Initially, a term insurance plan was launched in the market with the sole purpose of the financial protection of your loved ones. In your absence, term insurance would provide death pay-out to your family members for their financial sustenance. However, a regular term plan has evolved into a smart term plan with better benefits. A smart term plan is a whole insurance policy, which is a combination of death benefits as well as survival benefits under a single plan.
Whether you want to choose a regular or smart term plan, you might be overwhelmed with the numerous choices in the market. Therefore, let’s look at the top six parameters of a term policy that can help you to make the right choice at the time of purchase:
- Financial needs
A term plan usually aims to fulfil the financial requirements of your loved ones in your absence. Hence, you should analyse the needs of your family members before you buy a term plan. If you have more financial dependents, you should purchase term insurance based on their financial requirements. For instance, you should consider your spouse’s retirement goals and your child’s educational needs to ensure their financial well-being after your death. When you pass away, term insurance can provide financial support to your loved ones to meet their financial goals.
After determining the financial requirements of the members of your family, you should select the adequate coverage amount. Typically, you should choose a coverage amount, which can safeguard the needs of your loved ones after your demise. However, see to it that you don’t get overwhelmed while choosing the coverage amount. If you buy a high coverage than required, the term insurance premium would automatically increase. Select a term plan that can allow you to increase the term coverage as you cross the specific milestones such as getting married, having a child, and so on.
Premium is an essential element of every insurance product, whether it is traditional life insurance or a term plan. Since the premium is paid in exchange for the term coverage, you should pay it regularly within the selected time frame. Typically, you can choose the premium payment mode based on your convenience. As a policyholder, you can have the liberty to pay your premium quarterly, monthly, half-yearly, or annually. Failure to pay the premium within the chosen time can lead to lapse of your term policy.
As the name suggests, a term plan can offer coverage for a specific tenure. Selecting the right tenure can be as essential as choosing an adequate coverage amount. Typically, you should choose a term plan, which can cover you until your active working years. Since many of you might prefer to work beyond 60 years, you should opt for a term plan until the age of 65 years. As a working professional, you should consider your retirement age and choose the tenure of the term policy accordingly.
- Online presence
Many insurance companies have availed term insurance policies on their online websites. Since term plans are made available on the online platforms, you should buy a term plan directly from your insurer’s website. An online term plan can be the most time-saving as well as a hassle-free form of purchase. Moreover, purchasing a term policy online can be relatively cheaper since it might not involve any third-party commission charges. Due to the zero involvement of the third-party, you can ensure maximum transparency.
Inflation can be your worst nightmare. If you are unable to combat the impacts of inflation, you can burn a hole in your pockets. Hence, you should consider the effects of inflation before purchasing term insurance. For instance, if you buy term coverage worth Rs. 60 lakh without taking inflation into account, your coverage might be insufficient to help you survive the next 10 years. The coverage value of your selected amount (Rs. 60 Lakhs) might be only Rs. 38 Lakhs after 10 years if you assume the rate of inflation in the future would be 5%.
With these top six parameters mentioned above, you might be able to choose the right plan based on your financial requirements. Since term insurance benefits are plenty and it is affordable as compared to other insurance products such as endowment plans, money-back policies, and so forth, do not be lured with the low premium amount. Choose a reputable insurance company that can offer a comprehensive term coverage at an affordable rate.