How to Select the Right Term Insurance Policy?

A term plan is the most cost-effective and efficient approach to protect your loved ones. Individuals and families are increasingly preferring term plans over unit-linked insurance plans (ULIPs) and other traditional plans in India, indicating that term plans are becoming more popular. If you have dependents (spouse, children, and parents) and large liabilities (such as a home loan) and other financial responsibilities (children's schooling and marriage), you should consider term insurance. You should read on to find a six-point checklist before purchasing a term plan.

How to Select the Right Term Insurance Policy?

Here are certain factors that should be considered to purchase the right term insurance plan.

Must Read: Why is a Term Insurance Plan Right for Home Insurance Buyers?

1. Coverage

The primary motive for purchasing life insurance is to provide financial security to your dependents in the event of your death. They expect the insurance policy to cover their dependents financially if they are unable to work. As a result, they must ensure that their life insurance coverage is enough. The insurance must cover the individual's human life value, or as it is known in the insurance industry. Simply described, the HLV is the sum of an individual's earnings and liabilities, such as loans. This is the foundation for life insurance coverage, and the best plan for an individual is one that includes at least the HLV.

2. Affordable Cost

We've all heard that term insurance is the most affordable. But that doesn't rule out the possibility of a lower price. Choose the cheapest term plans because this equates to reduced premiums for the same coverage. Give preference to insurance providers that provide reduced premium rates, such as for non-smokers.

3. Necessary Riders Only

The ideal term life insurance policy for you covers all of your bases. Riders are one way to accomplish this. A rider is an add-on to primary insurance that provides additional benefits subject to specified circumstances. Riders can be added to the term plan by the policyholder. So, if he/she has a critical illness rider or a critical illness policy, he/she is entitled to the sum promised when diagnosed with a critical illness. This is in addition to the death benefit; an equal amount paid out if the policyholder dies within the policy's term. Other riders include disability coverage, loss of employment coverage, and premium waiver coverage, among others. Riders should be chosen depending on the policyholder's needs and his or her family since they can significantly increase the value of life insurance.

4. Enhanced Cover

The freedom to increase life insurance during important stages of a policyholder's life is a feature offered by some insurers' term plans. For example, an insurer may allow policyholders to increase their life insurance coverage by 50% when they marry and by 25% when they become parents. This allows policyholders to begin with a basic level of coverage and gradually increase coverage as their responsibilities grow, as well as their ability to pay greater premiums.

5. Convenience

Term life insurance is the most innovative among the various types of life insurance policies. For starters, costs and, by extension, premium rates have been significantly cut, and this process is still ongoing. The internet has simplified the process of purchasing a term plan. A healthy individual, as defined by the insurer, can now purchase a term plan on the company's website without having to take a medical exam. Moreover, purchasing an online term plan will help you save money as well due to the absence of administration fees.

Endnotes

Before selecting a policy, it is critical to examine an individual's insurance needs. Hence, one must first create goals, needs, and expectations based on the family's needs and then set aside money to meet those demands. It's also crucial to evaluate the claim settlement ratios of various businesses before deciding which is ideal for you and your family. It's also vital to review your insurance needs on a regular basis to protect your family in the event of an emergency.

Also Read: Top Term Insurance Buying Mistakes You Should Avoid

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.