For most individuals, purchasing term insurance has become a necessity more than a choice. Nowadays, term insurance has gained huge popularity among customers and more and more individuals are keen on purchasing the policy. With a continuous increase in demand from customers, the insurance companies offer an extensive range of term insurance policy. However, choosing the right policy can always be a herculean task for policy buyers. With different options available in the market, it is quite easy for policy buyers to get attracted to the insurers, which offer a lower premium.
However, one might end up buying insufficient coverage, by just focusing on a lower premium. Thus, buyers need to consider the following factors while purchasing a term insurance policy.
An individual should consider choosing the term life insurance coverage that will be adequate enough to take care of the family’s financial need in case of any uncertainties. The best way to choose the right coverage is to calculate the following.
By calculating all these factors, you will be able to evaluate the amount of coverage you need to secure the financial future of your family.
Once the coverage amount is determined, it is important to know the term period of the policy you would need it for. You should not choose a smaller tenure as the policy will lapse before the completion of the financial obligation. Similarly, you should not choose too long policy tenure as the premium charge will increase with the increase in age and you will end up paying a very high premium.
It is important to choose the right policy tenure. The right way to estimate the tenure of a term insurance plan is to determine the liquid net worth after subtracting the liabilities. The age at which your liabilities will be covered by your liquid net worth should be the right age till which you need coverage.
Term insurance policies offer different rider options to enhance the coverage of the policy. Thus, it is important that you go through the benefits offered under the rider option before choosing the one. There are four different types of riders offered by the term insurance policy. These are:
It is the most important factor to consider while purchasing the term insurance policy. The claim settlement ratio shows the efficiency of the insurance company. The higher the claim settlement ratio of the company will be, the more efficient it will be at settling the policy claims. Thus, you should always consider purchasing a policy from a reputed insurer, which has a higher CSR ratio. By this way, you will be ensured that the claim filed by the nominee of the policy will be paid in case of an eventuality.
Whether you buy a 1 crore term insurance plan or not, it is important to know that the coverage you choose for your term plan should be 10-15 times your annual income. As a comprehensive and simplest form of life insurance product, the term plans offer the advantage to purchase a higher coverage amount at a minimal premium rate. Thus, make sure that you follow this thumb rule while purchasing a term insurance plan and also consider the other significant factors like health conditions, age, dependents, annual income, etc. By considering all these factors equally and by comparing the quotes of the plan online you will be able to select the most remunerative plan as per your suitability and requirement.
The insurance experts always advise purchasing the policy at a young age, as with the increase in policy tenure the premium of the policy also increases. By considering these factors you can choose the term insurance policy that fits your requirement right and ensure the financial security of your loved ones.