3 Things to Get Right in an Ideal Term Insurance

Term insurance is well-known for financially protecting your family after your death or inability to work due to disability. It pays out a lump sum to your family up to the sum assured you chose when you purchased the policy. However, selecting the perfect plan for your loved ones' security can be difficult with so many options available. We provide you with the top three considerations that can help you pick the best term insurance plan.

Three Things to Get Right in an Ideal Term Plan

Top three considerations that can help you pick the best term insurance plan:

1. Coverage amount

Never choose the sum assured amount at random. Pay close attention to your current financial position, existing debt liabilities, and family responsibilities. If your debt-to-income ratio is greater than 50%, you must choose a higher level of coverage. Refer to the following table to have a rough idea of what should be the ideal coverage amount.

2. Policy tenure

Several critical factors are considered when determining policy tenure. For example, if you are young and have just begun your career, you may want to consider a 40-year term plan. Similarly, if you are over the age of 50, a term plan with a tenure of 10-15 years is recommended.
Apart from that, consider your financial obligations. If you have a home loan with a repayment period of 20 years, the policy term should be at least 20 years. It ensures that even if you lose your earning capacity or die, the policy payout will cover your debts without putting a strain on your family.

3. Payout options

Once you have a clear understanding of the above parameters, you must carefully select your payout option. Insurers typically provide a payout in the form of a lump sum or regular income. Remember that the payout option you select has an impact on your policy premium. You can use a term insurance calculator to figure out how much your policy will cost.

Other Parameters to Consider

1. Check the claim settlement ratio and claim filing process when selecting an insurer for a term plan.

2. Nowadays, term plans are available with customisation Term Insurance Benefit. See the list of riders provided by your insurer and select only those that meet your requirements.

3. Don't forget to include a nominee in your policy. It will help to speed up the claim settlement process.

4. Never conceal your medical history or a habit (smoking/alcoholism). Incorrect information will result in claim rejection, and any premiums paid to date will be lost.

Term Insurance Benefits

1. Term plans enable you to claim tax advantages under Section 80C. If you purchased the critical illness add-on, you are eligible for additional tax advantage under section 80D.

2. Term plans are relatively inexpensive in comparison to other types of life insurance. You can easily obtain Rs 1 crore term insurance by paying a few hundred rupees per month.

3. A term plan offers whole life cover. It means you get coverage for up to 99 years of age.

4. Term plans allow you to select a return on premium benefit. If you live to the end of the policy term, the premiums you paid to date will be refunded to you. However, to receive this benefit, you will have to pay a higher premium.

5. Term plans are the purest form of life insurance. It does not have any investment component in it. The premium you pay to the insurer guarantees you a certain amount of coverage for the duration of the policy. Hence, it is simple to understand, with no complicated provisions.

Conclusion

Choosing a term insurance plan after evaluating various parameters will help you provide extensive coverage to your family. It is critical to review your monthly income, debt liabilities, and family responsibilities before deciding on the coverage amount. 

To know more, please read the relevant articles at our website PNB MetLife.