In the ever-evolving world of finance, the need for term insurance remains constant. Term insurance is an intelligent tool that works as a financial shield for your loved ones as it provides financial assistance even in your absence. However, selecting the correct term insurance is crucial as numerous options are available.
In this blog, we will discuss various tips you should remember while buying term insurance.
Important Tips for Buying a Term Insurance Plan
Keep in mind your life stage and your dependents
One of the essential things to consider before buying health insurance is knowing your financial responsibilities and life stage. Because when you select a term plan, your age and financial status are considered. If you are the only earner in your family, your family is more dependent on you. At the same time, if you are single and young, you have less responsibility. Hence, you should consider the amount of term insurance coverage while buying.
Insurance company’s claim settlement ratio
The claim settlement ratio is the ratio that indicates how much you are likely to get the claim when you raise a valid claim. All the insurance companies display their claim settlement ratio in percentage. The higher the claim settlement ratio, the higher your chances of getting the claim approved. Claim settlement ratio percentage shows the number of claims the insurance company has settled for the total number of claims requested by the policyholders.
Method of Buying insurance
There are mainly two methods of buying insurance, online and offline. It depends on you which method you wish to go for. Both methods have their pros and cons. When you want to buy insurance online, you eliminate the agent and buy the policy directly from the company, and in this way, you can save the agent’s commission. You can also buy term insurance offline through an agent but may miss additional benefits on the online policies.
Customizing your term insurance policy
Everyone has their own needs and aims with finances and term insurance is no exception. These days, you can customize your health insurance based on your needs. You can select different riders, such as accident, critical illness or premium waiver riders. Riders improve the overall efficiency of your term insurance. Hence, make sure that you select the riders based on your needs, and if you think that a particular rider will not add value to your term plan, you may avoid it.
Go for only one premium policy.
In many cases, you have to select between a single premium and a regular premium while buying a term plan, and many people believe that one one-time premium is easy to pay and is more efficient, but that’s not true. The best plan you can select is a yearly premium, and it works for most people and you don’t have the burden of paying a significant amount at once.
Disclose your lifestyle habits.
If you smoke or drink alcohol, you must disclose the same while buying health insurance because the calculation of your premium is done based on this critical information. If you hide this information, your insurance claim may be rejected when you claim it. Ensure you fill out your form yourself while buying the insurance because your family member or the insurance agent may mention you as a non-smoker or non-alcoholic to get the policy issued easily.
Add a nominee
When you buy term insurance, adding a nominee’s name is crucial. A nominee is a person responsible for the claim receivable. A nominee can be your spouse, children or someone you plan to pass your money to. Also, if you already have a term plan and you want to change your nominee, you can change by requesting the insurance provider.
Term insurance calculation
The term insurance calculation determines how much premium you must pay every year. The main aim of term insurance is to provide financial assistance to your family when needed. So, as a general rule, you should select a term plan that is 10x more than your annual income, as this helps you deal with inflation. You can also use a term insurance premium calculator online to determine an ideal amount based on your financial needs.
Disclose your old insurance policy
When you buy a term insurance policy, it is crucial to disclose your existing insurance policy if you have one because the insurance company must know how much coverage you already have. Based on that, they can offer you additional coverage.
The Bottom Line
Protecting your family’s financial future is crucial; term insurance empowers you to achieve that. With the tips above, you can have a clear objective with your term plan and make better financial decisions.
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