Life is uncertain, and it can subject to a severe accident or illness which can directly impact your financial stability. However, buying a life insurance policy safeguards your financial situation in the future, making your life, at the very least, tolerable. On another note, our needs change with our age. The value of a Term Insurance Plan is essential for everyone, regardless of age group. Their purpose might vary from time to time. For example, a college-going student's needs are entirely different from a working individual. Life insurance is a savior for every age group against any possible unfortunate event, and term plans are the best among all the life insurances. It is not just limited to ensuring your financial security; it also gives you the power to help your family if they are diagnosed with any critical illness such as cancer.
What is a Term Insurance Policy?
Life insurance that gives you coverage for a said or specified period is term insurance. If the insured dies and the policy is still in force during the specified term, the financial institution will pay you a death benefit. If you compare term insurance to permanent life insurance, the former is initially less expensive. Contrary to permanent insurance, term insurance has no cash value. Meaning you can only avail of the value of guaranteed death benefits with these policies. Banks offer many types of term insurance policies with level premiums for the policy's period, such as 10, 20, or 30 years. Thus, the term insurance policies are also called the "level term" policies.
Also Read - What is Term Insurance?
How to Choose the Perfect Term Insurance Policy?
It would be best to keep in mind certain factors before choosing the best term insurance policy for you or your closed ones. Here are some of those factors:
1. Claim Settlement Ratio
This ratio includes the claims which will be covered by the insurance company out of the total number of claims filed when the insured dies. If the insurance company provided you with a 70 percent claim ratio, then 70 out of every 100 claims filed will be paid by the company.
2. Solvency Ratio
The solvency ratio tells us about the insurance company's capability or insurer to meet the debt obligations. It includes certain cases where the insurance company has to pay the insurance coverage to the beneficiary if the policyholder's death occurs. It should not be less than 1.5.
3. Inquire About the Existing Customers' Experience
One thing you should always do is take suggestions from the company's existing customers. It is paramount to know about their experience with the insurance company. In the world of digitalization, you can always check for online reviews and ratings of the company. You must ensure an excellent customer experience to avoid the emergence of any issue while you are in the term policy.
How much Term Insurance Cover do you Need?
The company's insurance experts will always suggest you to opt for a term insurance plan covering 15-20 times of your total annual income. Considering that your salary is Rs. 7-9 lakh, then the term insurance must include a minimum of Rs. 1 Crore Term Insurance. We are listing some of the other factors one should consider keeping in mind before calculating the perfect term insurance plan one needs:
The younger age group of our society believes that a person can pay the premium for quite a long time with fewer chances of any disease or illness to keep the premium rate low. Those who fall under the older age group of our society permit various diseases but a lesser chance to pay, thus paying higher premiums.
2. Current Cost of Family
Diverse family has miscellaneous expenses and lifestyles. No one wants their family's lifestyle to affect them if something happens to them. One must consider the family's current cost to ensure that the sum is assured accordingly to prevent the family from suffering.
If a person is concerned about the wedding of his/her young ones and wants it to happen at full efficiency, irrespective of your presence he/she must consider it while calculating the sum assured.
Last but not least, one should not forget to calculate the ability to pay the premium. The premium should be bearable and payable for a person so they won't even think of closing it down due to fund crunch.
You pass through various stages of life, and each of them calls for different plans and goals. They include jobs, marriage, kids, retirement, and others.
Thus, it is essential to structure and plan out your goals before achieving them at the right time. Similarly, a person's financial liabilities change with their age. Therefore, you must select your cover accordingly.