Term Insurance

Tips to Buy the Best Term Insurance Plan

by SMCIB on Wednesday, 08 February 2023

Tips to Buy the Best Term Insurance Plan

Electricity outages are a common occurrence in India. When you get a message from the electricity department about an electricity outage, you keep all your gadgets charged, ensure your inverter is working, and try to finish off any perishables. So what you’re essentially doing here is preparing for an unexpected situation.

On a similar note, if you want to be prepared for any uncertainty in life, purchasing a term insurance plan is a wise decision. It will be a safety net for your loved ones which will protect them financially in your absence.

But but but! Insurance is an ever-evolving market and you will find a huge variety of term plans to choose from. How can you find the best term life insurance plan? Let’s see!
 

Term Insurance 101 - The Basics

Let’s first quickly go through what term insurance is and how it works. It is quite literally the simplest form of life insurance. It pays your family a fixed sum of money if you pass away during the policy period. This money will help them live a comfortable life and fulfil their goals and dreams. You need to pay premiums to keep the plan active.

The only downside to the plan is that it won’t pay you anything if you survive the policy period. However, if you’ve chosen a TROP (Term Return of Premium) Plan, you will receive a refund of the premiums you’ve paid (minus taxes).

Choosing The Best Term Insurance Plan - A Few Tips!

  1. Choose the right type of plan

    We’ve already discussed that there is a huge variety of term insurance plans available in the market. You have TROP Plans, which give you a refund of the premiums you’ve paid. Or you have Increasing Term Plans, under which your cover amount increases by a specific percentage until it reaches a maximum limit. These plans are a great choice to meet increasing financial obligations or inflation. You also have Decreasing Term Plans, which lower your cover amount by a specific percentage and are a good option for financial liabilities like a mortgage. You should choose a plan that fits your financial needs.

  2. Opt for the right policy duration

    You can customise the policy duration to the time when you think you’ll have completed all your financial obligations , perhaps with an additional timeline of 4-5 years to be on the safe side. Make a note of your income, savings, and investments. This will give you an idea about the time you will need to meet all your financial obligations and accumulate enough funds.

  3. Select the cover amount that is sufficient for your family

    Choosing the right cover amount is as crucial as choosing the right term plan to fulfil your needs and requirements. An inadequate cover amount might create hassles for your family members in times of need. Calculate the difference between how much you own (savings, existing life insurance, fixed deposits, etc.) and how much you owe (loans, debts, long-term financial goals, and other expenses). Your cover amount should bridge this financial gap. Also, factor in an 6-8% inflation rate on the total value.

  4. Choose the correct premium payment frequency

    Choose the appropriate premium payment frequency depending on your income and convenience. You will lose out on the policy benefits if you miss paying your premiums.

    You can pay the premiums annually, half-yearly, quarterly, or monthly.

    Example: If you are a salaried employee with a regular monthly income, the monthly premium payment option will be the right choice. If you are a business owner with an irregular but big income, you can go for the half-yearly or yearly option.

  5. Opt for the right premium payment term

    You need to pay premiums to keep your term insurance coverage active. You can also customise the premium payment term as per your needs and convenience.

    There are three options to choose from -

    Regular Pay

    Here, you have to pay the premiums until the end of the policy term.

    Single pay

    Here, you can pay the entire premiums in a single go, at the time of policy purchase.

    Limited Pay

    Here, you can complete your premium payments over fewer years in comparison to the policy tenure you opt for.

  6. Choose the suitable payout option for the claim amount

    Under a term insurance plan, your nominee receives the claim amount if you pass away during the policy period. You need to make sure that the nominee uses the money wisely and doesn’t fall into any bad investments or traps.

    Term insurance plans come with three payout options -

    Lump Sum Payout Option

    Choose this option if your family will have to pay off any loans or big financial obligations. You should choose it if your nominee is financially well-versed and can handle huge sums of money efficiently.

    Monthly Payout Option

    Choose this option if your nominee won’t be able to manage a large claim amount. They can use the monthly payouts as income replacement for recurring expenses and other needs.

    Lump Sum + Monthly Payout Option

    Choose this option if your nominee will have to take care of unpaid liabilities and will need a regular source of income for their everyday days and short-term goals.

    Note: People other than your family, like lenders or relatives, can swoop in for the claim amount. And so, your family will receive only the amount left after such payments - which may not be enough to cover their expenses. To avoid such unwanted situations, you can purchase the term insurance plan under the Married Women's Property Act, if you are a married male. Your spouse will receive the claim amount first, and no one else will be able to grab hold of it. She can decide how to manage the money.

  7. Check if you need any riders

    You can add riders to your term insurance policy for extended coverage in specific situations by paying an extra amount. Some riders available with term insurance are accidental death benefit rider, surgical care rider, critical illness rider, hospital cash rider, accidental disability rider, waiver of premium on accidental disability rider, waiver of premium on critical illness rider, etc.

    Choose the riders you need. For instance, if you travel frequently, you can opt for the accidental death benefit rider which will provide your loved ones with an additional amount of money along with the death benefit of the term insurance plan if you pass away in an accident.

  8. Research and pick the right insurance company

    Choosing the right insurance company is an important part of the process, since it will affect every step of your term insurance journey - from your purchase process to how efficiently your nominee’s claim request is settled. It is important to choose a reliable and credible insurance company to have a smooth and hassle-free experience.

    You can have a look at the insurance company’s claim settlement ratio, reviews, social media handles, community forums, etc. to gauge their performance and claim settling ability
    .

Buying The Best Term Life Insurance In India - At SMC

At SMC, you find some of the top term life insurance plans in India. To purchase a plan, all you have to do is -

  1. Visit our website and choose the ‘Life Insurance’ option.

  2. Enter your personal details like your name, birth date, phone number, etc.

  3. After that, you’ll be asked questions about your annual income, the policy duration and sum assured you need, and whether or not you smoke/chew tobacco.

  4. Then, select the ‘Compare Quotes’ option. You will be shown different term insurance plan options. You can customise your chosen plan according to your needs and finalise the purchase.
     

Conclusion

Term insurance is a long commitment which will give out benefits only in your absence. So, to ensure that your family has enough protection when they’re vulnerable and distressed, follow the tips we’ve listed above while conducting your own research. The best term life insurance plan depends on your family’s specific set of needs. Understand them well and make an informed decision!

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