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Understanding how to choose the right term life insurance policy

Term insurance plans are basic life insurance plans that were initially designed with a single objective of providing a sum assured as financial security to the dependents/nominees in case of an insured’s death. The term insurance normally provided coverage until the age of 65 years, at affordable annual premiums. However, with the growing needs of the customers, insurers began to introduce a variety of term insurance plans online through trusted financial platforms such as Finserv MARKETS. 

How to Choose the Right Term Life Insurance Policy

Insurance companies today offer multiple combinations of term insurance covers like the increasing term cover, return of premium term plans, payout plans, and so on, that the customers may choose from. Although this vast choice to the customers is welcoming, it could often leave them confused about the right term life insurance policy to buy. Here are 5 broad considerations that could help you understand how to choose the right term insurance policy:

Compute the Term Insurance Coverage for your Needs

Your term insurance coverage must be able to fulfil all the financial needs of your family in the event of your untimely demise. The amount of term insurance coverage can be computed by considering the factors listed below:

 

  • Future Monthly Expenses (M): Estimate the current monthly expenses of the dependents in your family and multiply it with 150 to factor in inflation and arrive at their future monthly expenses.
  • Short- and Medium-Term Goals (G): These could be the financial goals that you may have set for a period of the next 15 years such as children’s education, marriage, etc.
  • Liabilities (L): These include debts in the form of loans, and credit card bills.
  • Liquid Assets (LA): They comprise stocks, FDs, mutual funds, etc.
  • Retirement Corpus (RC): This is the amount that you would want to bequeath to your spouse on his or her retirement.

The term insurance coverage (TC) required for your needs can now be computed as 

TC = M+G-L+LA+RC

 

Decide the Tenure of the Term Insurance Plan

Once you have calculated the term insurance coverage amount, you must now decide on the term plan’s tenure. The tenure of the term plan cannot be too short that your policy lapses even before you could fulfill your financial obligations, nor too long that you end up paying higher premiums. 

The optimal tenure for a term insurance plan would be until your age at which your assets outgrow your term insurance coverage amount. Post that age, your assets shall be capable of taking care of your family’s financial needs.

Choose your Riders Smartly

Riders are add-on covers offered at a nominal cost, along with your term insurance cover, and choosing them would be a smart idea even if they don’t fit your requirement. Add-on covers such as accidental death benefit, critical illness cover, waiver of premium on disability or critical illness can be quite beneficial in the event of the insured’s unfortunate demise. Make sure that you read the fine print of these riders carefully, as they differ between insurers.

Check the Insurer’s Claim Settlement Ratio

Purchasing term insurance with a proven record of a high claim settlement ratio would be a wise move, as the claim settlement ratio indicates the efficiency of the insurer in settling the policy claims. A claim settlement ratio of at least 90 percent shall make it easier for you to decide your insurer for a term policy.

Pick a hassle-free Insurer

While choosing a term insurance plan, also verify the insurer’s stability and reputation as your association with them would need to last long, say for at least 30 years. In addition to the premium that you pay, the market reputation of the insurer also matters. Term insurance plans offered online by reputed insurers are cheaper and you can also pre-calculate the premium using their online term insurance calculators. 

To end, if you are looking to purchase a term insurance policy online, Finserv MARKETS is surely the portal that you need to visit. On Finserv MARKETS, you can determine the term insurance premium beforehand with their online term insurance calculator and proceed to purchase a term policy. Their application process involves zero paperwork, and the claims initiation process is really quick.

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