When it comes to purchasing a term insurance plan, most consumers start by comparing pricing. Yes, cost is crucial. However, putting too much emphasis on the cost of a term insurance plan might jeopardize your family's financial stability. To ensure that your family is not harmed in the future, we've developed a list of five key factors that should assist you in selecting the finest term insurance plan.
Key Factors For Saving Term Plan For 5 Years
1. Claim Settlement Ratio
This figure represents the percentage of claims settled compared to the total number of claims submitted in a given year. The higher the ratio, the easier it will be for your family to claim insurance and continue to live comfortably in your absence.
The goal of term life insurance is to provide financial security for your dependents. The better the claim settlement ratio, the better your chances of safeguarding the future security of your family.
While the claims settlement ratio is significant, it's also necessary to look at the overall number of claims the insurer has settled. The Claim Settlement Ratio becomes significant only when a large number of claims are settled.
2. Solvency Ratio
The solvency ratio determines whether or not the insurance you pick will be financially capable of resolving your claim if it becomes necessary. The Insurance Regulatory and Development Authority of India (IRDAI) requires that each and every life insurer have a solvency ratio of at least 1.5, because a life insurer will receive a significant number of claims in a short period of time in the event of a natural catastrophe.
In instances when a large number of claims must be resolved rapidly, the solvency ratio becomes critical. The financial health of your life insurance will determine the financial security of your family. Even if natural disasters appear unlikely, failing to address this critical issue might jeopardise your family's financial stability.
3. Critical Illness Coverage
A term insurance policy protects your family's financial future in the event of a disaster. However, the loss of the primary breadwinner isn't the only time a family's financial stability is jeopardised. A critical disease, such as cancer or brain surgery, can be extremely expensive and financially crippling to a family. Critical illness plans must be presented and must pay the cover amount promptly upon diagnosis. The critical illness benefit helps to cover the high expense of treatment while also ensuring that your family has enough money to live a normal life. Premiums paid for critical sickness insurance are also tax deductible.
4. Additional Covers
All term insurance plans include a basic life insurance cover. If ensuring the financial stability of your family is a priority, make sure you select a term insurance plan that provides comprehensive coverage and benefits.
Premium Waiver :
In the event of permanent incapacity, life insurance coverage will continue without the need to pay a premium.
Accidental Death :
This benefit raises the amount guaranteed to be paid to your family members if you die in an accident. The majority of reputable term insurance plans provide an accidental death benefit equal to the basic sum assured.
Income Benefit :
Rather than a single sum payment, some term insurance plans provide a recurring income to your family members. This benefit is useful if you want your term insurance policy to provide your family a monthly income in your absence.
5. Premium Cost
After you've compared term insurance plans using the criteria above and reduced your options down to a handful, you'll want to consider the cost before making your final selection. Make sure, though, that you don't skimp on any of the criteria listed above only to save money. Remember that term insurance premiums are tax deductible under section 80C of Income Tax Act.
So, there were a few things that you need to keep in mind while selecting the best term plan for you and your loved ones. These tips will make sure you get your hands on a policy that’s not just affordable but also covers the requirements of your family when you’re no longer around.
*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.