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Key Factors to Consider When Buying a Term Plan
Table of Content
The journey of life is full of surprises. Although we always hope for the best, we must prepare for the unexpected. Term insurance can help weather unforeseen financial storms and provide your loved ones with a much-needed security net. A term plan promises to provide your beneficiary with a payout if something happens to you during the policy tenure. Choosing the ideal term insurance plan necessitates a careful consideration of several factors. Let's look at the major elements to consider when purchasing a term insurance plan, so you can make an right decisions that meets your needs.
Understanding Term Insurance
Before we go into what factors to consider when buying a term insurance, let's first have a better understanding of this important financial product. A term plan is a type of life insurance that covers you for a certain length of time. The beneficiaries get a lump-sum payout if the policyholder dies while the insurance is active.
Unlike other types of life insurance that may have investment components, term policies focus solely on providing financial protection to your family in the unfortunate event of your passing. It’s a straightforward, cost-effective way to ensure your loved one’s financial stability, making it a crucial consideration in your overall financial planning.
Key Factors to Consider When Buying a Term Plan
Evaluating the following factors can help you identify the ideal term policy for your family’s needs.
Coverage Amount
Evaluate your Human Life Value (HLV) to understand how much your family will lose financially should anything happen to you. Your HLV helps you calculate the life insurance coverage required. Your sum assured should help your family meet their future financial needs and pay off some outstanding debt.
Policy Term
The policy term depends on your life stage and financial goals. Ideally, your term plan should remain in place until you decide to retire. Younger individuals can opt for plans with tenure of around 35 or 40 years. Conversely, professionals in their 40s can select plans with a 20-year term.
Premium Amount
Your premium amounts should be affordable and sustainable over the policy term. Premiums depend on various factors, including age, health, lifestyle, and coverage amount. You must balance adequate coverage with an affordable premium.
Riders and Add-Ons
Many insurance providers offer riders1 or add-on options to enhance your term insurance coverage. Riders can include critical illness coverage, accidental death benefits, and waiver of premium in case of disability. Assess your needs and consider adding riders that provide comprehensive coverage tailored to your circumstances.
Claim Settlement Ratio
The claim settlement ratio reflects the percentage of claims an insurance company has paid over a specific period. A higher ratio indicates a better track record of fulfilling claims.
Term insurance gives financial stability to your loved ones. When selecting the best plan for your family, keep in mind the coverage quantity, policy term, claim settlement ratio, and availability of riders. Consider the term plan as an investment in your family's future.
Term insurance is a testament to your commitment to your loved ones. It is a promise that resonates even beyond your lifetime. So, embark on this decision-making process with confidence. Remember, you’re building a safety net that will stand the test of time, ensuring your family’s well-being regardless of life’s uncertainties.
Related Articles:
- How to Choose the Right Term Policy Period?
- Basics of Term Insurance - Key Points and Benefits
- Tips to Choose the Best Term Insurance Plan
- 8 Questions to Ask Before Buying Term Insurance
- Growing Together, Saving Together: Financial Tips for Married Couples
- What is ₹ 1 Crore Term Insurance?
ARN - ED/09/23/4749
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Francis Rodrigues
Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.
Written By:
Vishal Subharwal
Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.
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We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.
For all details on Riders, kindly refer to the Rider Brochures available on our website.
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