We don’t think about meeting our fate or anything unforeseen happenings in life in our young years. However, during the later age of life, when you should responsibilities, you realize the need for such back-up plans, which holds great significance. Generally, providing financial security to your family becomes our base of acting the idea into plans. Term insurance plays an important part in such events, which becomes a financial protection tool to your family in your absence.
Before going into the details, let us first take a closer look at a term plan and the policy’s core features.
A term plan is a life insurance plan where a policyholder, usually the family’s bread earner, is covered for a specific period against a sum assured. If, in an unfortunate event, the policyholder dies, the beneficiary can claim the amount. Term insurance is a comprehensive life insurance plan which provides several benefits according to the policy.
Most term plans provide tailor-fit solutions to everyone, but here are some things that can help you identify the best term insurance plan.
1. Provide the right details
The policy contract is signed with utmost faith on either side; hence, it is necessary to give accurate information. If you don’t give correct details of your health condition and similar others, the insurer may hold the right to annul the contract. For instance, you’re a smoker, but you tick a ‘no’ while filling out the form to avail lower premium benefits. Suppose your insurer finds out if, in any situation, the policy may be rendered void or null. Also, if you’ve paid any premium for the insurance policy, you may lose the amount. Lifetime habits and other such things define your future. Thus, giving out correct information may help you in the future, including making policy claims.
2. Insist on medical tests
If purchasing the best term insurance plan is essential for you, you must let the insurance companies take a comprehensive medical examination. The companies usually follow routine testing, but if you’re not satisfied with the process or if the tests are not carried, you can always insist on opting for a complete medical analysis to get better out of your policy. It will help you in case of early death.
Many claims may get rejected each year, which have occurred due to the policyholder’s premature demise. In such cases where the cause is unknown, the insurance company may claim the incomplete, false declaration of the policyholder’s medical health, which may not be the reality. Thus, insisting on medical tests while purchasing a policy will only less future hassles.
3. Consider several factors
Term insurance is the ‘low-priced premium’ form of life insurance, which may have a negligible investment component. You can get a coverage of up to 1cr for about Rs 8 to 10,000, but it should not be the only deciding factor while purchasing the best term insurance plan. It would help if you considered several factors like the insurance company’s claim settlement ratio, the sum assured, the policy period, riders, and similar others. Do not alone decide on the cheapest premium as it may not give you enough coverage or fulfill your requirements.
Image Courtesy: Shutterstock
4. Get the right sum assured and policy tenure
The best term insurance plan serves the purpose of replacing your income in your absence. Thus, ensuring the policy provides a correct sum assured and covers the maximum period will hold importance. Generally, a person must take cover until 65 years to get the most out of the policy plan.
The sum assured must also be selected according to the family requirements. Consider your present financial condition and family lifestyle to get the best policy amount. Purchasing a policy in young years will cover comprehensive coverage at lower premiums than buying at policy at 40.
5. Select the required payout option
It is also one of the factors you decide while purchasing a policy. After selecting the right sum-assured and policy period, you must choose the right payout option, which will fulfill your family’s financial demands in your absence. Evaluate your current financial condition and select the payout accordingly.
For instance, your policy has Rs 1 crore sum-assured amount, and at present, you hold a debt of 40 lakh. Therefore, you can opt for a lump sum with a monthly payout option where you can choose 40lac as lumpsum payout, which can be used for paying the debt and the rest as a monthly income to your family. It will only ensure that your family has monthly financial security, which can fulfill their needs.
It would help if you considered some of the factors while choosing the best term insurance plan for you and your family.