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A term policy is extremely necessity for an individual who has dependents or a family. It is a proven fact that a term plan is the basic form of life insurance plan where a fixed sum assured is paid on the death of the life assured. The right term policy can provide security as well as value of money.
A term plan offers you financial coverage against fixed premiums for a specified duration. So, it is important to choose and invest in the right term insurance policy for those who has dependents.
What Exactly is Term Policy?
Term policy or Term insurance policy is a pure life insurance product. It provides financial protection to the family of the policyholder in case of an unfortunate demise. The nominee receives a death benefit as defined under the chosen term insurance policy. The lump-sum amount paid to the family members of the policyholder can be used to fulfill their financial needs.
The premium rates in term insurance plans are affordable and differ upon your age, gender, coverage tenure, etc. So, you should thoroughly know the term plan meaning for selecting the suitable term policy for you.
Benefits of Investing in Term Policy
To make sound financial decisions in life, it is essential to know certain basic things like what is health insurance and what is life insurance. These are policies that every individual must have to have a sense of financial security today.
Let’s talk about the several advantages of term insurance plans. Here are the most important ones.
How to Find The Right Term Policy For You?
The term plans were introduced with a basic structure, the plan will offer a sum assured upon the death of the policyholder. While the profusion of choices is good, it is becoming a problem for most of the investors to decide which plan to buy.
Here are the important things to consider while buying a term insurance policy.
Calculate Term Insurance Coverage
It is very important to calculate how much money your family would need if you were to meet with an untimely death. You can do it by estimating your dependent family’s monthly expenses and adding your liabilities on the account of home loan, personal loan, or credit card bills. After that, deduct all the liquid assets you already have in form of FDs, stocks or mutual funds.
Determine The Tenure of Term Policy
It is essential to know till what age you would need the coverage. The tenure should not be too little as the policy might lapse before your financial obligations are completed. You should also make sure that the tenure is not too long because the premium charges would be so high.
The right way to determine the tenure of the term policy is to estimate by what year your liquid net worth.
Choose Add-on Wisely
The term plans offer riders benefit at a reasonable cost which should be certainly considered by you even if they might not fit your requirement. There are major four riders available, Accidental Death Rider, Critical Illness Rider, Waiver of Premium on Disability, and Waiver of Premium on Critical Illness.
The cost of various riders is different. So, you have to run sum research to find out if the additional benefits match up with the premium charged.
Check the Reputation of the Insurance Provider
It is one of the most important factors to consider before buying an ant term plan. You can check the reputation of the insurance provider by considering corporate governance records and assets under management (AUM) of them. You can also consider the number of instances that the insurance provider has violated IRDAI (Insurance Regulatory and Development Authority of India) rules.
Check Claim Settlement Ratio (CSR)
The claim settlement ratio of the insurance provider is a great way to ascertain the company’s credibility. The IRDAI (Insurance Regulatory and Development Authority of India) announces the claim settlement ratio of every insurance company each year. The figure explains the number of claims a insurance provider settles against the total number of claims placed in that year.
A term policy is a long-term contract between you and your insurer. It will provide financial support to your family when you are not there. Thus, it is very crucial to choose and invest in a suitable term plan and protect your loved ones financially.
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