Have you been thinking of buying a term insurance plan? It is a smart move, considering how it offers adequate financial protection for your family in case something unfortunate befalls you. However, you should always check a few crucial things before finalizing your purchase decision. Let us check some of them out in this article.
Things to Evaluate Before Buying a Term Insurance Plan
Purchasing a term insurance planmeans a major life decision by all means. Here are some of the key things that you should not miss before finalizing your purchase.
- Coverage-related requirements- You should be clear about the life coverage that you require. Calculate this beforehand, including inflation, future projected household costs, higher education expenses of your kids, and repayment of debts or liabilities. Then check whether the insurance company offers this coverage or not. You should also look for flexibility to increase the coverage later on, with increasing income and family responsibilities. Ensure that the sum assured is determined based on your Human Life Value (HLV), which factors in your income, liabilities, and long-term financial needs.
- Policy tenure- Most insurers offer term insurance plans with policy tenures ranging from 10 to 40 years, with some policies extending coverage up to 99 or 100 years. However, it is always best to look this up to make sure that your policy duration aligns closely with your specific requirements.
- Premium affordability- Your premium amount should be affordable in relation to the coverage that you get. Compare multiple insurance companies based on the premiums for the same coverage amounts. Go for the lowest possible one without any coverage-related compromises.
- Riders- Examine the riders available with your term insurance plan, covering critical or terminal illness, premium waiver, accidental disability or death, etc. However, do not solely opt for the lowest premium—ensure that the plan offers sufficient coverage and necessary riders.
- Insurer’s Reputation- Always check the reputation and ratings of the insurance company. Go for a reliable company with a high CSR (claim settlement ratio) and an efficient claim process. Apart from CSR, the insurer’s grievance redressal system and customer support quality should be evaluated. Also, check whether the claims process is convenient and read customer testimonials and reviews before going ahead.
Final Thoughts
You should also check the policy documents carefully, noting any terms and conditions along with inclusions, exclusions, fees and charges, etc. Do this extensively before you purchase the policy and confirm your decision with the insurance company. Also, make sure that you have ample premium payment flexibility when choosing the frequency. It can be monthly, yearly, quarterly, etc. At the same time, the insurer should have a proper customer support mechanism to help you address queries or any issues.
These are all things that you should verify beforehand. Make sure that you choose the coverage amount wisely without skimping on it by all means. Determine your sum assured based on financial calculations rather than simply opting for the highest amount you can afford. Also, make sure that the insurance company is transparently informed about your health conditions and lifestyle habits. Non-disclosure of medical conditions, smoking, drinking, or other habits may lead to claim rejection under Section 45 of the Insurance Act, 1938. Your family will suffer at a critical juncture due to these slip-ups. Hence, they are always avoidable.