Factors to Consider Before Getting a Term Insurance Plan

India’s insurance penetration stood at 4.2% in FY 2021. Life insurance penetration had a 3.2% share out of this. A term plan is a type of life insurance that offers coverage for specific years or ‘term’. The predetermined sum of money is paid to the beneficiaries in the event of the unfortunate demise of the insured. The leading insurance company in India charges a nominal premium to serve the future needs of your family. It offers life cover starting as low as ₹25,000 and it may double in case of accidental deaths. You can choose from either single or regular payment options. The best plan is the one that offers the best ‘value for money’. It is necessary to consider a few factors before you buy term plans. Read on.

The Coverage

This is necessary to avoid under-insuring yourself. Get death benefits which are at least 8-10 years of your gross annual income. Further, assess your age, current financial responsibilities, family’s future requirements, tax-free earnings and the present ongoing loans. Keep the inflation in mind as well. You can either use an online calculator to arrive at the amount or simply talk to an expert about what is term insurance and how to choose a cover.  

Claim Settlement Ratio

This is the percentage of claims that an insurance provider has settled in one financial year out of the total claims. It is a great indicator of their credibility. If anyone records a ratio of 50%, it means, they have cleared 50 claims out of the 100 made. A CSR of 80% and above is usually considered excellent. Pick a company that has settled 96.06% of all claims made in the individual business in the FY 2018-19 before you buy term plan online. All you need to do is fill out the claim form and contact the advisor from whom you bought the policy.

Flexible Premium Payment

Make sure the company is offering multiple pay plans to suit various needs. You must be allowed to choose from monthly, yearly or half-yearly premium payment frequencies. Check for single premium (one time), limited premium (5 years or 10 years) and regular premium options (equal to policy term). Further, make sure you are allowed to revive a lapsed policy within five years from the date of the first unpaid instalment of regular/limited premium.

Protection Duration

Determine how long you wish to stay protected. Choose a standard individual term insurance policy that offers a wide range of coverage from 5 years up to 40 years and assures ₹5 lakhs up to ₹25 lakhs respectively. Do not forget to check the waiting period which is usually 45 days from the date of commencement of risk.

You must be able to understand what is term insurance, the basic features and benefits, how premiums are calculated and how the policy works. The terms and conditions must be simple to grasp without prior financial knowledge. This way the insured will be able to manage the plan independently and make informed decisions as well.