Even though the penetration rate of life insurance may be low in India, life insurance policies are rapidly increasing in popularity. Term insurance, a type of life insurance, is considered to be its purest and cheapest form. Term insurance offers life coverage upto a predetermined period of time, i.e. the ‘term’. Policyholders can avail high term insurance coverage amounts at nominal rates. While the benefits of term insurance are already plentiful, there are an ample amount of ways that policyholders can maximise their coverage to avail optimum coverage at low rates.
Here are some factors policyholders can consider before opting for a term plan:
Decide the sum assured
As a rule of thumb, this is how to decide term insurance amount:
The younger your age, the greater your policy sum assured should be. If you are in the age bracket of 25 to 30, your cover should be about 15 times your annual income. If your age is between 45 to 55, a cover of 10 times your annual income would probably suffice.
This is the first step. Policyholders should ideally select an amount that they think will be adequate for their family to maintain their lifestyle, in their absence. However, your premiums should not put you in financial stress right now. There are multiple factors to be considered when deciding how to choose term insurance with the right sum assured.
Decide the policy duration
How to choose term plan with the right policy duration, again, depends on multiple factors.
Decide the type of policy
Term insurance policies come in several different variants. They are:
Decide the premium payment mode
This is a crucial factor in deciding how to choose a term plan. Many policies offer the option of a single lumpsum premium as well as a regular premium. Policyholders should opt for the former only if they have a substantial amount of extra cash that they can spare.
Decide the payout mode
Certain term plans offer flexibility in choosing one’s payout mode. Options can range from lumpsum and monthly income to part lump sum-part-monthly income. For beneficiaries who might not be as financially well-versed with investments and who may find handling a large amount of money all at once burdensome, monthly income options would be suitable. For those who are comfortable handling such amounts, a lump sum or part lump sum-part monthly income policy would be ideal.
Select the right insurer
Policyholders should compare plans online to determine the plan most suitable for them. Select a credible company. Keep in mind that the claim settlement ratio of the insurer should be at least 90%.
When contemplating how to choose term life insurance, policyholders should also think about riders for enhancing their coverage. For example, if you are frequently exposed to occupational hazards, an Accidental Death Benefit rider or Accidental Disability rider would make sense. A Child Support Benefit rider can be availed by policyholders who want to provide extra security to their children.
Disclose any existing policy details
If you have an existing insurance policy, you must disclose the policy number, company, and other required details to your new insurer. Failing to do so might affect your claim process.
A variety of factors should be taken into consideration when zeroing in on a term plan. You can easily go for a comprehensive, benefits-loaded policy like Canara HSBC Oriental Bank of Commerce's new iSelect+ Term Plan. It offers policyholders the option of multiple payout modes, premium modes, level, increasing, and decreasing insurance options, riders, spousal cover and much, much more.
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