Term insurance is a kind of life insurance plan, which ensures to provide coverage for your life for a definite period. In simple words, under this scheme, your nominees will get pre-defined death benefits under any unfortunate event if you are insured. It will provide financial security to your loved ones if there is a state of loss of income due to your death.
But it is important to understand the terms and conditions and how to choose the right term before buying the term insurance.
Factors to keep in mind while choosing the right term
Choosing the right term insurance comes with the understanding and importance of the policy. With age and responsibility, you understand the goals of your life and the importance to provide financial security to your loved ones in your absence, which can result in regular income loss. This would impact the goals of your family, such as higher education of your kids, marriage, etc. Additionally, if there is any liability such as a home loan or a car loan that needs to be repaid, this policy can save your family members from the burden after your death.
Below discussed are a few factors to keep in mind while choosing the right term
1. Age is one of the most important factors for buying term insurance. The earlier a person buys the policy, the lower is the premium.
2. Responsibilities come with the number of dependants in your family. The total number of dependents and your liabilities (personal loan, home loan, car loan) play an important role when you are thinking to buy term insurance. If you have a lot of liabilities and have a huge family to take care of, it is advisable that you choose for a life cover.
3. Term insurance will provide financial security to your family and help them fulfill their goals with ease after your demise. Therefore, having defined life goals can help you evaluate the policy period of your term insurance.
4. What happens when you get retired? The good news is you can also strategize term insurance basis for your retirement age. In this case, your policy period is reliant on the number of years left until you retire.
5. There are some term plans which offer against lifestyle risks like critical illnesses. If you find yourself under such circumstances you should definitely consider a term plan.
6. It is advisable to have a life cover up to 20 times your annual income your age is less than 45 years old. But if you are older, you should opt for coverage which is around 15 times your annual income.
7. Nowadays, there are premium term life insurance plans on a monthly, quarterly, and yearly basis. It depends on your needs and goals if you want to instruct your bank to deduct premium payment periodically from your account. You can also opt for plans that provide a one-time premium policy. This also depends on your cash inflow. If you are a salaried individual, you can go ahead with a regular premium either monthly or quarterly, or yearly. But if you are self-employed and have inconsistent cash inflow, you should choose a single-premium term plan.
8. Finally, you can also assess the “Claim Settlement Ratio” of the various insurance companies as it will help you build trust that your family will be secured in your absence. Claim Settlement Ratio is an indicator of how often the company accepts or discards the claims it receives. Also, check for the usual turnaround times of insurance companies as it will help you select a better service provider.
Have you heard of term insurance riders?
Riders are additional value purchased along with a basic term plan. For instance, in the case of a critical illness rider, you will be covered by the insurer only if you are detected with critical illnesses specified by the insurer. The money can also be used for the treatment of critical diseases. On the other hand, in the case of a regular term plan, only the nominees will get the pay-out, after the death of the insured. In case of any accident or illness specified by the insurer, a waiver of premium rider can be used to waive off your future premiums. The accidental death benefit riders provide an additional pay-out to the nominees in case the insured passes away in an accident.
Difference between an offline and online term insurance plan
Now that you have understood the details of term insurance and how it can fit your family’s financial plan and goals, it’s time to buy one. The dilemma comes whether you should buy it online or offline. The insurance policy remains the same whether you buy it offline or online. Having said that, online term insurance makes the buying process much easier as well as saves your time. Besides, it is way more transparent in terms of process and pricing as compared to the offline. While buying an online term insurance policy you don’t have to depend upon everything you are told by an individual.
If you buy the policy online from any of the leading insurance companies, you might get 5% off on the premium. The free-look period is another significant difference between offline and online term insurance policies you might notice while buying it. Every insurance company gives you time to read and understand your policy in detail. You can cancel it if you feel you have been sold the wrong or inappropriate product during this time. This is known as the free-look period. Online policies give you a free-look period of 30 days, whereas offline policies give you a free-look of 15 days.
Conclusion
With the emergence of COVID-19 in our lives, we have started to understand the value of keeping good health. Currently, the entire world has begun to focus on health and adopt ingenious measures to protect ourselves and loved ones from any such unpredictable event. During such times, we should have a backup plan to secure our lives along with our loved ones. This is the appropriate time to opt for term insurance as it enables families to meet their financial goals and pay off liabilities during such an unfortunate event.
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