A term insurance is the smartest and cheapest way of protecting your family in case something unfortunate happens to you. In such as case, you receive the sum assured as a lumpsum amount. However, it is important that you choose a term plan that suits you. Here are the steps to follow to select a term plan.
1. Select the right sum assured: A lower than required sum assured will mean that your family is not protected adequately. So it is important to assess your life insurance needs. You need to keep in mind your income, the number of dependants, and the expenses that are required to maintain the current lifestyle. Major life goals like your spouse’s retirement and the education of your child also need to factored in on the basis of the investments that are required to meet this goals. Life insurance providers have calculators on their website which will help you calculate your insurance needs. As a thumb rule, the sum assured should be at least 15-20 times your current annual income.
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2. Choose the right type of term plan: There are different types of term plans available. There are level term plans where the sum assured is fixed throughout the tenure of the policy. The benefits are paid to the nominee on the demise of the insured. There are term plans where the policyholder can increase the sum assured on an annual basis. In some term plans , the sum assured keeps on decreasing. These plans are suitable for those who are paying off a house loan and hence have a decreasing liability as they pay their EMIs. There are also term plans which offer a return of premium if the policyholder survives the tenure. It is important to buy a term plan that is aligned to your needs.
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3. Consider adding riders: Term insurance policies let you add critical illness riders at a low cost. These provide a sum assured on diagnosis of listed critical illnesses. A normal health insurance may not be adequate to meet costs of diseases such as cancer. Once you have applied for a term insurance with a critical illness rider, the premium remains the same throughout the term of the policy. You can also consider an accidental death rider that comes with an increased sum assured if the insured dies due to an accident. There are also riders that pays additional sum assured due to disability due to an accident. You can also opt for an income benefit rider which provides an additional income per year for 5 to 10 years apart from the sum assured. It is important to add necessary riders to your term insurance policy.
4. Compare different policies: Before making a choice, look at the cost. To compare plans you can use online loan aggregators. However, remember that your plan should include all the features above according to your needs. A cheaper policy without critical features will not serve your needs.
5. Buy online: Finally, it is best to buy a term plan online. As we have seen , you can find tools to decide on the amount of coverage you need and also to compare quotes by different insurance companies. Online term plans bought directly from the insurer’s website are also cheaper as they do not involve agent.
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