When it comes to protecting your family’s financial future, term insurance is one of the most straightforward and efficient alternatives accessible in India. It offers a high life cover at an inexpensive premium, guaranteeing that your loved ones are financially secure in the event of your untimely death. With various types of term insurance policies available, choosing the right one can seem daunting. But don’t worry—we’ve got you covered! In this article, we’ll go over the many types of term insurance, how to utilise a term insurance calculator, and what aspects to consider when selecting the best term insurance for your requirements.
Types of term insurance policies
- Level term plan
This is the most basic form of term insurance. The sum assured on insurance is fixed and does not change throughout the policy term and the premiums are also predetermined. It is easy and perfect for people who want an uncomplicated insurance product.
- Increasing term plan
In an increasing term plan, the assured sum rises at a given rate every year and the premium are fixed. This type is ideal for people who desire their coverage to rise in proportion to inflation and other emerging financial obligations.
- Decreasing term plan
Here, the sum assured reduces as the policy progresses throughout the term of the policy contract. These plans are normally adopted to cover loans or mortgages which is a liability that reduces with time. This amount does not change during the policy, and it is known as the premium.
- Return of premium plan
This type of term insurance plan differs from the normal term plans in that it pays back all the premiums charged when the policyholder is alive at the end of the policy period. The premiums are higher, but it offers a payout at maturity which is good for people who would like to earn some interest on their money.
- Convertible term plan
This plan enables policyholders to turn their term insurance into a permanent insurance plan at some point without the need to go through some medical examinations. This is beneficial for those who may need to upgrade in the future to a more extensive plan.
- Term insurance with riders
Riders are extra features that can be included in the base term insurance plan like critical illness rider, accidental death rider or premium waiver rider. These offer better protection and can be modified according to the requirements of the user.
Factors to consider when choosing a term insurance policy
- Coverage amount
Consider your financial responsibilities and requirements to come up with a suitable figure that would protect your family should the worst happen.
- Policy tenure
Select a policy term that best suits your financial planning and the time your dependents are likely to need financial support from you.
- Premium affordability
Use a term insurance calculator to estimate premiums and ensure they fit within your budget without compromising on coverage.
- Claim settlement ratio
It is worth comparing the claim settlement ratio of the insurer to determine how efficient the insurer is in handling the claims.
- Riders and add-ons
Optional features you can include with the policy are critical illness cover, accidental death benefit, or waiver of premium.
- Insurer’s reputation
Check the insurer’s standings, customer-friendly service, and reviews to make sure you select the right company.
- Inflation protection
If you want your coverage to be adjusted to inflation and other rising costs, then, go for an increasing term plan.
- Policy conversion option
If one day you realise that you will require permanent insurance, go for a convertible term plan.
- Financial goals
Link the policy benefits to your future financial needs including the need to educate children, get married or pay for other existing debts.
- Medical history
Ensure that you reveal all your medical history to avoid being rejected for a claim due to failure to reveal some information.
- Lifestyle choices
Disclose your lifestyle habits such as smoking or engaging in risky activities since these reduce the chances of a policyholder being offered higher premiums or being turned down outrightly in the event of a claim.
- Policy exclusions
You must be aware of the policy exclusions that would give you an understanding of what is not covered so that you are not caught off guard when it comes to the time of claim.
- Maturity benefits
If you want something in return for your premiums, then there are return premium plans available.
- Family’s financial awareness
Make sure your family understands everything related to the policy and how to file a claim so that they don’t get confused when the time comes to do so.
- Regular review
Periodically review your term insurance coverage to ensure it remains adequate as your financial situation changes.
Ending note
In choosing the term insurance policy, some considerations should be looked into, as well as the type of term insurance policy to be purchased. If you look at the coverage amount, policy term, cost of the premium, and the riders, then you can have the best plan with adequate life cover for your dependents. Ensure that you employ devices such as a term insurance calculator to make the right choices and make sure that you assess your policy now and then to ensure that its terms are in line with your needs. And so, with the right term insurance, you get the assurance that your family’s future is protected.
