How to Choose the Right Term Insurance Plan for You?
24th March 2017
The life insurance industry offers many options to individuals. The discerning individual is particularly interested in term insurance plans, so how does he choose the right term insurance plan?
Selecting the right term insurance plan involves focusing on the key features that can make a difference to you and your dependents.
We have shortlisted some of the more important features for you:
1. Human life value
The main reason for taking life insurance is to offer financial cover to your dependents in your absence. They expect the insurance policy to provide financial cover to the dependents in their absence. That is why they must make sure the life insurance cover is adequate. Or like they call it in insurance – the insurance must cover the individual’s human life value (HLV).
Simply put, the HLV is the individual’s income / salary plus liabilities like loans. This forms the basis for the life insurance cover and the right plan for the individual is the one which provides for at least the HLV.
We have all heard that term insurance plans are the cheapest. But that does not mean they can’t get cheaper. Go for term plans with the lowest expenses since this translates into lower premiums for the same cover. Also give preference to insurance companies that offer discounted premium rates – like for instance to non-smokers.
The best term life insurance plan for you is the one that has all the angles covered. One way to achieve this is through riders. What is a rider? A rider is an add-on to the primary policy, which offers benefits over and above the policy subject to certain conditions. The policyholder can attach riders to the term plan. So if let’s say there is a critical illness rider or a critical illness policy, he is entitled to receive the sum assured on being diagnosed with the same. .This is in addition to the death benefit of an equal amount on death over the term of the policy. Likewise there are other riders like disability cover, loss of employment cover, waiver of premium cover, among others. The policyholder should select riders based on individual and family needs since they can add considerable value to the life cover.
A feature offered by term plans of certain insurers is the flexibility to enhance the life cover during critical stages of the policyholder’s life. For instance, an insurer may allow policyholders to enhance the life cover by 50% at the time of marriage and by 25% at the time of turning a parent. This allows policyholders to start with a modest cover and enhance cover as responsibilities increase as also their ability to pay higher premium.
Across the gamut of life insurance plans, one finds term life insurance seeing the maximum innovation. For one, costs and by extension premium rates have been reduced considerably and this process is on. Buying a term plan has been made easier thanks to the internet. It is now possible for a healthy individual, as defined by the insurer, to buy a term plan on the company’s website without taking a medical test.
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