5 Simple Steps to Buy a Term Insurance Plan
Term insurance is life insurance in a compact form that gives your family the most affordable financial protection. Term life insurance offers fixed premium coverage for a fixed period. You get a large life cover (i.e., insurance) at a relatively low premium rate. While both protection and investment are part of traditional life insurance plans, term insurance plans are mostly just protection plans. Term insurance schemes are, therefore, said to be mere protection schemes that ensure the financial stability of dependents in the event of the insured's early death. However, compared to conventional insurance plans, term plans have the benefit of providing significantly more affordable coverage with the given amount.
It is important to ensure that even if you are not around, your dependents are financially protected in tough times. For this, purchasing a term policy is the most effective and economical way. The guaranteed amount received through a term plan as reimbursement helps meet your family’s basic financial needs.
The Benefits of Term Insurance
Rider# Benefits (additional to basic plan)
Key Terms When Comparing Term Insurance Plans
Disbursement amount of plan
Amount of the premium
Terms and conditions of the policy
IRDAI-approved settlement ratio
Additional benefits offered
Factors Affecting Term Insurance Plans
Medical history of the family
Smoking and drinking habits
Thus, considering all the factors, it becomes difficult to find the perfect plan curated for your needs. But with a bit of research and information, you can find the best insurance. To ease your dilemma, here is the stepwise process to choose the best plan possible.
1. Determine if you require insurance.
Term insurance isn’t self-beneficial; it is the fund your loved ones can use if you are unable to meet their needs. If no one is financially dependent on you, you have no debt, and your assets are enough to pay off your liabilities, you probably don't need term insurance. However, if you have a family and your assets are on the lower side, an insurance policy should be taken. This depends on your family’s requirements, income sources, the liabilities you currently have, the amount required to maintain the current basic lifestyle, and the assets you currently hold.
2. Choosing the right company
It is important to choose the right insurance company as you put all your savings in the company’s hands, trusting that it will secure your family’s future. To choose the right insurance plan, first, compare the policies of leading companies, remember to choose a plan that corresponds to your financial plan, and do not go overboard. Also, remember to choose a company with high goodwill and trust. Verify their claim settlement ratios provided by IRDA (Insurance Regulatory and Development Authority). For more details, check the company’s complaints, reviews, and customer service quality.
3. An insurance that fulfils your needs
Choose a term plan that fits your budget and provides the maximum benefits. Don’t rush such decisions as this is about securing your family’s long-term future. Basic term plans, term plans with monthly payouts, and term plans with lump-sum payouts are the three forms of term plans available in the market. While a lump-sum payment plan covers your immediate financial obligations, monthly income is needed to keep the family afloat. It is important to look at exactly what is covered in your policy as there are various terms and conditions one may overlook. And when the time comes, you get to know that the claim is not eligible for settlement.
4. Additional benefits (riders#) to the policy
Opt for the normal term insurance, and then you can customize it according to your needs and extra precautions against factors, such as accidental death cover, critical illness, disability claim, etc. Some term insurance plans have pre-included additional benefits, while others have optional choices that can be included according to your needs. As a result, in the latter case, you have the option of attaching the desired riders# to the basic policy rather than taking a readymade policy with riders#, which you may or may not find useful.
5. Option to pay the premium
In the thought of securing the future, don’t ruin your present. Think as per your needs if you can pay the premium annually, half-yearly, quarterly, or monthly. Some insurance policies give additional discounts on annual payments as they get the lump sum amount on such policies. The premium shouldn’t be a burden on your pocket. It is recommended to choose a premium in the range of 20% to 30% of your total income.
Thus, as people are becoming more aware of term plans and their benefits, such as less premium payable than life insurance, term insurance tax benefits, and an assurance on the family’s future, they are opting to secure their futures by buying such plans at a premium.