Term plan insurance has become an integral part of financial planning today as it enables individuals to secure the financial future of their dependents. These insurance plans help individuals build a financial safety net for their dependents and help them become self-reliant by providing financial aid in case of the insured’s sudden death. This makes it crucial to pick a comprehensive term insurance plan to make the most of their offerings. However, picking an ideal plan can be challenging for many reasons, and many may be concerned about just the premium cost. This perspective harms the nature of one’s research about the scope of a term plan insurance. As a result, it becomes difficult to determine the effectiveness of the policy features and their associated benefits. That said, in this article, we will explore the top features in detail and navigate their associated merits.
A Brief Explanation of Term Plan Insurance
Term plan insurance serves as a financial lifeline for the insured’s loved ones by providing financial protection during the policy term against a regular premium payment. In return for the policy premium, the insurance company extends a guaranteed death benefit or sum assured, which is paid to the insurance policyholder’s nominees in the event of the insured’s unfortunate death. This term plan insurance acts as a financial safeguard for the policy buyer’s dependents and protects them from financial strain. It also helps them meet financial obligations even in the absence of the insured and allows them to pay for future obligations without burdening their budget. The term plan insurance covers immediate as well as future financial obligations, ensuring the overall financial independence of the policyholder’s family members.
Notably, a term plan insurance can be categorized as – a pure life cover and life insurance with investment and savings component
The Best Way to Compare A Term Plan Insurance
To compare a term plan insurance effectively, individuals should compare these features carefully –
Cover: The sum assured is basically the financial protection that the insurance company promises to pay under the term plan. It is an important factor for evaluating the scope of different term plan insurance options. This is because a high sum assured is crucial for empowering an individual’s family members and allowing them to fulfill their current and future financial liabilities and account for other financial needs smoothly even in the event of the sudden passing of the policyholder. Hence, selecting a high coverage amount is indispensable to safeguard the financial future of the policyholder’s family members. Those seeking a term insurance policy should mindfully their financial obligations to ascertain the required life cover with more accuracy. Comparing different plans and using financial tools like term plan insurance are effective ways to determine which cover would be best suited for one’s needs.
Critical illness cover: Although term plan insurance aims to act as a shield for the insured’s family in the event of their untimely death, the financial strain of critical illnesses and related medical costs can threaten their financial stability. In such a situation, having a critical illness cover typically proves to be an effective financial safety blanket, alleviating the burden of high medical expenses. They also ensure that the beneficiaries of the policy can retain their current living standard without hampering their financial standing or existing budget. This type of insurance generally extends substantial financial aid to help the policyholder’s family members easily bear the medical expenses and cost of critical illness treatment. Additionally, the premiums paid to avail of a comprehensive critical illness cover are deemed eligible for tax deduction under the provision of the Indian Income Tax Act’s Section 80D. This aspect helps individuals to lower their tax burden and save money.
Claim Settlement Ratio: The claim settlement ratio is an important metric for assessing an insurance provider’s ability to process and resolve policy claims. The CSR of a company is ascertained by dividing all claims settled by all claims they received in a year. Note that a high ratio, more than 90%, reflects the insurance company’s record of approving and settling term plan insurance claims.
Individuals can readily check the insurance provider’s CSR on the company’s website. It is recommended to pick an insurance company with a high settlement record to be at peace thinking that the policy’s beneficiaries can claim promised insurance benefits without any delay or hassles.
Rider: While term plan insurance offers a simple life cover, policyholders can improve their financial protection by including Riders or add-ons into their current insurance policy. The insurance Riders are carefully tailored to help address certain needs, including those that help add cover for critical illness, premium amount, or unforeseen situations. Notably, these add-ons come with an added cost, increasing the premium amount. This makes it important to assess the depth of each Rider to understand their potential to enhance the coverage before including the same into their existing policy. Some of the most popular Riders are the ones that allow waiver of premium, increase the income benefit, and also accidental benefit rider.
Premium: When analyzing the effectiveness of a term insurance plan, it is important to maintain a balance between insurance premiums and the extent of features offered. Indeed, the insurance premium plays a key role in helping understand if they should purchase an insurance policy. However, it should not be the only key parameter that helps you determine the effectiveness of the insurance policy. It is important to make sure that the chosen policy extends a comprehensive coverage that aligns with their aspirations and financial objectives. Typically, a high premium amount can increase their financial burdens and strain their ability to make timely payments. To ensure that their financial standing remains unaffected during the policy term, individuals should pick a term plan insurance whose premium suits their budget. They can use an online term insurance calculator and not a lump sum SIP calculator to determine the premium amount they can pay comfortably without straining the budget.
Selecting the term plan insurance is crucial in meeting one’s needs and requirements when it comes to securing the family. To ensure one picks the best-suited plan, it is recommended to compare different plans and their features. Once all information is availed, individuals can make an informed decision.