Life is full of uncertainties some pleasant and some unpleasant. Few of these uncertain incidents can affect the dreams and lives of your loved ones. For such events, you cannot prepare financially in a day or two. But you can have an insurance to take care of their needs when you cannot.
A term insurance plan is one such life insurance plan. This plan acts as a financial cover for your dependent family members in the case of your untimely death. Getting the best term plan in India can make life easier for both you and your family.
But how do you find that one policy out of many which will work as per your family’s needs? Simply follow the five steps given below:
1. Measure the Effect of your Life-Stage & Family Size
Your income may grow each year by a certain percentage, but life progresses in stages. Each life stage can have a different number of people depending on you financially and emotionally. Also, each life stage marks a milestone in your financial life.
For example, marriage, childbirth, purchase of your first house, etc. are all life-stages.
Each life stage has a specific relation with your income, savings and financial needs. For instance, marriage means you now either share your financial responsibilities with another person or have someone depending on you. Similarly, childbirth would mean a whole different list of immediate financial needs and long-term goals.
Each of these stages means your financial responsibilities are growing, and so should your term insurance. Thus, you need to make sure your term insurance can keep up with your growing life needs. You can either look for a term insurance plan which continues to grow every year at a fixed rate. Or you can also look for a term plan which allows you to increase your sum assured upon every key life event.
Know more about increasing sum assured in a term plan.
2. How much Money will your Family Need?
Will your family need Rs. 1 Crore to live out their lives without the support of your presence and income? Or will they need Rs. 2 Crores to maintain their lifestyle as well as meet their important life goals?
These are the questions you need to answer if you want to buy the best term insurance plan for your family. Here are the three primary objectives your family will need money for in your absence:
- Running the kitchen and lifestyle
- Paying off any ongoing debt
- Investing for long-term future goals
Usually, as a rule of thumb, you can assume 10-15 times your annual income will sufficiently provide for all three needs. While you are already looking for a growing term insurance cover, this is where the term cover should start.
So, if you are earning Rs. 2 lakh a month, you can start with a minimum term cover of Rs. 2.5 crores.
3. Pay Attention to the Pay-Out Options
The purpose of term insurance is not to ease your life but to ease out the survival of your dependents in your absence. The way the plan pays out the benefit is important for your family members, especially if they are financially dependent on you.
Imagine, if your spouse and children are dependent on your financial intervention and decisions, and suddenly they become the owner of Rs. 2 Crore from your life cover. Although the sum is huge, it is the only sum of money they may receive for many years to come. They also need to decide the following three:
- Pay-off the debts
- Invest for future goals
- Run the kitchen
While the first two are still easy to do, as you only need to put aside a lump-sum amount, the third option is where the challenge lies. Withdraw too little and you risk shrinking your lifestyle, withdraw too much and you risk running out of money in future.
Thus, a term insurance plan which can help you set up a regular monthly benefit pay-out is a better choice. As the term insurance plan itself will bear the burden of providing a regular income to the family.
4. Maximising your Coverage with Riders
Riders are additional covers that you can add to your life insurance policy. These covers will enhance your risk coverage by providing financial assistance under different circumstances. For example, in the case where you met with an accident, the accidental rider will support you financially. If you end up losing any two limbs, the rider will ensure that your term cover continues without further premium payments.
The best term policy is the one that provides useful riders, like:
- Accidental death and disability cover
- Terminal illness benefit
- Premium waiver benefit
Term insurance plan from Canara HSBC Oriental Bank of Commerce Life Insurance, iSelect Star term plan, offers all these benefits and a rider for child support benefit. Child support benefit ensures a lump sum payment for the child’s future upon your demise.
5. Insurance Providers with High Claim Settlement Ratio
The claim settlement ratio is one of the important parameters to check while purchasing life insurance plans. This ratio tells you about the following two things:
- How smooth is the claim settlement process of the insurer?
- How fast the insurer settles a new claim?
Both factors are an important measure to judge how easily your family members will get the financial support you have planned for them. Nowadays, insurers like Canara HSBC Oriental Bank of Commerce Life Insurance promise to settle the eligible death claims within one working day.
Additionally, the best insurers have processes to handhold the bereaved family members through the claim filing process.
Buy Only the Best Term Insurance for your Family
A term insurance policy is an instrument made to ease your family’s survival in your absence. While nothing can replace you for your family, the least you can ensure is that they don’t face financial and social hardships without you. Be financially responsible by buying a term insurance plan.
Thus, the criterion for selecting the best plan makes life easier for your family. Additionally, you can look for options like online availability, payment options and other features.