A term plan is a life insurance policy that provides comprehensive financial cover to a policyholder’s family. The policy comes with a death benefit, wherein the insurer offers lumpsum amount to the nominee if a policyholder has an untimely demise during the tenure of term insurance. While buying term insurance is essential, choosing the right one is also equally crucial.
This article will explain the important points you need to consider while choosing a term insurance policy.
What is the most critical responsibility in someone’s life? Without a doubt, most of us would answer family. When you’re are the only breadwinner in the family, you must buy term insurance so that your family can cope financially in your absence. However, untimely demise of the sole earner can put a family’s future at risk. In such cases, term insurance plays a crucial role.
Buying term insurance is one of the best ways a person can provide a financial cushion for his/her family. Term plan has become a popular choice of thousands and thousands of individuals because of its two primary advantages-
- It can be availed at a very cheap premium cost.
- The sum assured offered by term insurance is significantly higher compared to other forms of life insurance.
While the benefits of term insurance are plenty, buying one can be hectic. To avoid the hassles, consider these points before you purchase a term insurance policy-
- Determine Human Life Value
Human Life Value (HLV) is the sum of your income against financial liabilities. It is one of the fundamental factors that impact the sum assured amount.
The HLV amount is especially important to determine the funds your family will need if you meet with an untimely demise. Hence, make sure your policy covers at least the HLV amount.
- Compare Different Policies
Don’t buy the first policy you see. Put some time and efforts into it. There are many insurers who offer a variety of term insurance policies. Compare their benefits, disadvantages, premium price, etc. before you select one. Don’t make a hasty decision.
- Claim Settlement Ratio
Claim settlement ratio sheds light on the number of claims a company has settled against the number of claims raised by the policyholders.
Thus, you must look for a company with a high claim settlement ratio. It is also essential that the personal details you share, such as medical history, income, etc. are legitimate. Any false data might result in a claim’s rejection irrespective of an insurance company’s claim settlement ratio.
- The Tenure
The tenure of term insurance is the timeframe for which the insurer provides cover to the beneficiaries. For example, you buy a term insurance plan with a tenure of 30 years. If you pass away during this term, then the insurer will allow your family to avail the death benefit. However, there is no sum assured provided if you survive the term. You will stand to lose all the premiums you have paid to the insurance company. This is the only drawback of a term insurance plan.
Secure your family’s financial safety with term insurance, and don’t forget to check the aforementioned points before buying one.