At some point in life when you are earning good and have a stable job, you must have thought of getting a term plan to safeguard your loved ones. But do you know certain crucial aspects of the term plan that you need to consider before making that buying decision? So, let’s look at five important factors that you need to know before getting a term policy.
Factors That You Should Consider
Here are some of the factors that you should thoroughly understand and consider before getting a life insurance policy:
1. Sum Assured
The sum assured is the amount your beneficiary will receive in case something unfortunate happened to you. This amount should not be chosen just because the insurer said so. You should go through the needs of your family including factors like age, future requirements, debts, inflation, etc. and contemplate the sum assured before coming up with a number. The question that has to be answered is; if you were to pass away, and your family did not have any other financial source, would the sum assured suffice for their requirements?
2. Policy Term
The policy term is the most vital part of your term insurance policy. As a term plan does not have a maturity benefit, the sum assured is the component that holds value and depends on your policy term. If you were to pass away after the policy term ended, your beneficiary would not get any money to depend on. Hence, you should thoroughly discuss the future plans and needs before settling over a policy term.
3. Premium Payment Option
Paying your premiums is dependent on things like the frequency of your salary and the amount you are comfortable paying. There are four modes of payment namely, monthly, quarterly, half-yearly and yearly. So when you get the premium quote for all these four modes, you should calculate the annual premium amount you are paying for all of them. You will find that you are paying a bit extra in monthly, quarterly and half-yearly mode when compared to the yearly method. But the capacity to pay the premium should also be factored in. Many people run a business that has a seasonal trend, leading them to choose the yearly method. But a student who is working part-time can only afford monthly. Hence, it varies from case to case.
4. Insurance Riders
Riders are additional components that can be added to your policy and provide extra coverage over and above your term plan. The rider benefit can be perks like a lump sum or regular payout, premium waiver and others. Such benefit enables you to gain coverage for conditions that are not covered under the policy like accidental death, getting diagnosed with a major illness or a loss of income. Extra attention should be paid while adding riders to your plan as it leads to an increase in premiums.
5. Insurance Company
It is always advised to get several premium quotes before finalizing the insurer. But you should not only look at the premium they are offering but also aspects like claim settlement ratio, solvency ratio, the reputation of the insurer, etc. These factors reflect the stability of the insurance company and how likely they are to settle your claim. These values are easily available online on the government’s official website for you to refer to and decide.