How to Choose the Best Term Insurance Plan for Your Family?
New Delhi : Selecting suitable term insurance plans for the family is something that you should prioritise above everything else. After all, proper insurance coverage is the foundation of securing your family financially for the future. Now, there are some factors or considerations that should be kept in mind while evaluating and finalising term plans.
Things to Remember While Finalizing Term Insurance Plans
These are some of the key considerations worth noting while selecting term plans that are suitable for your family.
Dependents and Your Life Stage
The first thing to do is to evaluate the stage of your life. Your age, financial circumstances, and the number of dependents will naturally influence the selection of your term insurance policy. If you are the only earning member of the household, then the others will naturally be dependent for a longer duration of time. If you do not have any dependents or responsibilities at present, you may need lower coverage, but keep in mind future responsibilities or dependents you might have later. Hence, choose appropriately, depending on your life stage and family responsibilities.
Your Present Lifestyle
Choosing term insurance plans is also linked to your current lifestyle and specific requirements. Your family’s lifestyle and the patterns of your spending are what will help you work out how much they will require in the future from a financial standpoint. It will also enable the selection of a suitable coverage amount, factoring in inflation, thereby ensuring that there are no compromises for your family in your absence.
Check Your Income
Evaluate your income closely to practically understand how much goes into every financial responsibility or necessity. Ensure that you calculate the financial needs of every family member accurately. While term insurance is generally affordable, you should know how much you can afford in terms of premiums and aim to allocate a small percentage of your income (2-5%) to your coverage. This way, you avoid unnecessary financial stress while securing your family’s future.
What are Your Liabilities?
Debts and loans should be analysed carefully as well. Check their tenures minutely as well. If the insurance tenure does not fully cover this loan repayment duration or the coverage amount falls short of the pending amount, then it may be tough for your family members in your absence. If your liabilities decrease over time, you may also consider a decreasing term insurance plan, which aligns with your reducing debt and lowers your premium outgo.
Adding Strategic Riders
You can choose optional add-ons or riders to enhance your term insurance plan and make it more beneficial for the family. Some standard choices include accidental death, accidental disability, premium waiver, critical illness, etc. Accidental death riders provide an additional sum in case of accidental death, while accidental disability covers loss of income in the event of permanent disability. Riders like premium waiver or critical illness could also come in handy, depending on your circumstances. However, be mindful that too many riders may increase your premium.
Check the Credibility of the Insurer
The insurance company’s track record and overall reputation should also be analysed thoroughly. Examine the claim settlement ratio (CSR) with care. It indicates the percentage of claims that the insurer has settled in a financial year against the total claims received. While a high CSR is a positive indicator, it’s also important to consider other factors like the insurer’s solvency ratio, average claim settlement time, and customer reviews. Also, keep an eye on the policy documentation, application procedure, and claims process before finalising your decision.
These are some of the key aspects worth noting while choosing term insurance plans for your family. In addition to protecting your family, term insurance offers tax benefits under Sections 80C and 10(10D), making it a smart financial choice. Here’s to making an informed and effective decision.
