Things To Consider When Purchasing Term Insurance

Term Insurance can be called the purest form of insurance since it provides protective cover to its customers. If a person has a tight budget or has immediate financial liabilities to take care of, purchasing a term insurance can be ideal since the plan is cheap. However, one must not simply purchase a term insurance scheme only because the premiums are cheap and it does not put too much pressure on one’s pocket. So what are the other factors that people must look at before purchasing a term insurance for themselves? Flexible payment option - There are certain plans where the premium payment term is single payment mode .i.e. the customer pays the premium during the inception and is not required to make any more payments till the time the policy is in force. The other option is where customers can choose to pay the premium as per their choice. They can pay it on an annual, bi-annual, or on a monthly basis. It is always recommended that customers do consider a plan where they have the flexibility to pay premiums according to their convenience. Option to customise - Term insurance plans work on a simple concept of paying the sum assured in case the insured dies. One of the questions which the customers must ask is whether the sum insured is sufficient for their families/dependents. In order to ensure one's family is financially covered in the absence of a breadwinner, he or she can opt for a different type of life insurance plan.There are plans called income replacement term insurance plans. In this type of plan, a portion of the cover amount is paid on a monthly basis for a required number of years. For example, if someone has a cover amount of Rs.1 crore and he/she has availed the income replacement term insurance plan, he/she may choose an option wherein his/her family is paid Rs.50,000 for 20 months post his/her death and the plan expires. This is helpful as it allows a family to function within a certain budget and does not allow them to exhaust the lump-sum amount quickly. Thus customers must always look for a plan that allows them to customise in terms of distribution of their cover amount. Rider or add-on plans - Add-on or rider plans are always helpful and adds an extra layer of protection. Customers apart from looking at the premiums they will have to pay must also consider plans that also offer riders to them. It may increase the premium rates slightly but it is extremely helpful in case something happens to the insured. The plan should suit the age of the insured - Not all insurance companies offer a similar policy term and it may differ from policies to policies. Customers must purchase plans as per their age and ensure the tenure of the policy is good enough for them. It is understandable that a 25-year old person may purchase a term insurance with a longer policy term as compared to a 40-year old person who may have to purchase a plan with a shorter policy term. The needs and future goals may decide the type of plan a person may have to buy. Option to purchase the plan online - Customers must look to purchase term insurance online as it is cheaper than buying one offline via an agent. Purchasing a plan offline means that a portion of the premiums paid by customers goes into the pocket of the agent. When people buy pans online, the premiums paid are simply utilised directly by the company for the maintenance of the policy. Thus, the premium payable is cheaper. The whole process of buying a plan is also easy, fast, and hassle-free in nature. Claim settlement ratio - People must always check the claim settlement ratio of the company before purchasing a plan. The last thing a customer would want is to run behind the insurer regarding the settling of the claim. Hence, higher the claim settlement ratio, better the company is likely to be. Hence, these are some of the factors that a customer must keep in mind before purchasing term insurance. Apart from choosing a plan based on his/her needs, a policybuyer must properly compare each plan and look for features, and then finalise the plan most suitable for him/her.