However, when it comes to taking the final step of purchasing a term plan, most of us are often confused about the amount of life cover to seek, tenure of the policy, which company to select, and what plan to buy? To resolve this and help you make an informed decision, here are a few tips to choose the best term plan.
1: Think About Your Life Stage & Number of Family Members When Determining Cover Amount
You purchase a term plan for your family to secure their financial future when you are not around. Number of members in your family will vary at different life stages. Financial responsibilities of a single person are the not the same as that of a married one or one with kids. So, the cover amount should vary according to the number of family members. Don’t forget to keep an eye out for the future and plan for an increase in your financial responsibilities even if you are buying a term insurance plan early in your life.
2: Think of How Much Your Family Will Need to Maintain Their Lifestyle
Apart from the number of family members, the extent of cover availed largely depends on the current lifestyle of your family. Assess the amount of funds required to sustain your current lifestyle, don’t forget to factor in inflation, and accordingly plan the life cover.
3: Cover Amount Should be Determined Based on Family’s Needs & Not Just Your Income
Whether you are the sole breadwinner of the family or a contributing member to the collective income of the family, go for a cover amount that is equivalent to the amount of income required to sustain the basic needs of the family in your absence.
4: Add Any Liabilities You May Have to the Cover Amount
Earning individuals are often under the burden of existing liabilities such as short term loans, personal loans, home loan, and car loan. To prevent the burden of EMI repayment from falling on your family it is essential to include the amount repayable of outstanding loans in the life cover availed.
5: Higher Claim Settlement Ratio is Better
To live up to their promise of offering monetary reimbursement, Life Insurance Company should have an effective claims settlement process. Claim Settlement ratio is the numerical value representing the number of claims settled against those filed. Higher the claim settlement ratio, better are the chances of availing the entire sum assured amount.
6: Know Which Riders Best Suit Your Needs
Apart from the death benefit extended by a term plan, life insurers also offer additional cover in the form of riders. Riders like disability cover, loss of employment cover, waiver of premium cover, can be added by paying a small amount of added premium. These riders add considerable value to the basic term plan purchased.