Term Insurance Comparison
We don’t buy anything without comparing. The reason behind it is just to be sure that we get the best. Then why not term life insurance, one of the essential financial tools to be included in our financial planning. And there are multiple reasons to do so! First, it secures our family financially when we are not with them, ensuring they lead a comfortable life. Second, it is the most affordable form of life insurance as it offers a substantial sum assured against the low premiums amongst others.
However, opting for the right term life insurance is more critical than buying just any term insurance. Why? Let’s know the answer.
Importance of Term Life Insurance Comparison
Term life insurance comparison is crucial as it helps select the right policy based on your needs and requirements. Although it sounds like a simple task, it’s not. There are plenty of term insurance plans available in the market from the top insurers. And every term life insurance plan will comprise of different features, benefits, terms, and conditions. For instance, term plans with the same sum assured from different companies might have different premiums and some add-on benefits, which can be pretty confusing. Therefore, you need to research carefully, assess their offerings, evaluate your requirements and then shortlist the best-suited term insurance for yourself and your family.
How to make Term Insurance Comparison?
So, here are certain factors that you need to consider while comparing various term plans.
- Insurance Coverage Amount
- Policy Tenure
- Different Premium Payment Options
- Various Payout Options
- Claim Settlement Ratio
- Solvency Ratio
- Add-on Benefits and Riders
Now let’s understand these factors in detail.
1. Insurance Coverage Amount
The coverage amount is one of the significant factors to opt for term insurance as it offers high insurance coverage. However, the coverage amount or the sum assured should be carefully selected such that it can suffice your family’s requirements and expenses after your demise. Hence, you should consider certain factors while determining the coverage amount.
- Lifestyle: The sum assured of your term insurance largely depends on your lifestyle. For example, if you smoke, have a non-healthy lifestyle, or be involved in a high-risk job, you should opt for a high insurance cover.
- Annual Income: As per industry experts, your insurance coverage amount should be 15-20 times your yearly income. Such that it can be sufficient for your loved ones in your absence.
- Liabilities: If you have taken a home loan or car loan, then after your demise, paying off the loans can be a significant burden on your family. Therefore, the death benefit amount that your family receives after your demise could be a great help for them.
2. Policy Tenure
Deciding on the policy term is another crucial factor to consider while comparing term insurance. It should be based on the age till which you want the insurance cover. Generally, experts recommend choosing the policy tenure up to 65 years of age or your retirement age.
After determining the coverage amount, policy tenure, the premium is another factor to consider while making a term insurance comparison. People often think that term insurance with the lowest premium is ideal; however, that’s not always the scenario. The premium you chose should be affordable, such that you can continue the plan in the long run as term plans have long policy tenure. Hence, you can use a term insurance calculator for a quick comparison of term plan premiums.
4. Different Premium Payment Options
The term plan you will be choosing should offer flexibility in premium payment modes like regular, single, or limited premium payment terms along with various frequencies to pay premiums such as yearly, half-yearly, quarterly, or monthly.
5. Various Payout Options
While opting for a term policy, you also need to select a payout option. You should carefully choose the payout option to ensure a comfortable lifestyle for your family when you won’t be with them. Usually, there are 4 types of payout options – Lump-sum payout, monthly income, Lump-sum + monthly income, and increase monthly income. So, you need to carefully select the right option based on your family’s future requirements and their financial knowledge.
6. Claim Settlement Ratio
It is important that you buy term life insurance from a reputed insurance provider so that you can be sure that your loved ones’ future is in safe hands. This you can ensure by looking at their claim settlement ratio, which means the number of claims settled by an insurer in a year. If the claim settlement ratio is high, the insurer is credible, and you can trust the provider. So, look for an insurance provider who has a claim settlement ratio higher than 90%.
7. Solvency Ratio
Another vital factor to consider while comparing term insurance plans is the solvency ratio, as it gives a clear picture of the company’s monetary worth. According to IRDAI, every insurer must have a solvency ratio of 1.5. Therefore, while choosing an insurance provider, you need to know their financial position to ensure that your family won’t face any financial hurdles in your absence.
8. Add-on Benefits and Riders
Term insurance comes with various riders, which helps in enhancing the scope of the base policy coverage. Therefore, you should compare the riders and other benefits you are getting with each term plan and then decide to buy. Make sure you opt for the one which you need the most.
If you are looking for a term insurance plan to secure your family’s future, make sure you compare them first. You can visit iiflinsurance.com and use the term insurance calculator to know the ideal term plan for you and your family.