Over the past few years, and mainly since the advent of the COVID-19 pandemic, there has been a significant increase in the number of insurance buyers in India. As the awareness about the importance of a robust life insurance cover during uncertain times increases, more and more people are willing to buy insurance and give their families much-needed financial security.
Amongst other types of insurance, the popularity of term insurance is increasing rapidly. Term insurance is a pure protection policy that offers life coverage up to a predetermined period or term at a nominal premium. You can avail high-value insurance coverage at an affordable rate.
While the benefits of buying a term policy are aplenty, you must be careful about choosing the right plan. Here are a few vital factors you must consider before opting for a term plan.
- Determine the sum assured or the coverage amount
One of the critical factors to choose while buying a term plan is the sum assured. Experts recommend following the thumb rule to select the right amount. The coverage amount you choose must be at least 15 to 20 times your annual income. The amount you select must be enough for your family to maintain their usual lifestyle even in your absence.
- Choose the suitable coverage duration
Remember, the primary purpose of buying term insurance is to give your family the financial cover in your absence. Hence, it is advisable to purchase a plan with a longer tenure so that they can stay protected for a longer period or at least all the family members become financially independent without any liabilities.
- Decide the type of policy you want
Over the years, term insurance has evolved significantly. Today, you have different variants of the policy, including.
Level term plan – This is the most common type of term insurance wherein the premium, and the sum assured remains unchanged throughout the term.
Increasing term plan – As the name suggests, the sum assured increases periodically in increasing term plans. This is an ideal policy for those expecting an increase in their financial responsibilities or the number of dependent family members.
Return of premium term plan – Typically, a term plan does not provide any returns or benefits if you outlive the policy duration. But, with the return of the premium plan, the insurer repays the premium you pay upon the plan’s maturity.
- Choose the right rider
When you buy a term plan, you must consider adding a rider to the policy and enhance the coverage scope. Suppose you are involved in a high-risk occupation. In that case, you can consider buying the accidental death benefit rider so that you can get protection against unexpected demise, which otherwise is not covered under the regular term policy.
- Select suitable premium payment mode
This is another critical factor to consider while choosing a term insurance policy. You can either opt for a single premium payment mode or a regular premium payment mode. Under single payment, you must pay the total premium for the entire duration in lump sum. In comparison, you can pay the premium periodically in regular premium payment mode, i.e., monthly, quarterly, or annually.
- Choose the right insurer
The importance of choosing the right insurance company cannot be stressed enough. Make sure that you buy your term policy from a reputed insurance company. Also, ensure to check if they have a high CSR (Claim Settlement Ratio) so that your family does not face any hassles while filing a claim.
Now that you know the critical factors to consider, do your due diligence and choose the right policy to suit your needs.
Hemant Kumar is a project manager at Tridindia with more than nine years of commendable experience in writing about LMS, translation, and IT. His unmatched talent and passion for digital marketing gave him the opportunity to work as a multi-tasking project manager at TridIndia’s sister company, Link Building Corp. Today, he contributes to the world by imparting knowledge on SEO, link building and internet marketing etc., that helps business owners grow their online business.