Online Tips For Evaluating Term Insurance Policies
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Planning for the future is something which many young people delay in doing. As sad as it may be, death is an eventuality which each one of us has to deal with, some time or the other. As one moves forward in life, many changes take place, which also bring about a change in the number of responsibilities one shoulders. A young and unmarried person will have relatively lesser responsibilities as compared to someone who is married and has children. In case of the latter scenario, having a back-up plan which provides protection to your family in case of a mishap is an absolute necessity.
If you are seeking a simple and uncomplicated protection plan for your loved ones, a term insurance plan can be an ideal option. Term plans are very simple in their working, making them very easy to understand. This plan will offer financial protection to your loved ones in the unlikely and unfortunate event of your sudden demise.
Tips To Choose The Best Term Insurance Policy
1. Assess Your Needs
The very first step involved in the purchase of an insurance policy is assessment of coverage needs. Calculate the amount of coverage you think your family will be comfortable with in the coming years and then set out to look for plans accordingly.
2. Which Term Plan To Choose
As you make progress in life, your financial situation will change. Choosing a term plan takes these hanging situations and needs in mind. Here are the differences between the 4 types of term plans and how they might be helpful.
- Level term insurance - Under this plan, the premium amount remains fixed throughout the policy term. This is a regular term insurance plan.
- Decreasing term insurance – Different life stages are marked by different liabilities. During early years, one may have the responsibility of loan repayments, children, siblings, or aged parents. However, with time, after your children and siblings can support themselves and loan repayments have been successfully completed. You have lesser dependents to look after. This will automatically lower your insurance coverage needs. Decreasing plans are ideal for such situations as the sum assured amount decreases by a fixed percentage each year.
- Increasing term insurance – Under this plan, the sum assured amount will increase by a pre-set percentage to take care of increasing costs due to inflation. Increased costs need a higher cover and this is where increasing insurance plans come in useful.
- Monthly income plan – Under this plan, the sum assured benefit is paid out in regular monthly installments to help the dependants take care of monthly recurring expenses.
3. Term Insurance Premiums
Premium is an important factor which heavily influences one’s decision of purchasing or not purchasing a plan. Premiums charged for term insurance plans by various companies are quite varied. However, pricing does not define the efficiency of a plan or the reliability of the provider. An expensive plan will not necessarily mean the plan will offer the best benefits. Similarly, a relatively inexpensive plan won’t necessarily be useless either. However, when purchasing a plan, do not let pricing be the prominent factor. Compare and select the plan which provides the best coverage and benefits, even if it is more expensive than what you’d be willing to shell out. Also, look for term plans online as these are usually significantly cheaper than their online counterparts.
4. Term Insurance Riders
Besides death, there are several other risks such as accidents, critical illness diagnosis, accidental disability, etc., which can threaten the financial stability of your dependents. A rider is an add-on benefit which helps protect from such risks and can be attached to the base policy on the payment of an additional premium. When choosing an insurer, consider one which provides you with multiple rider options. Some of the common types of riders available are Accidental death rider, Premium waiver rider, Accidental disability rider, Accelerated sum assured rider, Critical illness rider, and Hospitalization benefit rider.
5. Term Insurance Claim Ratio
Another important factor which must be considered when buying insurance is claim ratio. Before you shortlist an insurer, make sure you check their claim ratio which is basically the total number of claims registered versus the number of claims settled by the company. For example, if an insurer has received a total of 100 claims and they honor 90 of those claims, then the claim ratio would be 90%. This is an important indicator of the company’s intention with respect to claim settlements.
6. Term Insurance Customer Service
When purchasing insurance, make sure you also do some research on the state of the insurer’s customer service department. After all, once you have bought the policy and may have an issue, the efficiency of the customer care will decide how fast or slow your issue is resolved.
7. Term Insurance Solvency Ratio
Another indicator of a company’s capability is its solvency ratio. As per the rules laid down, an insurance company must always have a higher value of assets than liabilities. This is done to ensure that the insurer always have sufficient funds to honor claims in times of emergencies. A higher solvency ratio is a preferable quality to look for in an insurance company.
8. Buying Ease
Convenience is something which everyone wants. When it comes to purchasing insurance, customers now look for plans which can not only be purchased online but can also be accessed online. Gone are the days when one policy document was made on paper. Now is the era of e-policies where the policy document is issued online and sent to your email id, from where it can be accessed anytime and anywhere.
Conclusion
Besides the claim ratio and solvency ratio, there are some other factors which one can consider to assess the insurer’s reputation. These include the insurer’s corporate governance record, their assets under management (AUM) and also the number of instances that the insurer has violated IRDAI rules.
Also read- The Advantages Of A Term Insurance Plan With A Premium Refund (TROP)
