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3 Important Questions to Consider When Buying a Term Insurance Plan

  By : , Delhi, India       18.6.2018         2 Comments          Mail Now

Do you have a friend who keeps complaining about the insurance agent who sold the wrong term plan to them? Or have you heard stories of people struggling for their claim? †

Unfortunate incidents like these can force anybody to rethink their decision of buying a term plan. But, what people donít understand is that one canít just rely on the advice of friends, family or an expert for buying a suitable term plan. You have to do some bit of homework to find the best term insurance plan at your end, too.

So if you are buying a term plan, the first thing you need to do is make a list of factors that will impact your term plan buying decision.

The process can be overwhelming. Letís make it simple for you.

You must start with three important questions that help you determine the factors that will help you choose the right term plan.

Letís take a look at what these 3 questions are

1. What amount would your family require?

How much money (or cover amount) would your family require, if you werenít there to support them? This is one of the first questions that you must answer when buying a term plan. And to answer it, you must consider the following aspects.

- Your familyís day to day expenses
- Their future financial goals (such as your childís education, their wedding)
- Any outstanding liabilities or loans that your dependants would need to pay off after you

Besides these major expenses you must also take the inflation rate into account. This will help you ensure that the rising inflation costs donít bite into the investments you made for your family. ††
Quick fact - Some Term Insurance plans in India allow increase in term cover amount during the policy term.

2. How long would your family require financial assistance?

Coverage term is another important factor to consider when buying a term plan. The coverage term in turn depends on factors such as the age of the dependants and the tenor for which they would be dependent on you. Letís try and understand this with the help of an example.

Rishi has a 2 year old son, Abhishek, who he expects to be married by 28 years old and also financially independent by then. It means if something were to happen to Rishi today, he must have a term plan with a coverage term of 26 years at least, to take care of his son.

Now letís say Rishi also has a home loan with a repayment period of 20 years. In this scenario itís advisable that he buys a term plan with a cover term of at least 20 years. This will help him ensure that his family does not have to bear the financial burden of paying the outstanding loan, in his absence. †

FYI - While most life insurance companies provide life cover up to the age of 70-75 years, Aviva i-Term provides coverage till the age of 80 years, too.

3. What is the credibility of the Insurer?

What good is a policy if it does not pay to a nominee, on the death of the life insured? Simply buying a term plan with sufficient cover amount and optimal cover term is not enough. You also need to consider the market reputation of the insurer when buying a term plan.

There are a few basic checks that you must perform before buying a term plan from any life insurance company. Ratios like Solvency Ratio and Claim Settlement Ratio are good indicators of the credibility of an insurer- higher the better. Also consider the market reputation of the insurer because if the insurer has good reviews floating amongst the customers, they must be worthy of it.

4. Other Factors

Once you have shortlisted a few insurance companies, you can decide between them based on other factors such as
Premium †- Depending upon your budget, you may want to go with a company thatís asking for a lower premium for a sum assured that another company is offering at a higher premium. †

Add-on benefits - Many companies offer add-on benefits such as critical illness rider, total disability riders. The best part is that these add-on benefits come at very reasonable prices.

Word of Advice

Buying a term plan would be one of the best decisions you would make for securing the future of your family. But if you have been pondering over it till now, and havenít taken a concrete step in that direction, itís time you that now. Without further procrastination, get in touch with an insurance advisor to help you choose the right term plan for your family. Alternatively, you can also go online to an insurance buying portal that helps you compare between different term plans.

TAGS: Term Insurance plan,   Buying a Term Insurance Plan,   choose the right term plan,   right term plan for you,  


   Jaiyant S, Noida
Reply Posted On :
26 - 6 - 2018

I just became a father of one and wanted to make sure that my family is secure financially in my absence! Thanks to the post, now I can buy insurance that covers life, illness, and disabilities as well. A very informative post indeed!

   Snehal, Uttar pradesh
Reply Posted On :
18 - 6 - 2018

This really helped. I have been trying to figure out how to buy a term insurance plan. This atleast gives me some direction. Thanks for sharing :)


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