We all know how much term life insurance is important in this age and time. Many life Insurance companies take advantage and try to sell their term life plan to the people by misguiding them. But through this blog, you will get the answer about “How to choose best term life plan in India 2021.”
Do you really need a term life plan?
Before choosing any life insurance or term plan, ask yourself “Do I really need a term plan”.
The answer is simple, life is uncertain and we all need life coverage but if you have family and they are dependent upon you and you are the only bread earner, then buy a term life plan today. Don’t procrastinate, your whole family relies on you, and if anything happens to you, then who is going to support them, How will they survive in this inflated world?
How much cover do I need?
As of 2020, the inflation rate is 5% in India and this percentage is increasing every year. So, if anything happens to you in the future then your family needs a good amount so that they will be financially stable. That means your children still get a good education, proper meals or there should be enough funds for any emergency medical requirement. You need at least 20 times cover of your annual salary.
If you are earning 5 lakhs yearly then you should choose 1cr. term life plan.
What age is appropriate to buy a term life plan?
As early as you can, there’s a lot of benefits of starting early, either an investment or insurance. You will get the benefit of compounding interest in investment and In insurance, you have to pay less premium, and the sum assured is also high.
For example:- At age 20, you will get a 1 Cr. term life plan for just Rs.700/month. On the other hand, you have to pay Rs.1500 at age 30 for the same cover (1cr.)
Riders are the additional benefits that you will get with the policy for which you have to pay some extra charges. Riders are totally optional and it’s up to you. But you should always choose these riders along with the policy.
There are certain riders…
Critical illness riders
If you have some severe disease/illness then, in this case, the policy waives/close and you will get the term amount. Critical illness may cover Cancer, kidney failure, Heart attack, etc. This depends upon the company “what they are covering and what they are not”.
Accidental benefit rider
Every year thousands of people die in a road accidents. In this rider, if the insurer met with an accident and lost his/her life then the family will get the double term amount. which means if you have chosen 1 cr. term life plan then the family will get 2cr.
Accidental disability rider
Sometimes the person who met with an accident gets disable. In this case, the Insured and his family need the money most because the insured is now unable to work and the flow of income has stopped.
Truth hurts, but I need to say it..
“If you die, you are a single loss to your family, but if you become sick/disable, you become a daily loss to your family”- by Dr. Sanjay Tolani.
If you choose these riders and you are paying Rs.700/month then it becomes nearly Rs.1200/month. But every penny is worth it because we don’t know what will happen to us in the next second.
Claim settlement ratio
The important question while choosing the term life plan is the claim settlement ratio of the company. Claim settlement ratio means. It is calculated as the total number of claims received against the total number of claims settled. Let us say, Life Insurance Company received 100 claims and among those, it settled 98, then the claim settlement ratio is said to be 98%
Basically, you can choose any company with a 95% claim settlement ratio. What if you pay all the premium on time but when the time comes and your family needs insurance amount, the insurance company rejects your claim. So always choose the company wisely with proper research.
Amount settlement ratio
Everybody discuss about claim settlement ratio but nobody talks about the amount settlement ratio. This is also a very important factor while choosing the term life plan. So what is the amount settlement ratio/
Suppose the insurance company received 100 claims and they settled 98 claims of 10 lakh rupees amount each but for the remaining two claims, they denied because the amount is huge, 1 cr individual. In that case, the claim settlement ratio is 98% but the amount settlement ratio is just 83%. So, always consider this factor also, while buying any term life insurance.
Don’t hide anything
The insurance company has the right to deny the claim if anything missing from the insured side. Discuss all the things regarding your health, previous surgery, disease, or whether you smoke or not. Don’t hide anything while buying the policy, disclose all the things. If you save a bit premium by hiding something today from an insurance company then you will pay for it in the future.
Since the company is giving a huge amount, they will do a detailed investigation before the settlement of the claim. And according to the survey, most claims are rejected in term life plans as compared to other types of insurance such as Endowment or Whole life insurance.
let’s conclude, term life plan is one of the most important parts of your financial planning. Take your time and research all the things about it and then make your final decision. But if you are confused, we can help you in choosing the best term plans as per your requirement and goals.
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