A term life insurance policy provides financial protection to one’s dependents in case of sudden or accidental death of the primary bread earner. Currently, only 30% of urban Indians have term insurance.
You should opt for the term life insurance early to enjoy a low premium and an extended cover for your family members. Term life insurance provides both risk cover for your family and peace of mind for you. Any person looking to buy term insurance must be aware of the following points before making the final decision and must compare insurance online:
1. Tenure of the policy
The policy tenure plays a crucial role as the nominee, or the family will be provided with the insurance cover in case of policyholders’ death within such a period. You should own a term life insurance till you don’t have any financial dependents. Alternatively, you can own a term insurance policy till retirement and assume you no longer have any financial dependents.
2. Riders
Riders are extra benefits which can augment a term insurance plan. For instance, let us assume that someone purchases a term insurance policy with a death benefit of Rs 80 lakhs, and an accidental death and dismemberment rider for Rs 20 lakhs. In such a case, if the policyholder passes away due to an accident, then the nominee will receive Rs 1 crore as the consolidated amount. However, if the policyholder dies away due to any other reason, the nominee would receive Rs 80 lakh.
Here are some riders: waiver of premium, critical illness, accidental death and dismemberment, the accelerated sum assured, partial and permanent disability. Riders can be very useful, and you should purchase them as per your needs. For example, if you frequently travel over long distances in a car or bike, it makes sense to purchase the accidental death and dismemberment rider.
3. Honesty
A term insurance plan would require details concerning you and your family members’ lifestyle and health. Such questions include essential information such as smoking and drinking habits, past illness, history of illness in the family, etc. The answer to these questions should be authentic to avoid any dispute in the future.
Many potential buyers think of lying to such questions to reduce the premium payable. However, it can result in the rejection of their death claim in future and put their nominees or dependents at risk.
4. Quantum of cover
The quantum of cover is one of the most debated topics for many potential policyholders. Most insurance policy agents will push for an insurance cover based on specific multiples of the consumer’s income. However, instead of income, the focus should be on the total expenses and liability held by you.
A policy covering the consumer’s total liability, along with including a provision of monthly expenses for the foreseeable future, would considerably reduce the financial burden on your family. A popular thumb rule is to ensure that the death benefit is ten times one’s annual salary.
5. Claim settlement ratio
The claim settlement ratio is the most critical aspect of a term insurance plan. While you make term insurance comparison online, check out the past settlement ratios of the insurance company under consideration as well. A higher ratio indicates that the company is more likely to pass your claim if the need arises. For instance, if an insurer’s claim ratio settlement is 98%, then that means the insurer will settle 98 out of every 100 claims.
It will make the settlement process hassle-free for the nominee or family member of the policyholder. Apart from the claim settlement ratio, also analyse the claim settlement process in detail to understand all the associated terms and conditions.
Conclusion
Term life insurance policies are an essential component of the overall financial planning for an individual. The decision regarding selecting proper term insurance would go a long way in assuring your entire family’s long-term security and financial stability. You can read the points mentioned above carefully to make an informed decision regarding your future life insurance policy and ensure the best protection and financial cover in the future for your loved ones.