Term Insurance Plans: A Quick Brief
by Term insurance has become a key financial planning means as more people realize its value for safeguarding the future of their health and financial standing. These insurance plans can assist families in achieving financial independence by providing financial support in the event of the insured’s death. This makes it vital to pick the right policy to make the most of their features and offerings. However, choosing the right term insurance policy can be challenging, as many individuals focus solely on the cost of premiums when comparing plans. What they fail to realize is that this can lead to overlooking other important factors. Without weighing a variety of factors, including the sum assured, the term length, the premium, and the claim settlement ratio, individuals will not be able to understand the virtue of the policy features and benefits of the best term insurance plan.
Read along to understand how to analyze the best term insurance policy.
Term Insurance in a Nutshell
Term insurance is a life insurance policy that offers financial protection for a given period or policy term. The policyholder pays a pre-specified premium amount to the insurance provider, and in return, the company agrees to pay a pre-disclosed death benefit to the insured’s beneficiaries if the insured dies during the active policy term. The primary objective of this insurance is to safeguard the financial security of the policyholder’s family in the event of his/her death. The policy can help to cover immediate and future obligations, meet expenses, and more.
A term insurance policy is available in two forms:
- Pure Life cover
- Life insurance cover with savings or investment component
What to Consider to Compare Best Term Insurance Plans Effectively?
Individuals can compare the best term insurance plan options easily by keeping these factors in mind –
- Cover Amount
The sum assured, or coverage amount, promised under the term insurance plan is a key factor to consider when comparing term insurance plans. A higher coverage amount can help the insured’s family members meet their financial obligations and maintain their lifestyle in the event of their death. It is important to choose an appropriate coverage amount to ensure the financial security of the insured’s family. Individuals should identify their current and future obligations and existing liabilities to make an estimate of the required cover.
- Critical Illness Cover
Term insurance primarily protects the family’s financial future in the event of the policy buyer’s death, but critical illnesses and related treatment costs can have a negative impact on their financial stability. Hence, having critical illness coverage can be beneficial in meeting heavy medical expenses and ensuring the insured’s family can maintain their standard of living without increasing their financial strain. This type of coverage also provides financial aid to meet the cost of treatment. Additionally, the premiums paid for critical illness coverage are tax-deductible under Section 80D of the, allowing the policy buyer to save more money on taxes.
- Claim Settlement Ratio
The ratio is a metric used to evaluate how effectively an insurance provider can settle the claims. This ratio is calculated by dividing the total number of claims settled by the total number of claims received in a year. A high claim settlement ratio, ideally above 90%, indicates that the insurance company is adept at approving and settling claims.
