How to Select the Best Term Insurance Plan

1. Calculate Your Monthly Income

The most crucial factor to consider while selecting the right coverage amount is your monthly income. It is essential because if you opt for higher coverage, the premiums will also be substantial. This will cause an additional financial burden and result in disruption of your monthly budget. In such cases, it will become challenging for you to pay the premiums on time.

2. Analyze Your Current Lifestyle

You must critically analyse the current and future requirements of your family. You also need to consider their current living standards and spending habits while deciding the coverage amount. This will ensure that they won’t have to compromise on their lifestyle in your absence.

3. Consider Your Age

Your age plays an important role in selecting the right term insurance policy. This is so because it will help you decide on suitable policy duration and appropriate coverage. For instance, if you are in your 20s or 30s, you will have to go for a term insurance policy with a longer duration.

4. Evaluate the Number of Dependents

If there are about 3 to 4 members in your family, you can opt for a lower coverage compared to having 6 to 7 members. This is so because the financial requirements will increase significantly with an increase in the number of members. 

5. Compare the Policy Premiums

There are several companies in the market offering term insurance policies at different rates. So it is essential to perform extensive research on the premiums that you need to pay for each before finalising one. This way, you can choose the most affordable premiums to ensure maximum savings and avoid disrupting your monthly budget.

6. Add Essential Riders to Your Plan

You can customise your term insurance policy by adding riders specific to your need. For instance, you can choose a critical illness rider if you are suffering from one. You can also choose an accidental death benefit rider to opt for substantial coverage on unfortunate deaths during an accident.

7. Find out the Claim Settlement Ratio of Insurer

Claim settlement ratio refers to the percentage of claims settled against applications received. Again, you can easily access this information from the official website of your insurer. You must always go for an insurance company that has a high claim settlement ratio.

8. Calculate Present Liabilities

If you have taken any loan for financial assistance or for fulfilling your goals, then it is vital to keep them in mind while deciding the coverage amount. For instance, if you have taken a home loan for the construction of your house, you must consider its EMIs while deciding the coverage amount.

9. Select An Appropriate Cover

Once you have considered all the factors, you must select an appropriate cover for your insurance policy. For this, you can go through offers from various insurance providers to check the policies available. This helps you in selecting an appropriate cover for your term insurance policy.

10. Reveal Necessary Information to the Insurer

You must refrain from hiding critical information about your lifestyle from your insurance provider. These might include your frequent trips to outstation, work-related travel, unhealthy habits like drinking and smoking, and so on.

11. Go for Online Purchase of Term Insurance Policy

There are both online and offline options for purchasing a term insurance policy. However, the online mode offers several advantages over the offline one. Online applications rule out the involvement of an agent, thus eliminating additional charges of their commission. Also, the process is hassle-free, and you can apply for it from the comfort of your home.

12. Find out the Solvency Ratio of an Insurer

Solvency ratio indicates the availability of cash with the insurer so that they can settle the claim when you raise it. Every insurer must have at least a 1.5 solvency ratio according to the Insurance Regulatory and Development Authority of India (IRDAI) rules.

Now that you know how to choose a term insurance plan, you can proceed to buy one to offer financial protection to your family in your absence. Remember to stay away from the pitfalls when selecting the right insurance plan for you.