In order to ensure absolute safety and security for your family, in case something untoward were to happen to you, it is recommended that you buy a term insurance policy or a term plan because it provides you with a higher sum assured at lower premiums compared with other insurance policies.
Here are three steps that will lead you to a term plan that is suitable for your needs.
Decide On The Sum Assured
To be able to decide on the sum assured, you need to assess your family’s needs in case something untoward were to happen to you.
Factor in your income, the number of dependants, and the expenses that are required to maintain the family’s current lifestyle. Some of the major life goals like buying a house, the education and marriage of your child and the medical requirements of the elders also need to be considered.
To finalize the accurate coverage amount of the term insurance plan, the policyholder must also consider current liabilities, existing investments, and inflation that grows with time.
“Also, the life cover of the term life insurance plan is calculated on the human life value that assesses the amount based on the life stage. For instance, a person aged below 35 years should buy a cover 25 times the annual income, those aged 36–40 years should buy a cover 20 times the annual income, while those in the age group of 41-45 years should buy a cover 15 times their annual income,” says Naval Goel, founder and CEO, PolicyX.com, an insurance comparison portal.
A popular rule of thumb is to have a life cover (sum assured) of 10-15 times of your annual salary.
You should never go for a lower sum assured as that might not ensure full protection of your family. Life insurance providers usually have calculators on their website which would help you to calculate your insurance needs.
Choose The Policy Period Carefully
A term plan should cover you till the time you have family members dependant on your income.
Ideally, a term plan should at least cover you till the age of your retirement from work. “In case you have dependants who would need your support beyond your working years, for example, children with special needs, you can also opt for a cover till 99 years of age,” says Richit Ummat, head – D2C & online sales, Bharati AXA Life Insurance.
The younger you are, the longer the policy period should be. “For instance, a 30-year-old person should take a policy for the next 50 years, whereas a 50-year-old person should take a policy for the next 35 years. Additionally, the policy tenure can be finalized based on the liabilities a policyholder has and their financial goals for the future,” says Goel.
Select The Right Insurer
“Overall, the trustworthiness of the brand, products and services that a customer is looking for plays an important part in selecting any insurance policy,” says Ummat. The company you purchase the plan from should have a high claim settlement ratio.
The time taken to settle claims by the company should be less and the claim settlement process should be simple. The company should provide good digital servicing options of the policies for customers so that customers’ queries are resolved anytime, anywhere.