With regard to securing the financial future of your loved ones, the best term insurance policy is always a good bet. However, you should always look for some major features before deciding.
Sum Assured
This is basically the money that your nominee will get in case of your unfortunate demise in the policy tenure. You should work out the amount with care, taking future household needs into account along with inflation. Then there are other costs like higher education that you should include in your calculation, in tandem with repayment of liabilities. Most people recommend choosing a sum assured of at least 10-20 times your annual income.
Premium Affordability and Flexibility
Although premiums for term plans are mostly lower than other life insurance products, your premium must still be within budget. It should also ensure ample coverage tailored to your specific requirements. Many companies offer choices in premium payment modes: monthly, quarterly, half-yearly or yearly. Choose the one that suits your monthly income flow best in order to avoid defaulting on payments. The best term insurance policies often provide flexibility in premium payments, ensuring a smoother experience for you.
Policy Term and Entry Age
The policy term should ideally stretch over the years when your financial obligations are at their highest. If, for instance, you have young children or a house loan, then a long-term policy is advisable. Similarly, the age at which you buy a policy is also important; taking term insurance out when you are younger generally means lower premiums. Choosing the best term insurance at an early stage can help lock in a lower premium rate for the long term.
Optional Riders
Riders are extra benefits which can be tacked onto your basic policy for a small additional charge. Some of the most popular types are:
- Critical Illness: Upon the diagnosis of covered ailments such as cancer or a heart attack, you will get a lump sum cash amount as per policy terms.
- Accidental Death Benefit: If there is any accidental death, then the family of the insured person will receive compensation likewise.
- Waiver of Premium Insurance: For those with terminal ailments or disabilities arising from accidents, the premiums may be waived off as per the terms of this rider.
Settlement Claim Ratio
The claim settlement ratio is a reflection of the company’s trustworthiness in the handling of claims. A higher ratio means that they are likely to process all policies smoothly and quickly when filing claims. This is an important point that directly affects the living situation of your beneficiaries when you are suddenly no longer there to support them. Choosing the best term insurance often means opting for a company with a high claim settlement ratio.
Tax Benefits
Under Section 80C of the Income Tax Act, premiums payable are exempt up to ₹1.5 lakh annually. Under Section 10(10D), death benefits on account of natural causes or accidents are also tax-free, provided the premium does not exceed 10% of the sum assured for policies issued after April 1, 2012. While not the main reason to buy a policy, tax benefits are an extra reason for taking out term insurance.
How to Choose the Best Term Insurance?
Before you buy a term insurance policy, it is necessary to compare plans thoroughly, considering the terms and conditions involved. Analysing premiums, benefits, and features side-by-side with the help of online calculators can simplify the process by a few steps.
Investing in the right term insurance policy does not mean only securing a sum assured; more conveniently, it means you and your family have peace of mind in the event of death. Focus on these key considerations, and you will, therefore, be able to make a well-informed decision that also matches your family’s desires and goals.
