A term Insurance plan is a plan that is given for a specific period of time and in case of death of the insured during that period, the beneficiary gets the insurance payment. However, if the insured outlives the policy, nothing is received. Hence, you only get the death benefit, not cash / survival benefit.
Once you know what exactly it is and have received the term life insurance quotes, the main question arises is, how to evaluate a plan and identify the best plan for you? Here are some tips to keep in mind while selecting the right insurance plan for you and your family.
1. Look at yourself: Before going in to buy a plan, you must be clear about what exactly do you expect from the plan and what stage of life you are in. Some of the questions to answer while analysing your needs.
- Which stage of life are you currently in? [started earning, married, have infants etc.]
- What do you expect from the plan? [to cover your family after your death]
- What is your current income and that of your family’s?
- Based on your family’s lifestyle, how much will be needed to maintain that in the future?
- How many family members do you want the plan to cover?
- What is my current health position? Do I have any diseases?
- Does any illness like diabetes run in my family and can be inherited by me?
2. Determining the cover amount: Once you have answered the questions above, you should be in a position to safely determine the approximate amount of cover you are looking for. Keep in mind this cover amount will be for your entire family and not just yourself.
3. Tenure: Once the amount has been determined, you must also know approximately how long you need the cover.
4. Premium Payments: One of the most important aspects of any policy you look at. Premiums play an important role in our decision-making process. Knowing your payment capacity based on your incomes is the key to this decision. One thing to remember is that the earlier in life you take such term life insurance policies, lower will be the premium amount. So, it is better to take insurance policies as soon as you start having a steady stream of income.
5. Take Inflation into account: Inflation plays an important role in the value of money. And this is essential to determine while selecting your insurance value. Just like the value of Rs 10 lakhs has deteriorated significantly from what it was 20 years ago, the value of a crore will show the same results in the next 20 years. Most insurance policies do account for inflation, but the rates may differ. So, do some homework before you go and read these terms and conditions specifically.
6. Health Risks: Assessing personal health risks and those that can be inherited from lineage is essential to analyse the risk cover that is needed. Hence disclosing such aspects to the company or agent will help them in providing you with better options that will cover this aspect as well.
7. Riders: Many term plan, some plans offer additional cover in the form of riders. Riders may include various covers like a disability cover, loss of employment cover and many more depending upon the company. They add considerable value to the basic term plan purchased.
8. Company: The next important thing is figuring out whom to trust with such a thing. Check the history of the company and make sure it is reputed.
Analyse each and every aspect of the list given above and select the best option available. You can also get term life insurance quotes from different insurers and compare them to choose the one. The bases of a good investor are gathering all the knowledge and using it well to make decisions. This process may take a while, but it will certainly be worth it.
