Every individual holds a moral responsibility towards securing their family’s future in the event of an uncertainty. All insurance companies provide term life insurance plans in their bouquet of offerings. Though one of the simplest insurance products in the market, most people do not understand what is term insurance. Which is why they steer away from investing in a term plan, unaware of the countless benefits it will render in the future. People who are the sole breadwinners in their family should definitely secure their family’s future by investing in a term life insurance policy. A term plan provides life coverage for a defined time period. If the policyholder expires within the term period, his/ her family will get the death benefit. Usually, term plans have relatively low premiums but they do not provide any benefit if the policyholder outlives the defined term. To make sure that you choose the best term plan for yourself, take a look at the parameters mentioned below:
· Coverage requirement: The most important criteria while deciding on your coverage requirement is that you should not be under-insured or over-insured. Typically, a term life insurance is purposed to look into the financial requirements of your dependents. For this, you must ensure that the plan you chose takes care of all their basic and major expenditures including education, marriage, or loan liabilities, if any.
· Factor in inflation: If you think that taking a life insurance coverage of Rs. 50 lakhs will be sufficient to safeguard your family’s needs, think again! Factoring in the on-going rate of inflation, the amount of Rs 50 lakhs be equivalent to around Rs 20 lakhs, ten years later. Which is why you should always choose a plan that will render a good value after a couple of years.
· Term duration: You should not select a short tenure for your term life insurance plan because it will be completed in a short period. Therefore, it will not benefit you, especially when you require it the most. Alternatively, if you think of re-investing in a term plan at a later stage in your life, it may turn out to be a costly affair because of your age. You may also be denied a life insurance coverage if you have a major health condition. For this reason, look out for term plans that offer you flexibility in fixing the term tenure.
· Claim settlement ratio: To know the credibility of your insurance provider, it’s best to check the ratio between the number of claims filed by the policyholders and the number of claims settled by the insurance company. An insurer with the highest claim settlement ratio will be the best choice.
· Premium affordability: A term life insurance plan is a long-term commitment. Which is why you should choose a premium amount that you can afford comfortably. Making a premium commitment which you will not be able to fulfill will only add to your financial burden.
Investing in a term plan will always prove to be beneficial in safeguarding your family’s financial needs in your absence. However, it is up to you to make a wise choice in the beginning so that your family can reap its benefits in the future.