.
3. Choose a Plan Which Offers Riders: A good term plan is one which offers additional riders along with basic cover. You can avail supplementary coverage according to changing requirements. Avail additional riders based on needs. Don’t avail riders you don’t need or you needlessly pay additional amounts.
4. Check the Insurers Claim Settlement Ratio: The claim settlement ratio is the ratio of claims settled by the insurer, vis-a-vis claims received. This is one of the most important points you must keep in mind, before choosing term insurance policy. An insurer who is reluctant to settle death claims beats the entire purpose of availing the term insurance plan.
An insurer with claim settlement ratio of 90% or more is an ideal choice. With this data, you get to know if the insurer is customer-friendly and trustworthy.
5. Purchase a Term Plan Online: You may choose to avail term plan online. The process is completely online and hassle-free and solves the problems of dealing with insurance agents who may push for additional plans or a specific insurer for their benefit. With an online term plan, you can compare policy benefits, view customer reviews, calculate monthly premiums and choose the best plan according to your financial standing and family obligations.
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