The term insurance plan is considered as one of the simplest forms of life insurance product, which offers insurance coverage in form of death benefit to the beneficiary of the policy in the event of the unfortunate demise of the insured person during the policy tenure.
plans available in the market. Choosing an appropriate plan which fulfills all the requirement can be a difficult task. Thus it is important to keep certain things in mind while buying a term insurance plan.
Even though there is an extensive range of
Further here, we have given insight on 5 important things that you should consider while buying a term insurance plan.
1- Go for Adequate Insurance Cover
It is important to decide how much insurance coverage you should get. There are many different ways to estimate the amount of insurance coverage you need. Keep in mind the important aspects that influence the insurance amount like your current income, rising inflation rate, expected increase in the yearly rate of income, prevailing risk factor, etc.
Make sure that you choose adequate coverage to cover all the liabilities. As per the basic rule of thumb, it is advised that the insurance coverage you choose should be 10-12 times of annual income.
For example, in today’s value, if you require Rs.20 lakh on your child’s marriage, assuming that you have 10 years for the event to happen and at a 7% inflation rate, you will need to have a value of at least RS.39 lakh after 10 years. You can follow a simple formula to estimate the insurance coverage you will need i.e.
The outstanding liabilities + 300 times the monthly expenses (minus EMIs) + 3 times the current cost of goals. To ensure a secure future for your family it is very important to have adequate coverage.
2- Check the Claim Settlement Ratio of The Company
Checking the claim settlement ratio of the insurance company is one of the most important aspects while buying a term insurance plan. The record of the term plan claim settlement shows a clear picture of the insurance provider to the prospect of the insurance buyers. The higher the claim settlement ratio of the insurance company is the more reliable it is.
The claim settlement ratio of the insurance company can be described as the number of claims settled in one year divided by the number of claims filed. Before zeroing in on a plan make sure that you check the claim settlement ratio of the company. Try to purchase the policy from a renowned insurance provider, who has a higher CSR, so that you can be assured.
3-Don’t Forget to Add the Nominee
While filing the proposal form of the policy, make sure that you include the beneficiary name. Generally, the beneficiary can be your spouse or your children to whom you want to pass on the benefits of the term insurance policy. Choosing the nominee is an important part of policy purchase, as in case of your unfortunate demise, the insurance coverage will be given to the nominee of the policy as the death benefit.
4- Add Additional Rider Benefits, If Required
Apart from basic coverage offered by the term insurance plan, many term insurance policies also offer additional benefits as riders to enhance the coverage of the policy. These riders can be added to the base plan if required by paying an extra premium to increase the policy coverage. Some of the common rider benefits offered by the term insurance plan are:
- Accidental Death benefit Rider
- Accidental Death and Partial and Total Permanent Disability Rider
- Critical Illness Rider
- Waiver of Premium Rider
- Income Benefit Rider
If required, you can choose any of these riders to avail of the extra benefit offered by the plan
. However, make sure that you understand the inclusion and exclusions of these riders before including it in the base plan./
5 - Disclose All the Information Correctly
While buying a term insurance plan, make sure that you disclose all the information correctly to the insurer. Do not hide details like drinking and smoking to save on the extra premium. If you hide your health history from the insurance company then you are breaching the contract with the insurer, which can result in the rejection of claim later on. Thus it is crucial to show all the information in the policy form correctly and every verify it from your end before submitting the form.
If you don’t disclose the information related to your health issue correctly
in the form while buying term insurance and the insurer detects that the cause of death is the health issue which was not disclosed in the proposal form, in that case, the insurance company will reject the claim and also terminate the policy. thus it is vital to show the right information related to your health, age, lifestyle habits, past medical history in the proposal form.
Term insurance is one of the most important investments in the financial portfolio. The term plan not only provides financial security to your family but also acts as an emergency fund to achieve future goals even in your absence. Thus, by keeping these above-mentioned points in mind you can zero in on a term plan as per your requirement and suitability.