Life is full of uncertainties, in order to make the family financially secure in event of your absence one needs to have a life insurance cover. The options available include endowment plan and a term insurance plan and Unit Linked Insurance Plans (ULIP). Endowment Insurance covers the person for a specific period. Thus the individual can ensure himself till the period he desires. In the event of the death of the individual nominee receives the sum assured and bonuses the insurance company has paid for the years the policy has been in force. A Term insurance on the other hand offers the complete sum assured in event of the death of policyholder but in the event, the policyholder survives the term of the policy then he/she gets nothing but sum assured is pretty high at a low premium. If the policyholder’s main objective is security then term insurance needs to be a priority.
Following factors needs to be studied before taking up a term plan
1. Objectives: In event of security is a top priority and not an investment payout, the individual needs to go for Term Insurance as it offers high Sum Assured at a lower premium.
2. Time Horizon: It is a good idea to take up a longer horizon for the policy as financial responsibilities increase with age and any untoward incident towards later stage of life can be a big setback to the family and also taking an additional cover at a later age can be expensive.
3. Human Life Value: Human Life Value can be viewed as a monetary value of your life after taking into consideration monetary savings, income levels and liabilities. It is the value which denotes loss of income and increase of the liabilities the family of a person would have to incur in case of sudden demise of the person.
4. Cost: As already mentioned high sum assured is available to the individual at a low premium. Since there a plethora of choices available to the customers, one needs to look into the details carefully. The sooner a person decides to take up term insurance the cheaper it turns out as insuring the risk at a later age would come at a higher cost.
5. Claim Settlement Ratio: One of the important factors to be considered before choosing the term insurance plan is the claim settlement ratio. The ratio is an indicator of the number of claims which are accepted against the total number of claims that were put in. A low ratio indicates insurer has the history of higher policy rejections.
6. Riders: Insurance Company lets you attach the add-on to your main policy which is commonly called as riders. By taking riders on the base policy one can avail of the additional benefits over and above the provisions of the base policy. Based on case by case basis one can avail of critical illness rider, disability cover etc. These riders provide Lumpsum payments at the detection of disease.
7. Online Purchase: Insurance Companies provide a discount for the people who go ahead to purchase the policy online. One however, needs to take into consideration the features of the plan so that one can select the policy that is best suited to him/her. Selecting the right sum assured is of paramount importance.
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