8 Things to Keep in Mind While Buying Term Insurance

In the past, Term insurance was a very plain and simple product. It simply provided adequate financial security to the family in case of the insured person’s death that’s about it.

However, insurers, to differentiate from competing insurers, wore the product a marketing hat and created multiple features, customization options, and riders that have made the product moderately complex today.

Most top-selling plans have dozens of variants and customization features, making it difficult to pick the right ones and ignore the irrelevant ones. Not anymore, because we have compiled a list of important factors you should take into account before you shell out your hard-earned money.

Let us have a look.

Choose The Right Cover Amount

Do not just jump for a 1 Crore cover. A 1 Crore cover may look big today but may not be enough for many of us years later. It is, hence, important not only to get the right term plan but also to get the right amount of coverage. This will ensure your family is comfortably covered and financially secured when you are no longer around them.
A sum assured can be calculated in two ways.

Manual Calculation

You can find the appropriate term cover for your family by calculating the gap between what you’ll leave behind and what your family actually needs. You can find out this gap by calculating the difference between the -
Amount you owe: This includes your short and long-term expenses, long-term financial goals, loans, etc. Amount you own: This includes the funds you own, your savings, investments, FDs, etc.

HLV Calculator

You can also use our Human Life Value (HLV) Calculator to calculate the cover amount. In under two minutes, our Human Life Value (HLV) Calculator will calculate the cover amount most suitable for your family based on your answers to a few questions.

Suppose you are buying a smartphone, you look at its features and specifications. But, most importantly, you check the brand, its quality, authenticity, etc. before you make a purchase.
Likewise, when you buy an insurance policy, you weigh its features, benefits, and costs.
What's even more important? - To buy it from a reputable insurer.
Buying from a good and genuine insurer will ensure that your policy journey is seamless. If there are any issues during or after the policy period, they will work with you to solve them.
This is especially important at the time of claims since you won't be there to help your family in case things go wrong.

An insurer’s quality can be checked by looking at the following aspects -

• Detailed information about a company's claim settlement history.
• Reviews from previous customers can help you get a better understanding of the insurer's services.

Another thing you must check is the claim settlement ratio of the insurance company. The claim settlement ratio is calculated as the number of claims settled by the insurer divided by the number of claims received in a particular financial year.
Claim Settlement Ratio = Number of claims settled/Number of claims received (in a particular financial year)

A high CSR indicates that a greater number of claims are being settled by the insurance company. Basically, the higher the claim settlement ratio, the more reliable the insurance company is. ABSLI has a CSR of 98.08% - as per Financial Year 2021-22.

Most insurance agents or financial advisors may tell you that they will complete the proposal form on your behalf. However, you should never allow them. This is due to the fact that a proposal form is the basis of the contract, so it's imperative that you fill out the form yourself.
If someone else fills your form instead of you, there is a possibility of incorrect information being entered or important details being left out. Hence, fill out the proposal form on your own and review the filled details to ensure that all the relevant information has been disclosed to the insurer.
If you provide incorrect details or intentionally hide information, and the insurance company finds out, your family may have to deal with complications in the future at the time of claims.

Term insurance offers multiple customisation options and allows you to design the policy exactly as per your requirements. You can configure how frequently you want to pay your premiums, how you want your family to receive the claim payout, etc. Further, you can opt for features such as limited pay to speed up your premium payments, increasing cover to ensure your family is sufficiently covered throughout, and so on. Then, you can also opt for riders that offer additional benefits at a certain extra cost.

As per the law, if you have unsettled loans and liabilities, the term insurance claim amount that your family will receive will be used to settle those first. There may also be family members who may stake a claim based on succession laws. All of this can be inconvenient. But, if you are married and male, there is a smart way out. You can buy your term plan under the Married Women's Property (MWP) Act by signing an extra addendum. This will ensure that the term insurance claim amount directly reaches your wife and kids before it reaches anyone else.

Before purchasing term insurance, you should conduct detailed research and comparisons.
How do you compare the plans?
You have various online platforms to compare insurance policies. Use them to compare the benefits, features, drawbacks, etc. of various insurance policies, as well as the past performance, etc. Buying term insurance is a long-term decision, so invest your money only if you are only satisfied with what the policy offers.

Insurance companies provide an e-insurance account facility, where you can store and access your term policy and other insurance plans digitally. You can also open an account on the Digilocker app and store your policy and other documents there. Ensure that all of these credentials are kept safe and accessible.

You should also make sure you don't share the details with anyone other than your family. In order to enhance security, set up a strong password that you can remember and change it periodically. Ensure you share these account details with your family/nominee so that they can access your account at the time of claim.

A term insurance plan is a long-term commitment, so you should always consider the important things discussed in this article, before purchasing it. Also, make sure you read the policy documents and the T&Cs to avoid any hassles down the road.