Are you planning to buy a term plan to secure the financial future of your loved ones? A term plan is an insurance policy that provides financial security to your family in case of your untimely demise. It’s a vital investment that helps your family cope with the financial burden in your absence. However, before you sign up for a term plan, there are some things you should consider to ensure that you choose the best plan for your needs. In this article, we will discuss the essential things you need to know before buying a term plan.
Why Buy a Term Plan?
Before we dive into the things to consider before buying a term plan, let’s understand why you should buy a term plan in the first place. Here are some benefits of term insurance which makes it a must-have investment for everyone:
- Financial Security
A term plan provides financial security to your family in case of your sudden demise. The policy pays out a lump sum amount to your beneficiaries, which helps them cope with the financial burden and maintain their standard of living.
- Low Premiums
Term plans offer a high sum assured at a low premium, making them an affordable investment option. You can choose the sum assured and the policy term as per your needs, which further helps in customizing the policy and making it more affordable.
- Flexibility
Term plans come with a lot of flexibility. You can choose the policy term, sum assured, and the payout option as per your needs. Moreover, you can also add riders to your policy to enhance the coverage.
Things to Consider Before Buying a Term Plan
Now that you know why a term plan is an essential investment, let’s discuss the critical factors that you should consider before buying a term plan.
- Coverage Amount
The first and foremost thing you should consider before buying a term plan is the coverage amount. The sum assured should be sufficient to cover your family’s financial needs in your absence. Ideally, the coverage amount should be at least ten times your annual income. However, you can customize the sum assured as per your financial goals and liabilities.
- Policy Term
The policy term is the duration for which you want to be covered. It’s essential to choose the policy term based on your age, financial goals, and liabilities. Ideally, the policy term should be until your retirement age or until your children become financially independent.
- Premium Payment Term
The premium payment term is the duration for which you need to pay the premiums. You can choose the premium payment term based on your financial goals and income. Some insurers offer limited premium payment terms, which help you pay off your premiums within a shorter duration.
- Payout Options
You should also consider the payout options while choosing a term plan. You can choose between a lump sum payout or a regular income payout to your beneficiaries. A regular income payout ensures that your family has a steady source of income even in your absence.
- Riders
Riders are add-on benefits that you can opt for to enhance the coverage of your policy. Some popular riders include critical illness rider, accidental death benefit rider, and waiver of premium rider. You should consider adding riders to your policy based on your needs and financial goals.
- Insurer’s Reputation
The reputation of the insurer is another crucial factor that you should consider before buying a term plan. You should choose an insurer with a good reputation and a high claim settlement ratio. It’s essential to do your research and read reviews and feedback from other policyholders before choosing an insurer.
- Exclusions
Exclusions are the situations in which the policy will not pay out the sum assured. It’s essential to read the policy documents carefully and understand the exclusions before buying the policy. Some common exclusions include death due to suicide, death due to pre-existing illnesses, and death due to drug overdose.
- Premiums
Premiums are the amount that you need to pay to keep your policy active. It’s essential to choose a policy with affordable premiums that fit within your budget. You should also consider the frequency of premium payment, whether it’s monthly, quarterly, or annually.
- Claim Settlement Process
The claim settlement process is the process of getting the sum assured from the insurer in case of the policyholder’s death. It’s essential to understand the claim settlement process and ensure that it’s hassle-free and straightforward. You should also check the insurer’s claim settlement ratio before buying the policy.
FAQs
- What is a term plan?
A term plan is an insurance policy that provides financial security to your family in case of your untimely demise. It’s a vital investment that helps your family cope with the financial burden in your absence.
- How much coverage should I opt for?
The coverage amount should be sufficient to cover your family’s financial needs in your absence. Ideally, the coverage amount should be at least ten times your annual income.
- What are riders?
Riders are add-on benefits that you can opt for to enhance the coverage of your policy. Some popular riders include critical illness rider, accidental death benefit rider, and waiver of premium rider.
- What are exclusions?
Exclusions are the situations in which the policy will not pay out the sum assured. It’s essential to read the policy documents carefully and understand the exclusions before buying the policy.
Conclusion
A term plan is an important investment to secure your future and provide financial security to your loved ones in your absence. Before buying a term plan, it’s essential to consider the coverage amount, policy term, premium payment term, payout options, riders, insurer’s reputation, exclusions, premiums, and claim settlement process. By considering these factors, you can choose the best term plan for your needs and secure your family’s financial future. Remember to choose the term insurance calculator to know the premium for the sum assured, read the policy documents carefully, and choose an insurer with a good reputation and a high claim settlement ratio.
