8 Factors to Consider when Comparing Term Insurance Policies in 2021
No doubt there are plenty of term life insurance plans available from different companies available today. Although all the plans have some best features to offer, choosing the one that can get you the maximum benefits is critical. But to identify the correct term plan that can perfectly suit your needs is essential.
Let us learn from an example. Mithun, a 40-year-old family man, wants to choose the best term plan for his family. His family falls under the middle-income group with lots of financial commitments. The impact of Covid-19 and the demise of people around him has made him realize that life is uncertain and the importance of owning term life insurance.
Mithun is striving hard to get his children a good education. He also feels that for any reason, their education should not be interrupted. However, at the same time, he also has some debts to be paid off. He now fears that his family should not get into trouble if anything uncertain happens to his life.
These real-time responsibilities and threats have made Mithun now immediately choose term insurance. To help him, here is a small comparison guide and tips to choose the right term insurance plan.
Before you begin with the term plan comparison process, understanding what term life insurance is essential.
Term Insurance Plan:
First, it is essential to get a clear understanding of what is a term insurance plan. This is the type of life insurance plan that is availed for a certain number of years as a term period. This term period is fixed, and the continuity in the premium payment should be ensured to keep it alive and get the benefit at the right time.
Unlike the other types of insurance policies, term insurance plans have their own unique features and benefits to offer. There are also several types of term insurance policies. These policies are less expensive when compared to the other regular return giving plans. Although the term plan does not have any cash value, its value becomes visible on the policyholder’s demises within the timeline of the insurance plan in force.
8 Factors You Should Consider While Compare Term Insurance
The term plan comparison can be performed through various approaches. However, to initiate and make it simple, here are a few tips to help you:
- Term Period: As the foremost factor, try to consider the number of years for which you want to get the life cover. This life cover period can also be decided based on your age, requirements, and lifestyle.
- Types of Insurance Plans: There is no doubt that all kinds of insurance plans have some unique things to offer. Such features will undoubtedly benefit them at the right time. But here the question is, which type can fulfill your maximum number of expectations. Therefore, you need to make some efforts to understand and identify the correct type of term plan that fits your expectations to the maximum numbers.
- Use the Calculator: If you want to know the details more precisely, you can make use of the calculator that is provided by almost all insurance brokers. Such calculators will provide you with complete detail about all you want to know, like premium, term period, type of plan that suits you well according to your age, premium payable ability, riders, and more. Moreover, such a calculator can also simplify your job by quickly getting you the required details.
- Features and Benefits: You should take enough care to understand the benefits and features of the policy in your process of term insurance comparison. Remember, such features and advantages will differ with different term plans. Only by comparing them, you can understand which will be the best choice for you. Therefore, it is crucial to know the features and benefits of a term plan before selecting.
- Compare the company: It is not only the insurance plans and their features that you need to compare, but also have to compare the insurance companies. The reputation and reliability of the insurance companies have a significant role to play in your decision of buying the best plan. Remember, it doesn’t mean that an insurance company that is there in the industry for many decades has reliable plans, and the ones that have newly emerged in the industry have weak term plans. Both the new and existing companies can have some specialized plans to suit your expectations. Therefore, try to pay some attention even while selecting the insurance company.
- Claim Settlement Ratio: The Claim settlement ratio denotes the credibility of the insurer. It is the percentage of claims settled by the insurer in a year. This percentage may differ with the companies. Therefore, regardless of the insurance company, ensuring a higher settlement ratio is essential. This can help to get timely help and support at the time of claim.
- Riders and Add-on covers: Today, almost all insurance companies are offering riders in addition to the existing features of the term plans. Such riders offer an additional benefit. But remember, they can also influence your premium amount, sum assured, and claim settlement ratio. Therefore, before you choose the riders, you should ensure if they are really necessary for you or what type of riders can help you.
- Cost of the Term Plan: As you compare term life insurance, try to understand the overall cost. The price for an almost similar type of insurance plan offered by all companies may differ. Such differences can be minimal or with maximum differences. Therefore, there is a chance for you to end up buying a plan for the higher cost, which is available at low or medium cost with more or less similar features in another company.
Before you begin your term insurance comparison, consider all these points, you should also think about the inflation rate. This may wonder you, but before selecting a term life insurance policy, remember, the inflation rate can also hugely impact the term plan benefits.
The reason for this is the term insurance plan usually lasts for ten years to up to 40 or 50 years. During this period, the inflation rate can erode the value of the rupee. Therefore, at the time of claim settlement, the money received as a sum assured may not help to fulfill all the financial needs, which appeared to be a considerable amount when the policy was taken. This may lead to disappointment.
Therefore, assuming an increase of 5% to 10% every year, you can plan to choose the sum assured. At the same time, by opting for a higher sum assured, you will end up paying a higher premium. This should not disturb your premium paying continuity because if any interruptions happen in the premium payment, the policy may lapse and become useless.
Overall, term life insurance is definitely a necessary financial tool in today’s time but comparing term insurance before buying is equally important. IIflinsurance.com is one such platform that offers various term plans from different insurers. To compare different term insurance plans, you can simply visit the IIFL insurance website, fill in your details and get quotes from various insurers for different term plans.