When you are young, the last thing on your mind is death and the need to plan for it or even deal with it. However, as you start taking on more responsibilities, the need for a back-up plan becomes necessary.
The most important aspect of this contingency plan is making provisions for your loved ones so that they can continue to live their lives, even without you. It is in this context that term life insurance becomes highly essential.
A term plan is a crucial insurance tool that offers financial security of a death benefit to your loved ones if something untoward happens to you.
The best term life insurance comes with various solutions that are tailored to suit all circumstances. However, with so many options, it can often get overwhelming to find the ideal policyfor yourself.
To help, here isan insight into choosing the right term life insurance coverage for yourself and your loved ones.
Key Features of Term Insurance Plan
When you are looking at various term life insurance plans, you need to examine the following features:
- Sum assured: This is the coverage amount that is payable to the policy nominee after your demise.
- Entry age: You should be within the permissible age limit of 18 and 65 years to buy an insurance cover.
- Maturity: The policy expiration age is called the maturity age. Generally, the maturity age of these policies is 75 years. However, some insurers may even allow up to 80 years.
- Policy tenure: This is the duration for which term life insurance policy will be active. For instance, if you want to buy a term plan at the age of 40 with a maturity age of 75 years, then the tenure of your policy will be 35 years. The tenure can be anything between 10-40 years. If you want to enjoy the benefit of the lowest premium, then you must seek for the maximum possible tenure to get the most comprehensive cover.
- Claim settlement ratio (CSR): When you are looking to invest in a life insurance plan, then you must always check the claim paid ratio before you commit to it for an extended period. This ratio indicates the percentage of term insurance claim cleared by the insurer. It would help if you always looked for insurance providers whose CSR is over 90%.
- Add-on benefits: Also known as riders, these additional benefits are offered by insurance providers to help you expand the scope of your base term life insurance policy. You can choose from many riders and add on to your plan for a small premium.
- Health check-up: The insurance provider may ask you to get a health test if you apply for term life insurance at a certain age or require a high insurance cover.
Tips for choosing the best term insurance plan
Now that you are aware of the basic features, here are some tips to help you choose the best and the most comprehensive term life insurance for your financial portfolio:
The main objective of investing in a term insurance plan is to provide financial cover to your dependents in your absence. Therefore, your insurance policy should be able to cover not just the loss of income but also liabilities, lifestyle expenses, and other future expenses. This is the most crucial consideration when choosing a life insurance policy. Coverage amount should be neither too high, nor too low. It should be enough to meet all the future expenses of your family members.
You can get the best term life insurance at the lowest prices. However, that doesn’t mean that they can’t get cheaper! Term plans usually demand more moderate rates of the premium than other insurance options because they mostly provide financial payouts, only in case of the policyholder’s demise within the policy tenure. You can make your payable dividend lesser if you are a non-smoker or if you start investing early.
Don’t forget to add useful riders to your policy that will protect you from life’s uncertainties, such as accidents and critical illnesses. These riders can be easily supplemented to your base policy to earn benefits over and above your existing policy. For instance, if you take a critical illness rider with your plan, your insurer will give you the sum assured upon being diagnosed by a life-threatening condition mentioned in your policy document. Unlike a health insurance policy, the sum assured received from your critical illness rider can be used as you like. You can pay your hospital bills, medical bills, consultation, and even take care of your household expenses while you wait to recover. Many such riders can make your term life insurance more comprehensive. However, you must choose the rider carefully and based on your individual needs.
This feature is offered by many insurance providers that allow you to enhance your life cover during critical stages of your life. For instance, when you get married, you can increase your term insurance policy protection by 50% and 25% when you become a parent. Make sure your insurer gives you the option to expand your coverage at various stages of your life.
Choosing the right term life insurance takes research and careful evaluation of your future needs and liabilities. Use the tips and steps discussed above to make the most prudent choice as per your lifestyle.