A term plan is a contract between the insurance company and the policyholder, towards which the latter pays the former a fixed amount annually for a fixed number of years. Statistics reveal that about 1.28 trillion INR is the total value of insurance premium in India. In return, the insurance company will give a predetermined amount to those nominated by the policyholder on the latter's demise, in the manner mutually agreed upon.
The purpose of term plans is to protect the loved ones of the policyholder as they grieve their loss. It will cover the expenses that will be incurred on account of the death and to help them have some financial protection through the mourning period.
To know whether you have opted for the best term insurance plan, and whether it offers you the required coverage, ask yourselves the following questions.
1. Does the coverage meet your needs?
The coverage is the most important part of the best term insurance plans. It is the reason why the policyholder enters into the contract with the insurance company. If the coverage is not sufficient to meet the needs of the nominees, then the plan itself would have served no purpose. Calculate your needs and financial obligations such as like paying off debts, monthly expenses for the household, medical bills, education fees, etc. A simple rule of thumb that can be followed while calculating the coverage is to multiply the average monthly expenses by 150 and then deducting the value of liquid assets, if any, from this. This amount will account for inflation and will cover the needs of the nominees.
2. Is the tenure adequate?
The best term insurance plan covers the policyholder for longer tenures. This gives them a fair chance to actually protect their family. In the event that the tenure expires before the demise of the policyholder, no benefit will accrue to the nominees. It is wisest to ensure that the tenure of the term plan extends to retirement. Post-retirement, the financial liabilities of the policyholder will significantly reduce. However, during the period of employment of the policyholder, the expenses would be higher, and therefore must be protected by the term plan's cover.
3. Do you have the needed riders?
The sum assured is not the only cover that a term insurance plan offers. It can be enhanced by purchasing riders for specific purposes. Some of the most common riders are for disability, accidents, and critical illnesses. It is the medical history and the health condition of the nominees that will determine which rider should be purchased as an add-on to the existing cover.
4. Is the insurance company trustworthy?
The coverage given by a term plan is only as good as the trustworthiness of the insurance company offering it. Look at the claim settlement ratio and the customer service provided by the company to know what kind of service to expect. It is also wise to make use of the free look period in life insurance. The free look period allows you to carefully evaluate all the terms and conditions so you are completely confident that this plan will work for you in the long run.
5. Have you disclosed all material facts?
The best way to get the best coverage for a term plan is to disclose all the material facts to the insurance company. In the event that there is a change in the medical condition or liabilities after the term plan is purchased, the insurance company should be informed as soon as possible. This will enable the company to provide you with different options by which you can enhance your coverage to suit the changed circumstances. Full disclosure will also ensure that there will be no hassles when the nominees make claims on the term plan.
6. Have you compared your policy with others in the market?
This is perhaps the easiest way to determine whether you really have the best term insurance plan for you. Look at other term plans in the market and compare the coverage offered by ones that are similar to yours. If your term plan offers significantly lower coverage, you know it is time to change plans. Always keep in mind that the coverage should be looked at together with the specific terms of the contract to make the right assessment of the policies.
7. Have you read the fine print of the plan?
Every term plan will have specific clauses that speak of when the nominees will not be eligible for the sum assured, names and details of the nominees, etc. These should be read carefully so that you can ensure that the sum assured will actually go to the nominees. It will avoid any delays in receiving funds and ensure that the nominees receive the protection you have secured for them as soon as possible.
These questions will help you truly assess whether you have the best term insurance plan and if it provides the required coverage.
Source: https://www.statista.com/topics/6514/insurance-industry-in-india/#topicHeader__wrapper
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