How to choose the right term insurance for you?

Over the last few years, term insurance has been gaining a huge amount of popularity. With the insurance companies dropping the premium rates, they have also begun with enormous advertising of these policies. Additionally, companies have come up with online options for obtaining these term policies. These prove to be very appropriate for the buyers, while they compare and select their term plan.

Why term insurance is the best?

The financial planners today claim ‘term insurance’ to be the best and the most suitable type of policy available, as it provides a high cover at lower costs. The premium paid is just a portion of the amount you give to purchase a money-back policy or unit-linked insurance policy with the same coverage.The no-investment component attached to the policy, and the premium involved to cover the risk are some of the reasons behind the huge coverage of term policy.

Therefore, before you go ahead purchasing any term policy, you should look at a few steps given below:

Earlier, the better

If you know you need to take a term insurance plan, do not delay it, the earlier the better, as you age, the premiums increase, also if you develop any sickness in the future, it becomes difficult to get the policy.

Do not delay

Make sure you don’t delay. There are people who need the best term insurance, they start researching and end up not taking one, because they over-analyze the term plans and do not know which plan to buy. Hence they keep postponing it. Don’t be that one. It is better you get a decent or good term plan as soon as possible rather than searching for the best term plan all your life.

Choose a good insurer

Choose an insurer with a good brand name, market reputation, financial background, claim settlement ratio, who has been serving for a long time, and with good reviews. You can see their ratings and reviews online. Once you are satisfied with all this, you can go ahead with the insurer.

Add a nominee

Don’t forget to add the nominee’s name. It could be your spouse, children, or whoever you want to pass the benefits to. After giving the nominee’s name, you can anytime change it, in case your preference
changes.

Ensure the sufficiency of the cover amount

The amount required by the dependents of policyholders, in order to replace his earnings in case of his death, is termed as the life insurance cover. Therefore, before buying a term policy, one must remember to ensure that its cover is enough for the basic expenditure, the primary expenses, and other accountability of the dependents. If the same is not adequate for the same, it fails to meet the whole purpose of insurance. Thereby, always choose an insurance policy, which has enough cover amount to let your dependents lead a problem-free life.

Know about your policy’s tenure

Along with knowing the amount of the insurance cover, it is also very important to have knowledge of the term plan’s actual tenure. A policy should at least give the cover until the policyholder’s retirement.

Pertaining to the present scenario, people’s responsibilities do not end at the age of 60, which makes them work even after 60. One can attribute this trend to late marriages and, consequently having children at a higher age.

In accordance with the expert opinion, a person requires a cover-up until he/she reaches 65 years of age. Thus, an advisable term plan would be one that gives a person the flexibility to fix the period, according to his circumstances. However, apart from the flexible plans, still, many of the policies have fixed tenures of 15, 20, 25 or 30 years. One may even find some policies not offering cover beyond 60. As a result, it is beneficial to stay away from such plans that do not customize as per your needs.

Consider and compare the plans’ cost

Comparing the plans of different companies, we find their respective premium charges to be different. Therefore, look for and choose a plan that is the most affordable. While making a choice, also make a comparison between companies, and can prefer the one with a good claim allowance.

Mention in case you smoke or drink

Never hide these things, it’s better you tell them if you are a smoker or an alcoholic. Your premiums are calculated based on this and if you hide these facts it means you are breaching the contract which will lead to rejection of the claim. Don’t think your not an alcoholic or smoker
if you do it occasionally. Even if you do it occasionally you are considered to be a smoker or alcoholic in the eyes of the insurance company.

Make sure to fill the form by yourself, there have been cases where the agents mention you as a non-smoker or non-alcoholic so that the claim gets approved easily.

Never hide your health issues

This is also a reason why claims get rejected. Make sure to tell them if you had any health issues, major sickness, operations, surgeries, etc. This is your duty to inform them if you have any health issues.

Mention your family’s health history

This is also important and you should not hide this as well. If there has been any sickness in your family, it could be diabetes or any other health issues. Please disclose it as it is used to calculate the actual premium.

Keep the inflation factor in mind

While buying a term plan, also consider the inflation factor. A cover that looks sufficient today may not seem so after 20 years, or towards the end of the plan. This can be due to ever-rising inflation.

For this, many companies are coming with plans that will increase your cover each year by a small percentage (e.g. 5-10%). Of course, the premium for such plans tends to be higher than the normal. A good way, thus, is to review your need after a few years and accordingly add cover.

Disclose old policies

If you have already taken any insurance policies before, ensure to disclose them. Insurance companies need to know how much insurance cover you already have and only based on that they offer additional cover.

If you have already bought a term plan without mentioning the old policies, its time you tell them about your old policies.

Benefits of an online plan

With almost every insurance company coming up with the facility of_online term policies’ nowadays, it is better we choose to use the same. Opting for the online policy will benefit you in two scenarios. First, you can make a choice after analyzing all plans. Secondly, it is cost-effective with no dealer or broker linkage, thereby saving the extra broker charges.

Therefore, here we conclude the steps that you can follow, while choosing your life-term plan. In addition to the ones mentioned above, one must also know about his insurance company’s claim settlement period. This is another advantageous factor to consider, while planning to purchase a policy. Finally, go with the one that best matches your requirements, after a detailed comparison in all aspects.

Here is a checklist for buying term life insurance and also a cheat sheet to select the best term insurance plan for you

Now check out this easy to use Optimal Life Insurance calculator.

Here is an example of how this calculator is used.

Enter details such as your age, monthly income, your age of retirement. Here Mr. X has entered his details.
Just like this, enter your details and you will get the optimal life cover, for which you need to take insurance. You are supposed to review your life cover every year.

To take the right insurance whether it is health insurance, life insurance and other investments, preparing a fundamentally strong, fool proof financial plan is required.

If you have any comments or questions, write them in the comment box below.

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