Financial planning plays an integral role in your life. As a breadwinner of the family, you might not only work hard during your active working years but also invest in different financial instruments to grow your money. While your hard-earned savings and investments are crucial, they might not suffice to ensure the physical well-being of your family. Being the earning member of the family, it is imperative to insure your loved ones against inevitable things like death, which is why you need a term plan.
But what is term insurance? Term insurance is a protection plan, which provides death benefits to your family in your absence. Since there are multiple options of term insurance plans, you might get confused while selecting the perfect term plan for yourself. Therefore, let’s take a look at these top six steps before purchasing a term plan:
- Identify your needs
There is no denying that all of us require a life insurance policy for our financial security. When you purchase a life insurance product, you should never purchase it without analysing your needs. Since you would be the end consumer of your purchase, you should ensure you make the most of the term policy based on your needs and preferences.
- Choose the right policy tenure
Selecting the right tenure of your term policy is equally important as choosing an adequate coverage amount. Ideally, your term policy should cover you until and unless the time you’re working. As a policyholder, you should opt for a term policy, which covers you up to 65 years. While selecting the tenure of your term policy, consider the following things:
- Your assumed retirement age
- Your current age
- Purchase an online term insurance
While choosing the perfect term plan for yourself, you can either purchase it online or offline. However, an online purchase of a term policy has relatively more benefits. An online term plan is affordable, convenient, and time-saving. To buy a term policy online, you should follow these three steps mentioned below:
- Select the term policy
- Make an online premium payment
- Purchase the term policy
- Consider the rate of inflation
Inflation can be your worst nightmare when it comes to insurance. For instance, your life coverage of Rs. 60 Lakhs might not suffice you in the next 10 years. Now, if you assume the inflation is 5%, the value of Rs. 60 Lakhs would be only Rs. 38 Lakhs after 10 years. Therefore, while purchasing term insurance, you should consider the inflation rate. Many insurers eradicated the impacts of inflation of increasing the premium rate by 5%-10% every year.
- Compare several term policies
Comparing is an effective way of ensuring that you have the perfect plan for yourself. Before buying the final policy, you should conduct background research and compare different term policies. When you compare several term insurance options, you can easily understand if a particular policy can add value to your money or not.
- Look for a high claim settlement ratio
Claim Settlement Ratio (CSR) is the number of claims your insurer has settled during deaths over the period of years. Ideally, a credible insurance company is the one which has the highest number of claims. A claim settlement ratio of an insurance company directly impacts the reputation of your insurance company in the market.
As highlighted above, every buyer should analyse their financial requirements before purchasing a term plan. Other aspects like your age, income, and future expenses also play a crucial role while selecting the perfect term policy for yourself. All these six steps mentioned above would help you to land with the best plan for your entire family, which will eventually look after their financial needs when you are not around.
