If you are planning to buy online term insurance, then you need to know that it is a crucial decision that must be taken carefully. It is not just a lumpsum amount that they will receive after you but also takes care of all their dreams you had planned for them.
It is the best investment plan because term insurance is a simple product. Simply put, you insure your life for a certain amount by paying regular premiums for a certain number of years. As such, in case of an unexpected demise, the insurance company will pay a death benefit to your family member that can bring financial stability in their lives and also help them pay off any liabilities that you may have left behind.
However, if you are not careful in buying the right online term insurance policy, then your family may end up being underinsured and get sucked into a vortex of financial hardships in your absence, despite your best efforts.
This is the reason we have put together a list of essential factors that you must consider when you are buying online term insurance.
1. Coverage Period
The first and the most crucial consideration when buying an insurance policy is your age. Financial experts recommend that the younger you are, the longer your policy period is advisable. For example, if you are in your 20s, then your policy period should be at least 40 years, or if you are in your 50s, then the policy period should be at least 10-15 years.
If you want higher cover at a low premium, then you need to plan your insurance policy at an early age. Young and fit investors are a low risk to insurance providers. Therefore, they offer you handsome covers for a meager premium rate. The good thing is that once fixed, the premium will remain the same for the entire policy period.
The coverage period can also be determined as per the retirement age. In that case, you can choose the policy period as per the number of years you plan to work, which is usually until 60-65 years. This will ensure that the insurance extends throughout your work years and provide your family with financial stability in case something happens to you. Don’t worry if you don’t have a retirement plan. Even then, you should take the policy for the maximum period. Most insurance companies offer unique ways to help you pay your premiums when you don’t have a source of regular income anymore.
Alternatively, you can also take your insurance policy cover as per your financial commitments. For instance, if you have a house loan with a 30-year term, then it is advisable to take an online term insurance policy for that duration so that your family is free from the liability in case of an unfortunate event.
2. Premium Payable
The premium payable depends on the amount of cover you need. To calculate the correct sum assured, you need to consider the following things:
- Your age
- Existing financial responsibilities
- Your family’s future financial needs
- Your day-to-day expenses with inflation factored in
- All the existing debts
Once you have taken all these factors together, you need to calculate the sum assured, which should ideally be at least 15-20 times your current annual salary. Once you have the amount, you can use the insurance calculators to see the premium that will be payable for this sum.
The premium amount will also depend on the payout options you choose. You can choose between lumpsum payout or regular monthly income.
3. Insurer’s Claim Settlement Ratio
With so many companies offering different types of insurance plans, it can be challenging to choose the best online term insurance policy. To find the right plan, you need to find the right insurer first. You can do that by performing the following checks:
- Claim settlement ratio: Claim settlement ratio is the number of policies settled or the number of claims paid back in a given year. It is always better to choose a company that has a settlement ratio above 90%.
- Solvency ratio: the solvency ratio is the company’s ability to meet the long term commitments that indicate their financial strength.
- Reputation: Do online research to check the insurer’s reputation in the market in terms of consumer complaints and grievances.
4. Add riders
The best way to customize an online term insurance policy is by adding riders to it. Riders give you a supplementary coverage with additional benefits, over and above the actual death benefit. Some standard rider options include the following:
- Accidental death benefit: Adding to this to your insurance policy will give you an additional sum in case of your demise within the policy term due to an accident.
- Critical Illness: The insurance provider will pay you a lump sum amount if you are diagnosed with a life-threatening disease mentioned in the policy document. This sum can be used to pay for your treatment as well as day-to-day expenses.
- Waiver of premium: if you are unable to pay the premium due to loss of income or accidental disability, then the insurance provider will waive off the premiums while keeping the policy active. This means that your family will still receive the sum assured after your passing, even though you stopped paying premiums under specified circumstances.
You can choose the rider as per your preference and lifestyle. Therefore, it is essential to understand your requirements first and then select the riders carefully.
Term insurance is the best investment plan because it provides financial aid to your family and also helps you achieve your future financial goals. Online term insurance plans are available from renowned insurance providers such as Max Life Insurance that enable you to make a well-informed decision by comparing the policies in real-time. So follow the above mentioned steps to buy term insurance and select the right plan to give your loved ones the security they deserve.