Life is full of uncertainties, and anything can happen at any time. That is the reason you need to invest in the best term insurance policy to protect your family and their financial interests against these uncertainties. Investing in such a plan will provide them with income replacement when you are no longer there to provide for them.
But when you are looking for a term plan, there are several factors that you need to keep in mind in order to choose the best one. Even though the price is an important consideration, it is advisable to not base your purchase decision solely on the low-cost premium. While you may be tempted to pick the cheapest term plan, it may not be enough to provide adequate financial coverage. That is the reason it is necessary to follow certain steps to ensure that you only buy the best term insurance policy.
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Here are some tips to help you get started.
Step 1: Determine the coverage amount
When you are looking to buy the best term insurance policy, you first need to calculate the coverage amount based on your life stage and the number of dependents you have. Your requirements may vary at different stages of life, so it is necessary to account for those added responsibilities. For example, the financial obligation of an unmarried person will not be the same as someone who is married or has kids. The cover amount should consider these things and should be calculated accordingly. Remember to keep your future goals in mind while doing that and make sure that your insurance amount can be adjusted over time with added responsibilities.
Step 2: Estimate the money your family will need to maintain their lifestyle
When calculating the coverage amount of your term plan, you need to keep the dependents in mind and choose the coverage amount based on their current lifestyle. You need to accurately estimate the money they will need to sustain that lifestyle, even when you are not there anymore. Don’t forget to account for inflation.
Step 3: Account for family’s needs
Even the best term insurance policy will fail to deliver if you do not accurately account for your family’s needs over time. If you are the sole breadwinner of your family, you must always choose the coverage amount that will be equal to your current income. In doing so, you will be able to keep your loved ones afloat in the face of financial turmoil.
Step 4: Calculate the premium
Once you have found the best term insurance policy most suited to your investment needs,
now is the time to evaluate the term insurance premium. When you do that, you will be able to narrow down your options based on the plans you can afford and sustain throughout the policy duration. Experts also advise first-time buyers to choose a monthly premium system if costs play a major role in your decision making. However, it is necessary to not compromise on any of the factors mentioned above when choosing the policy. At the same time, don’t forget that your premiums are eligible for a tax deduction u/s 80C of the income tax act. So keep that in mind when calculating the premium.
Step 5: Account for liabilities
If you have any short-term loans, home loans, or personal loans, these need to be accounted for in your insurance coverage amount. This will help you prevent the burden of EMIs of falling on your family members.
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Step 6: Assess the insurer’s credibility
It cannot be stressed enough that you also need to ensure that your insurance provider is reliable other than choosing the best term insurance policy. What good is a life insurance that does not deliver on its promise when the time comes? The best way to judge that is by checking the insurer’s claim settlement ratio. This numerical value represents the number of claims settled by the insurance provider in a giver year against the claims filed. Always look for insurance providers with a CSR in the high 90s.
Step 7: Look for riders
Don’t forget to check the rider options that you can add to your term plan to expand its coverage. These add-on benefits can be added to protect your finances against life’s uncertain events such as accidental death or critical illnesses, to name a few. Make sure that the riders you choose are aligned to your lifestyle, as they will bump up your insurance premium.
Step 8: Customer Service
When you buy a term plan, you also need to do some background research about the company’s customer service department. You should be able to get quick assistance related to your policy when you need it. The efficiency of their customer care depends on their ability to solve your issue quickly.
Use these steps to buy the best term insurance policy to safeguard your family’s financial future.