How to Choose the Right Term Insurance Plan

What is a Term Insurance Plan?

A term insurance plan, in its most basic form, can be understood as a variant of life insurance. However, it comes with a unique set of features. Term insurance provides life coverage for a specified period. This means that, given you're insured, if anything happens to you, the nominee will receive the pre-set death benefit in the event of unforeseen circumstances. Since there is no savings or investment element involved, term plans are the most cost-effective form of life insurance.

The primary objective of having a term plan is to provide a financial safety net for your family or loved ones in the event of the unexpected demise of the primary earner, resulting in income loss.

How to Choose the Best Term Plan?

Before you start scrolling through various term plans, it is essential to understand that there is no one-size-fits-all approach here. Instead, you might choose a suitable plan based on your individual comfort and preferences. Here is a list of key factors to consider when selecting the right term insurance.

Coverage

One of the key factors in choosing a term plan is considering the right coverage. This is what will secure the financial needs of your loved ones. To start, consider choosing adequate coverage based on your family's annual expenses, living expenses, lifestyle, and other relevant factors. While 10 times your annual income is a general thumb rule, you might take a cover of up to 20 to 25 times your annual gross income, especially if you are the primary earner.

Premium Payment Amount

When choosing a term plan for yourself, be sure not to overlook its affordability. You have to ensure you lock the right coverage while staying within your budget. Ensure the premium payment amount is affordable for you. Remember, this amount may vary based on various factors, such as your health, age, and coverage.

Premium Payment Frequency

Next comes premium payment frequency. With term plans, you are generally allowed to choose the premium payment mode. This means the payment may be made on a monthly, semi-annual, annual, or quarterly basis. You may also want to notify your bank about these deductions. You might decide this frequency based on your work and cash flow.

For instance, if you're a salaried person, you might consider regular or monthly payments. Alternatively, if you're self-employed or struggle with regular cash flow, you might consider opting for single-payment or annual premium plans.

Claim Settlement Ratio

The claim settlement ratio is one of the key metrics to consider when evaluating a term plan for purchase. Why? Because, well, it tells you a lot about a company's ability to settle claims. For example, say an insurance company can settle 95 out of 100 claims raised in a year. Here, the claim settlement ratio becomes 95%.

Pro Tip: With Jio Insurance Broking, you can easily check and compare the claim settlement ratio and other relevant information of different insurers to make an informed choice.

Policy Duration

Next comes the duration of your policy. You may choose a suitable policy based on the duration you require for coverage. A policy term is nothing but the duration for which your policy is valid. You may want to adjust this term based on the dependency of your dependents. For example, if you have children, you might consider choosing a policy that lasts longer until they become financially independent.

Policy Riders/Add-Ons

Another important thing to look out for is riders. See what riders are being provided by your insurer. Some common options include an accidental death and disability rider, a critical illness rider, a terminal illness rider, and a waiver of premium, among others. You may want to consider selecting suitable riders based on your specific needs. These help make your policy more comprehensive and well-rounded.

Insurance Provider

To choose the right term plan, you must choose the right insurance provider. Consider checking the company's health, turnaround times, claim settlement ratio, and such metrics to compare. Again, at Jio Insurance Broking, you might compare a variety of reputable insurers and choose a suitable cover accordingly.

Final Word

A term plan can benefit you in several ways. From offering adequate coverage to providing a financial net for your loved ones, it is immensely helpful. However, you need to choose the right plan. The choice may vary based on your dependents' lifestyle, life requirements, and other factors. You might consider factors such as the company’s reputation, claim settlement ratio, riders offered, policy term, and others to make an informed choice. Also, be sure to regularly reevaluate and adjust your policy terms and riders to keep them current.