Term insurance plan is one of the most popular types of insurance policies out there. This is because the plan is extremely easy to understand and highly lucrative. Today, there are tons of term plans that come with various features. So, it is easier to get confused by all the options you have. Here are some things that you need to know before buying a term insurance plan.
- Get Term Insurance As Early As Possible
It is always recommended to buy a term plan in your early 20s. This will allow you to enjoy a lower premium and greater insurance coverage. You might end up paying double the amount when you get the same coverage in your late 30s or early 40s.
- Get The Right Coverage
Don’t just pick out your coverage value randomly. Instead, the term insurance coverage that you choose should be able to cover the financial requirements of your dependents after your demise. Your cover should be equal to your outstanding liabilities plus 300 times your monthly expenses and three times the cost of your existing goals.
- Selecting The Right Tenure
After deciding on the term plan coverage, the next thing you should focus on is the tenure. The right approach to estimate the period of your term insurance is to identify the year when your liquid net worth will be more than your term insurance cover. To calculate your liquid net worth, add your mutual funds, stocks, provident fund, etc., and subtract your liabilities. The age at which the two numbers coincide is the minimum year of the tenure.
- Be Smart With The Riders
Term plan provides different riders at affordable cost. Here are the top riders available with this insurance:
- Cover for critical illness: You get cover if you are diagnosed with a critical illness mentioned in the policy.
- Additional cover for death due to accident: If you die due to an accident, your nominee will get the benefit of this cover.
- Waiver of premium on critical illness: If you are diagnosed with critical illness mentioned in the policy during the term, you will no longer need to pay a premium.
- Waiver of premium on disability: During the term of the policy, if you become permanently disabled, your future premium will be waived off.
- Check The Claim Settlement Ratio
When choosing an insurance provider, make sure you research properly and choose the best in the market. One of the factors that reflects the reliability of a provider is the claim settlement ratio. It shows how many claims the insurer is able to settle out the claim that they have received. Associate with a provider who has a claim settlement ratio above 90%.
- Disclose Information Rightly
Your insurance premium is decided based on multiple factors such as medical history, income, lifestyle, etc. Often people forge the information to lower the premium. However, insurance companies do a thorough background check before giving the policy and settling the claim. So if you have provided any information incorrectly, then the company can refuse the claim and may be punishable by penalties.
Being mindful when taking the term insurance policy allows you to enjoy maximum benefits throughout your tenure. Above are some of the important things that you should keep in mind when taking a term insurance plan.