The term insurance plan is a device by which we can ensure that our family members get financial protection in case something unexpected happens to us. Most term insurance plans are customized to fit a variety of situations and offer necessary solutions. It is always advisable to research properly and compare the costs and benefits of a term plan before buying the plan.
8 Factors to keep in mind to choose the right Term Insurance Plan in India for yourself
- Choosing an appropriate cover amount: Term insurance plan is taken to offer financial support to your dependants in your sudden absence. If you are looking for a plan with plain indistinctive insurance, choose one that assures a lump sum amount to your family if you are not around in the future. You should also assure that the sum proposed by the policy is at least 15-20 times your current annual income. You can also add the Accidental Death Benefit which safeguards you against a range of unpredictable incidents such as road accidents, by offering large benefits at a low cost.
- Critical Illness rider: You can also get Critical Illness rider on a term plan which offers financial protection if your family has a history of critical or terminal diseases. Health insurance does not compensate for major illness which is very expensive to treat after they are diagnosed.
- Benefits of purchasing your plan online: It is more beneficial to purchase your plan online rather than offline. Online Term Insurance plan requires you to pay fewer premiums in contrast to offline Term Insurance plans. Online Term Insurance plan is also favourable as it is cheaper due to the absence of agents and you pay the premium directly to the insurance company. In addition to this, there is no requirement of paperwork and the process is swift and convenient. Also term plans with the lowest expenses should be chosen since they translate to lower premiums for the same cover. While purchasing the insurance online it is also easier to compare it with similar offers from a number of insurance companies and choose the most suitable one for you.
- Choosing a suitable Tenure: You should choose a suitable tenure in order to derive benefits from the term insurance plan for yourself. You should have a term insurance plan till you reach your age of retirement that is 60, which is normally considered to be an appropriate time.
- Single premium plans: A single premium plan can be costlier as you have to pay a large sum of money upfront but it has its benefits depending on your particular situation. In case you are prone to miss renewal deadlines and can afford to pay the premium at a time, it is beneficial to go for the single premium plans as the overall cost would be less and it will save you from the trouble of paying the premium a number of time before the deadlines.
- Take your responsibilities into consideration: Home loans, financing children’s education and other legal responsibilities should also be considered. It is also necessary to include the payable outstanding loans in your cover amount. Those financial obligations and loans will be taken care of by the insurance company and your family will be free from hassle in case something unfortunate happens to you.
- Claim Settlement Ratio and Solvency Ratio: In some cases, certain insurance companies delay settling the claim. It is of utmost importance to acquire your Term Insurance plan from an authentic and trusted insurance company to avoid putting your family through additional financial trauma. To insure this, it is necessary to check the claim settlement ratio of the company. Select a company with a higher claim settlement ratio as it is presumably better than a company with a lower claim settlement ratio. You can also find out if the insurer you choose will be financially able to settle your claim by the solvency ratio. A solvency ratio of at least 1.5 is needed to be maintained by every insurer as made compulsory by IRDAI. The solvency ratio becomes vital in case of natural disasters which, although seems unlikely to happen, could compromise your family’s financial stability if disregarded.
- Income Benefit: Your family members are enabled to receive a regular income instead of a lump sum amount from some term insurance plans. It should also be taken into account whether the insurance cover will continue without the need to pay the premium in case of permanent disability.
FAQs related to Term Insurance
1. Can I change the premium paying term for term insurance?
No, it is as per the initial agreement given in the schedule.
2. Is term insurance premium refundable?
Yes, if you buy return of premium plan which is almost double the premium than a standard product where premium is not refunded.
3. What happens to the premium on the term policies?
It contributes to the claims paid in the duration, that is how insurance works - many contribute for the benefit of few.
4. What is the premium payment term in term insurance?
All versions are available - Single, limited and regular but the regular premium is most economical and advisable.
5. What happens if a return of premium term policy is not held to the end of term?
You get a surrender value.
6. What is a limited pay premium payment option?
You pay the premium for a limited duration for the chosen cover period for example you pay for 6 years and remain covered for 20 years.
7. Who has the right to change the premium mode?
The customer has the choice to select the mode from monthly/quarter/Half-year and Annual.
8. Which premium payment mode is most expensive?
Monthly where you pay 8% more than the annual premium. So you pay Rs 108 in monthly mode, Rs 106 in HY mode and Rs 104 in Qtr mode.
9. What happens if I stop paying my term life insurance?
Your contract is over and your cover terminates.
10. Can I increase the tenure of my insurance policy?
No, you can't increase the tenure of your insurance policy.