5 Things to Keep in Mind While Buying A Term Insurance Plan
Life is not in our hands, and misfortunes can happen at any point in time. By considering this factor, the concept of term life insurance was introduced so that if you leave your dependent family in uncertain conditions, they will not have to worry about their financial wellbeing. However, many different types of term life insurance came into existence with time. This made it possible for everyone to opt for insurance; it also complicated the process of selecting the term insurance plan. If you are also confused about the procedure, we have brought here a small guide to help you out.
#1 Decide The Amount
The first thing you have to do while looking for the term insurance plan is to decide the amount that your family would require after you leave them. This should not be a vague estimate because a little here and there can land your family in trouble. A few factors you need to consider in the proper estimation are:
- Liabilities: You need to count on all your loans and bills in this amount.
- Monthly Expenses: This is the money that is spent every month in your house. It should be multiplied by 150, to count in future inflation.
- Future Goals: In a few years, your kids will go to college, get married, and a lot will happen. So you need to count all the expenses required for that as well.
- Retirement Plans: Your spouse may require some plans for their retirement. You will have to consider that, and add it in your term life insurance.
When you cut out your liquid assets from these expenses, you will get the amount you require from the term life insurance.
#2 Tenure Is Crucial
The tenure of your term insurance plan is as essential as its amount. If you opt for a short tenure, you will not be able to obtain the most benefits. On the other hand, if you choose for a long tenure, you will pay more premiums. The best option here is to calculate the year when your liquid assets’ amount will reach equivalent or more than the coverage of the insurance. That will be your required tenure. For more details, you can check out this blog on insurance tenure.
#3 Add-ons Can Be Tricky
There are several add-ons available for your term insurance plan. You can select them to get the most benefit from your policy. However, these add-ons can be a little tricky. So remember to read the fine print and research for the extra premium that you will be charged when you opt for a specific add-on. Only then will you get the best deal.
#4 Consider The Claim Settlement Ratio
The claim settlement ratio informs you about the percentage of insurance holders whose claim was settled by the company. Experts recommend here not to consider this as a factor in deciding about the insurance. Though it can be used as a filter in checking whether the company is reliable enough or not. But anything above 95% works fine in most cases. You can also check online for claim settlement ratio importance.
#5 Keep An Eye For Payout Options
There are broadly two payout options, lump-sum payout, and monthly income. You can choose one of them according to the requirements of your family. Plus, some insurers combine both the options and provide a better choice for you. Study a little about these options and select only the term insurance plan.
By keeping in mind these five factors, you can seek the best option according to your requirements.