How To Evaluate A Term Life Insurance Plan?
One of the first mantras towards having a sound personal finance balance sheet is to get yourself financially protected . Every person have their own aspirations and goals, sometimes they are for personal in nature and sometime family aspirations are involved. Plus everybody needs to be prepared for the period when one stops earning. This can be achieved by disciplined savings but then what this financial protection is all about?
All these goals and aspirations can only be meet through savings but for savings there should be a regular flow of income to support that. But the reality is life and income are both not predictable but does this mean that one’s goals are also unpredictable. That is not the case in real life, goals and aspirations have to be meet under financial or life conditions. This is where the concept financial protection emerge.
A term insurance plan is actually the type of financial product intended to offer financial protection as discussed above. In case the bread earner of the family died way before his or her normal age then how the goals and aspirations of the people depend on him or her would be handled. Now the family doesn’t have the regular flow of income to support the disciplined savings to support the goals. Term insurance here act as an instrument to provide financial backup to the family and if properly planned can take care of all the aspirations and goals.Even in case if there is a loan liability on bread earner the same also be taken care by the term insurance plan. So from the above definition we can easily evaluate how a term life insurance policy is an important component of one’s financial plan.
Like any other financial product, term plans also needs to be evaluated in detail before they are bought from an insurer. A wrong decision might actually make the financial protection wall insufficient to handle emergencies as discussed above. The below list can created by experts can actually act as a tool to evaluate the right plan from the right insurer suitable to one’s requirement.
- As term insurance is a critical component of one’s portfolio so the reliability of the insurer offering the plan should be unquestionable. But it always advised to policyholders to read the terms and conditions of the policy agreement in details before buying. one. Every insurer offer a 30 day free lop period, so even if one is not satisfied once a plan is bought can ask the insurer to refund within that period and insurer should be fast enough to respond to the query.
- Every term plan have an extent to which they will cover. Though there is always a sum assured amount which restricts an insurer to adhere to maximum amount of claim which they can’t reject but there can further issues like accidental disability or critical illness cases which might not be covered under a plan .Though in a case like this , the bread earner is not dead but his/her capacity to earn diminishes and so the goals also gets affects..When somebody has taken a plain vanilla term insurance plan, the same might not cover things like this. So to improve the extent of coverage the policyholder can look for additional add on cover to handle critical emergencies of this nature. The term insurance which one has opted for should have options like this.
- Another important parameter based upon a term insurance plan has to be evaluated is the minimum entry age and the maximum coverage age. The maximum coverage age defines the age of the policyholder until which the insurer would be responsible to pay for claims of you family when you are not there. If one is smart enough to take financial decision at an early age, can opt for a term insurance plan at that stage. Lower the age lower is the premium that you pay. On other hand higher is the maximum coverage age, the more it is suitable for policyholder to buy term insurance policy like that. Various insurers have also started offering 100 years plan in which case it become more effective as a plan at an older age, though goals have already been achieved and you are in a state when there is not flow of regular income and a simple emergency can disrupt the savings reserve meant to handle issues relating to superannuation.
- The fourth most important factor is the claim ratio of the insurer which defines the probability of the insurer settling your family’s claims in case of your demise. This is a critical factor to judge a term insurance plan other the whole objective of buying a term insurance plan would go in vain.
Though the parameters discussed above can give one a fair idea of how to make term insurance plan buying decision in a much better way but it is always advised to take help of online term insurance comparison websites to compare different offerings from different insurance and identify the right plan suitable one’s specific need.