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How to Identify Term Insurance According to Your Needs?

There are several term insurance in the market and provide a variety of solutions tailored to fit many requirements. Here are few important tips to choose a right term insurance plan.

  • 7,397 Views | Updated on: Feb 26, 2024

We can never foresee the future or any untimely occurrence for that matter. Hence, it is crucial for us to plan and provide financial security to our loved ones so that they can embrace a secure future.

Having said that, there are several insurance products available in the market today. They provide a variety of deliverables tailored to fit numerous requirements. And, amongst this comprehensive range of insurance products, term insurance plans qualify as the most prominent ones. In case of an untimely passing of the policyholder within the set tenure, they offer pure life cover or financial security to the beneficiaries. However, no such maturity benefit is rendered if the policyholder outlives the pre-defined tenure of the plan.

Such plans can truly help a policyholder’s beneficiaries sustain a secure future. But, when it comes to identifying the most suitable term insurance, one must always carefully consider and evaluate the following factors:

1. Opt for an insurer with higher claim settlement ratio

When it comes to monetary reimbursement, it is only essential to look for a plan with an effective claim settlement process. A higher claim settlement ratio by the insurer would endow the beneficiaries with a greater chance to receive the entire sum assured.

Keeping all these factors in mind, it would be wise to better understand your insurance needs and carefully choose the right term plan for you.

2. Consider the Solvency Ratio

The solvency ratio is a measure of the ability of a company to pay off their long-term debt and interests to survive in the longer run. The ideal solvency ratio recommended by the IRDA is 150%. The insurer you choose should have a ratio which is closer to 150%. Even a high solvency ratio is not ideal.

3. Use riders for enhanced coverage

Besides the death benefit provided by the basic term plans, you can also look at thenumerous term insurance benefits offered by other plans. Certain policies allow you to add riders to enhance your cover and minimize your risk. These may include riders, such as loss of critical illness cover, waiver of premium, disability cover, and more. You may even find a term plan with return of premium option being available in case the policyholder outlives the policy’s specified tenure. Here are some rider benefits that you can opt for:

  • Critical Illness: This type of rider covers some major illnesses like heart attack, cancer, renal failure, coronary artery bypass, paralysis, major organ transplant, stroke, coma, etc.
  • Waiver of Premium: This rider benefit helps you during problems that lead to loss of pay by waiving off future premiums.
  • Disability Cover: Disability cover enables you to secure your future from incidents that cause disability due to an unfortunateaccident.

4.Weigh the Premium Cost

After determining the type of life insurance plan you want and if you require any rider benefits, the cost of the premium will be the final deciding factor. Do not compromise on your policy just to pay a little less. You get tax benefits that you can claim under Section 80C which is why choosing the best insurance policy is vital.

5. Choose a Policy with Human Life Value

Human Life Value (HLV) denotes the amount required by your family in the case of loss of income and an increase in liabilities like loans. You buy a policy just to provide for your family in the event of your death. So you need to consider the actual amount needed to survive and choose a plan that provides the HLV.

6. Consider the number of family members and your income bracket

Your total income, and the number of dependent family members should be given careful consideration while choosing a term plan. Since the financial responsibilities may vary depending on the marital status of the policyholder, the coverage amount should be chosen accordingly. Moreover, this could aid your future financial planning.

7. Take your family’s lifestyle and growing inflation into account

While considering the number of dependent family members, you simply cannot miss assessing your family’s current lifestyle cost. The extent of the term plan’s cover should be based on your family’s lifestyle sustainability, and also in the growing inflation cost.

8. Take your liabilities into account

A majority of the people often possess a certain number of liabilities such as vehicle loans, personal loans, home loans, business loans, etc. Hence, in order to thwart the possible burden of loan repayments that may befall on your family members’ shoulders, it is extremely important to mention the repayable loan amount in the opted life cover.

9. Purchase a plan as per your needs

While it may be a good idea to hear what experts and peers’ have to say, selecting a term insurance plan should always be based on your own independent needs.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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