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12 Tips to Choose the Best Term Insurance Plan

Selecting the right policy is essential to provide appropriate financial coverage during emergencies. However, due to the availability of numerous insurance plans in the market, selecting the right one can be confusing. So keep reading to learn some vital tips on how to choose a term insurance plan.

Before getting into it, let us take a quick look at who needs to buy a term insurance policy.

Top 12 Tips on Choosing Term Insurance Plan

Some tips that you can consider while selecting a term insurance plan are:

1. Calculate Your Monthly Income

The most crucial factor to consider while selecting the right coverage amount is your monthly income. It is essential because if you opt for higher coverage, the premiums will also be substantial. This will cause an additional financial burden and result in disruption of your monthly budget. In such cases, it will become challenging for you to pay the premiums on time.

2. Analyse Your Current Lifestyle

You must critically analyse the current and future requirements of your family. You also need to consider their current living standards and spending habits while deciding the coverage amount. This will ensure that they won’t have to compromise on their lifestyle in your absence.

3. Consider Your Age

Your age plays an important role in selecting the right term insurance policy. This is so because it will help you decide on suitable policy duration and appropriate coverage. For instance, if you are in your 20s or 30s, you will have to go for a term insurance policy with a longer duration.

4. Evaluate the Number of Dependants

If there are about 3 to 4 members in your family, you can opt for a lower coverage compared to having 6 to 7 members. This is so because the financial requirements will increase significantly with an increase in the number of members.

5. Compare the Policy Premiums

There are several companies in the market offering term insurance policies at different rates. So it is essential to perform extensive research on the premiums that you need to pay for each before finalising one. This way, you can choose the most affordable premiums to ensure maximum savings and avoid disrupting your monthly budget.

6. Add Essential Riders to Your Plan

You can customise your term insurance policy by adding riders specific to your need. For instance, you can choose a critical illness rider if you are suffering from one. You can also choose an accidental death benefit rider to opt for substantial coverage on unfortunate deaths during an accident.

7. Find out the Claim Settlement Ratio of Insurer

Claim settlement ratio refers to the percentage of claims settled against applications received. Again, you can easily access this information from the official website of your insurer. You must always go for an insurance company that has a high claim settlement ratio.

8. Calculate Present Liabilities

If you have taken any loan for financial assistance or for fulfilling your goals, then it is vital to keep them in mind while deciding the coverage amount. For instance, if you have taken a home loan for the construction of your house, you must consider its EMIs while deciding the coverage amount.

9. Select An Appropriate Cover

Once you have considered all the factors, you must select an appropriate cover for your insurance policy. For this, you can go through offers from various insurance providers to check the policies available. This helps you in selecting an appropriate cover for your term insurance policy.

10. Reveal Necessary Information to the Insurer

You must refrain from hiding critical information about your lifestyle from your insurance provider. These might include your frequent trips to outstation, work-related travel, unhealthy habits like drinking and smoking, and so on.

11. Go for Online Purchase of Term Insurance Policy

There are both online and offline options for purchasing a term insurance policy. However, the online mode offers several advantages over the offline one. Online applications rule out the involvement of an agent, thus eliminating additional charges of their commission. Also, the process is hassle-free, and you can apply for it from the comfort of your home.

12. Find out the Solvency Ratio of an Insurer

Solvency ratio indicates the availability of cash with the insurer so that they can settle the claim when you raise it. Every insurer must have at least a 1.5 solvency ratio according to the Insurance Regulatory and Development Authority of India (IRDAI) rules.

Now that you know how to choose a term insurance plan, you can proceed to buy one to offer financial protection to your family in your absence. Remember to stay away from the pitfalls when selecting the right insurance plan for you.

Who Needs a Term Insurance Plan?

It will be prudent for everyone to stay financially prepared for untoward situations. Therefore, anyone who wants to secure their family’s future financially should purchase a term insurance policy. They can belong to any age group and can be either salaried or self-employed individuals. However, it is most crucial for people who are the sole breadwinner of their families.

There are a lot of term insurance policies available in the market. If you are wondering how to select term insurance that suits your need, the following are some tips that you can consider.

FAQs About Choosing the Best Term Insurance Plan:

Why is it important to choose a term insurance plan carefully?

Insurance is a crucial part of financial planning as it provides monetary assistance in case of emergencies. Also, there are a variety of plans available in the market. Hence, it becomes important to ensure that you select the most appropriate among them to increase your benefits.

Can you purchase two life insurance policies?

Yes, you can easily purchase more than one term insurance policies. However, you should read the terms and conditions of each very carefully before proceeding with your purchase.

What is the maximum and minimum age for purchasing a term insurance policy?

The maximum age for purchasing a term insurance policy is 65 years. Conversely, the minimum age for the same is 18 years. However, this might vary among insurers.