In 2020, the emergence of the COVID-19 pandemic disrupted lives across the globe, introducing numerous unforeseen challenges. It served as a stark reminder of the unpredictability of life, with many individuals losing loved ones. While the pandemic continues to impact our world, we have started adapting and finding ways to cope with this situation. One valuable lesson learned from this experience is the importance of financial planning for all eventualities. The stark reality of mortality prompted a significant number of people to invest in term insurance.
Term insurance is a kind of life insurance that offers financial protection to your family. It involves paying a fixed premium for a specified term in exchange for an assured sum. In the event of the policyholder’s death, the nominated beneficiary receives the term insurance payout. So, one should buy a term insurance. However, it is also essential to consider a few things before doing so. The following are the most crucial ones.
1. Term Insurance Coverage
To start, it’s essential to determine the appropriate life coverage you require. This sum insured will dictate the annual premium you must pay. Term insurance plans are designed to offer financial security to your family when they need it most. As a general guideline, aim for a life coverage amount that is at least 10 times your current annual income. For younger individuals with smaller dependent families, opting for coverage that is 15 times your income can be wise. This approach helps your family cope with inflation and rising expenses. However, the calculation of your term insurance coverage doesn’t end there. You should also ensure that the payout will be sufficient to clear any outstanding debts. If you have loans or other financial obligations, selecting a life coverage amount that can cover these debts is prudent.
2. Tenure Of The Policy
Next, consider how long you want to maintain life coverage. The policy’s tenure can influence your overall premium payments when purchasing term insurance. It’s crucial to select a tenure that aligns with your financial responsibilities. For instance, a 20-year-old might choose a 40-year policy tenure, while a 30-year-old might opt for 30 years. If you opt for a term plan without maturity or return of premium benefits, you may lose some money if you outlive the policy. Keep this in mind when determining your policy tenure.
Choosing a term insurance plan offers two options: purchasing it directly from the insurance company’s office (offline) or through the company’s website or an online insurance aggregator (online). The decision should align with your comfort level, understanding of insurance products, and personal preferences.
3. Evaluate The Claim Settlement Ratio
The claim settlement ratio is determined by dividing the total number of claims resolved by the insurer by the overall number of claims received, including those carried over from the previous year. Typically, this result is represented as a percentage.
When selecting an insurance provider, it’s essential to take the claim settlement ratio into account, as it offers insights into the company’s track record in settling claims. A higher ratio suggests that the insurer has a strong history of settling claims, instilling confidence that your beneficiaries are more likely to receive the payout when a claim is made.
Nonetheless, it’s crucial to recognise that the claim settlement ratio should not be the sole factor guiding your choice of insurer. Other critical aspects to consider include the policy’s terms and conditions, the scope of coverage provided, premium rates, the insurer’s customer service quality, and its financial stability. Balancing these factors will enable you to make an informed decision when selecting the right insurer for your specific needs.
Mode Of Purchase
You can get a term insurance both online and offline. Here are the benefits of the two methods.
Online Term Insurance Plan
- Cost Savings: Online term insurance plans generally feature lower premiums due to the elimination of intermediaries, passing on the cost benefits to customers.
- Convenience: These plans offer the flexibility to buy anytime, anywhere. Comprehensive plan information is available online, and the application process is typically faster.
- Comparison: Online platforms facilitate easy comparison of various term insurance plans. Side-by-side displays make it simpler to grasp differences and select the most suitable option.
- Transparency: Online plans provide readily accessible terms and conditions, allowing you to review them at your own pace and reducing the chances of missing important information or being influenced by sales tactics.
Offline Term Insurance Plan:
- Personalised Guidance: Purchasing offline allows you to benefit from the expertise of an insurance agent or advisor. They can simplify complex insurance terminology and assist you in choosing the right policy.
- Negotiation: There may be opportunities to negotiate policy terms or pricing with the agent.
- Relationship Building: Buying offline lets you establish a rapport with the agent, which could prove valuable for future claims or dispute resolution.
- Hand-Holding: For those uncomfortable with online platforms or struggling with insurance jargon, the physical process can offer a sense of reassurance.
It is usually advisable to evaluate as many plans as you can before deciding which one you want to purchase because there are so many different plans available on the market. There are several considerations you should make before purchasing a term insurance policy. The coverage and claim settlement ratio are some key ones. Moreover, you can get term insurance online or offline. Both methods offer unique advantages. Moreover, always go with reputed and trusted firms like Aditya Birla Sun Life Insurance. They shall offer you the best package with complete transparency.