The coronavirus (COVID-19) pandemic has made us realize the importance of health. There is no control over the spread of COVID-19, and each one of us is at risk. The cost of medication and healthcare is consistently rising. To ensure your family’s financial stability during your absence, you must invest in a term life insurance plan.
A term plan is a simple insurance policy that will provide a monetary death benefit in case of an untoward incident. The insurer will pay the sum assured to your family members, which will secure their financial future. A term insurance plan is for a specific number of years, according to your agreement with the insurer.
Things to remember before selecting a term plan
It is important to choose a suitable term policy as per your needs. Here are a few aspects that you must keep in mind:
- Type of the term insurance plan
Whether you choose to purchase insurance online or offline, you need to be aware of the different types of plans available. The various options include a basic term plan, term insurance with a return on premium, term insurance with a monthly income, and term insurance with an increasing monthly income plan. Consider your needs and pick an appropriate policy. Do not choose a plan only on the basis of the premium. You need to opt for a plan that offers valuable benefits, especially during these turbulent times.
- Tenure of the plan
There is no ideal duration of a term insurance policy; it depends on your requirements. Many insurers offer a period ranging from five years to 35 years. However, you can renew your plan after a specific term but doing that might prove costly. It is best to opt for a plan that has a high period so that the premium is nominal.
You need to consider the amount of term insurance coverage. This will depend on your family’s expected monetary requirements. To evaluate the amount, you need to analyze the average monthly household expenses, total liabilities, inflation, and any other expected costs, like your child’s education. It is advisable to opt for a higher sum assured for your family’s financial wellbeing, particularly during the current scenario. Use a term plan calculator to get an accurate estimate.
A rider (add-on) will provide an enhanced cover at a nominal cost. You can consider add-ons like critical illness cover, income benefit rider, waiver of premium, partial and permanent disability, and an accidental death rider. A rider is not a part of your base term policy; and you can include it in the plan at an additional premium.
- Claim settlement ratio
Claim settlement ratio means the ratio of the number of death claims approved by the insurance providerto the number of total claims received in a year. A high settlement claim ratio indicates that the insurer is trustworthy. Moreover, before finalizing on an insurer, check their reputation and financial background.
- Premium payment frequency
A term life insuranceplan will offer quarterly, monthly, half-yearly, and annual premium payment options. A yearly payment option is the least expensive. However, you can decide which alternative to select for as per your convenience. The premium will vary depending on the frequency of payment.
- Payout options
In case of an unforeseen circumstance, your nominees will receive the death benefit. You can choose from different payoutalternatives. You can either opt for a lump sum or a monthly income payout. Alternatively, you can select a combination of both wherein the insurer will pay some part of the money as a lump sum and the balance in monthly installments.
Keeping these factors in mind before purchasing a term insurance plan during COVID-19 will ensure that you make the right decision when it comes to choosing the insurer and the type of plan.