What you need to keep in mind when buying term insurance online?
The passing of a loved one or the breadwinner of the family is more than just an emotional crisis, they are financial ones too, which is made worse given that there are often heavy medical costs involved that further place stress on your savings and ability to recover from the loss. Buying term insurance and life insurance policies is one of the best ways to ensure you are protected against this. Not only do they insure you in the case of such an unfortunate emergency, but they also provide additional benefits, such as allowing you to save Tax. However, if one were to run a quick search online for term insurance plans, one would find a vast amount of life term insurance plans which all differ in their premium amounts, term durations and other specific nitty gritties. Thus, while you might have made up your mind about purchasing term insurance, deciding which term insurance plan to purchase from which company might prove to be a daunting task.
In this article, we will break down the process of buying term insurance, how you can compare term insurance and the importance of engaging in a term insurance comparison of the options that are available to you.
Why Is Term Insurance Comparison Important?
There are a number of reasons as to why carrying out a term insurance comparison of the policies on offer is an important task. While the market might be flooded with a number of options that might look extremely attractive on the surface, highlighting their offering of high coverages for low premium rates, picking the most amount of services for the least amount of money might not be the best way to go.
While buying term insurance, the goal is not to maximise overall coverage, Instead, the goal is to ascertain needs that are specific to you. Once you have done this, you can then proceed to compare the various term insurance offerings. Once you compare term insurance plans on offer, it will be easier to identify and select a plan that is best suited for the needs of you and your family.
How to Choose the Right Term Plan for You?
Now, we know that having a term insurance plan does not suffice; you must have a term insurance plan that is tailored to cater to your needs specifically. However, the question then arises, ‘how do I choose the right plan for me?’. Here are some things to keep in mind while making your decision.
1. A Sum Assured That Takes Into Account Your Liabilities
When you buy term insurance, you pay a routine premium in exchange for a sum assured. This is the upper limit of the amount that you will receive if you avail of your term insurance. While you may have a certain budget to work with, it is essential to ensure that the sum assured covers the costs for the requirements for your family and those dependent on you. One can also employ a human life value calculator to ascertain the ideal sum assured.
2. Offers a Number of Riders
Riders are add ons you can purchase for your term insurance, adding to the benefit you will receive. From accidental benefit riders to Hospital care riders, there are a number of options available. Generally, a good term insurance policy will have at least a few good riders, hence it is important to ensure that you compare term insurance plans to ascertain which one offers better riders. The ABSLI DigiShield plan, for instance allows you to take on a number of riders such as the waiver of premium rider, accidental death benefit rider as well as a surgical care rider.
3. High Claim Settlement Ratio (CSR)
The claim settlement ratio is one of the most important things to keep in mind while you compare term insurance. Put simply, the claim settlement ratio or CSR of an insurance company is an indication of the likelihood of your insurance company releasing your cover amount when you require it. Generally, if a company has a low CSR, that is immediately a red flag for those purchasing term insurance, as there is little sense in investing in a term insurance plan if you are not going to get the coverage when the time comes.
4. Premium Payment Term
The premium payment term can be simply understood as the total duration of the policy or in other words, the duration for which you are required to pay your premiums for. Generally, the premium payment term is the same as the total duration of the policy. Some insurance providers however, might offer you the opportunity to be able to vary your premium payment term to be shorter than the policy duration. This means that, if you are willing to dedicate excess funds, you could pay off your complete policy amount , before the duration of the policy ends.
5. Insurers solvency ratio.
A company’s solvency ratio refers to their ability to deal with their long term debt obligations. For insurance companies, this solvency ratio is the total size of its capital relative to its liabilities. As a customer, this is an indicator of whether an insurance company will be able to provide your family with the payout if the time should arise. If the company has more debt than it does capital, it is likely not a good sign for you as a customer. On the other hand, if the company has a healthy cash flow, it is more likely to be able to make the payout.
How to Decide Optimum Flexibility of Term Plans
1. Flexibility in premiums payments:
Regular premium payments are an essential part of the term insurance process, as these are the funds that go towards building up the sum assured that beneficiaries will receive upon the passing of the policy-holder. However this can be taxing, and it can be hard to meet these payments at all points in time. Opting for a plan that allows for flexible premium payments, such as through a lump-sum payment, or monthly or yearly payments can help in creating a premium payment schedule that works for you.
1. Flexibility in sum assured payouts:
While you engage in the process of conducting a term insurance comparison, one can look for policies that offer the flexibility to vary sum assured payments.Thus, the death benefit can be provided to beneficiaries through either a lump-sum amount, monthly payments or a combination of the two. This allows cash inflows to occur as per the requirements of the beneficiaries. The Aditya Birla Sun Life Insurance Company DigiShield Plan, for instance, offers flexible death benefit payouts.
3. Flexibility in coverage:
Term insurance policies allow you to pay routine premium amounts in exchange for the coverage they provide. While Term Insurance plans are provided for a fixed duration of time, it is possible that one’s income and/or coverage requirements increase during the same. A policy that offers flexible coverage will allow individuals to adjust their sum assured flexibly, allowing them to increase or decrease their cover if they wish to in the future. Flexibility in coverage might also help you account for future events in your life such as marriage or the birth of a child, through enhanced life stage protection. This facility allows you to increase your sum assured when you hit the aforementioned milestones.
4. Return of premium:
The nature of term insurance is such that you only get the benefits of the plan in case the policyholder passes during the duration of the plan. However, given the limited duration of a term insurance plan, however, it is possible for one to outlive the term. Policy providers have accounted for this possibility. Subsequently, term insurance policies have provisions to return the premium payments you made towards the policy if you do not avail of it. For example, the Aditya Birla Sun Life Insurance Company LifeShield Plan & ABSLI DigiShield Plan offers plans that entail the full return of premium to you.
Term Insurance Comparison
1. Decreasing Term Insurance Plan vs Increasing Term Insurance Plan
There is an inverse relationship between the sum assured and premium payments based on time while comparing these two types of term insurance plans. With a decreasing term insurance plan, the sum assured decreases over time since. With an increasing term insurance plan, however, the sum assured increases over time, though premium payments remain the same. In both cases, the increase or decrease happens at a fixed rate and is accounted for by the insurer at the start of the plan. This ensures that regardless, the premium payments remain the same throughout the lifetime of the policy though the premium for an increasing coverage plan is naturally higher than that of a decreasing one. . For those who have long term commitments and growing family responsibilities, such as the education fee of their children as well as loan repayments, an increasing term insurance plan may be best. However, for those who foresee their financial commitments reducing with time, such as someone who has bought term insurance to protect their family from the liability of a new loan, a decreasing coverage plan may be more suitable to account for the eventual repayment of the loan.
2. Single Term Insurance Plan vs Joint Term Insurance Plan
A single term insurance plan will provide coverage in the case of death for one person. A joint term insurance plan, however, allows one to include additional members such as a spouse to the plan. As part of a joint term insurance plan, in the event of the death of both parents, for instance, the children will receive compensation for the financial contribution of both individuals insured.
3. Individual Term Insurance vs Group Term Insurance
Similar to single term insurance plans, individual term insurance provides cover for one individual insured. Group term insurance on the other hand insures multiple people under one policy, as long as they are linked together by a common trait, such as being part of the same family or company. For instance, a company might purchase group insurance for its employees. As part of this insurance plan, all the employees are covered under one premium payment.
4. Online Term Insurance Plan vs Offline Term Insurance Plan
Offline term insurance plans offer a more customer-specific experience as they deal with individuals in a physical space on a one-to-one basis, receiving customised advice according to their requirements. However, if you are sure about what you are looking for, then online term insurance plans might help you save on service charges you would pay in an offline market. Additionally, online term insurance plans also offer customers the benefit of ease; allow quicker browsing, comparisons and purchase of policies due to the digitised process.
The Term insurance market is flooded with options, with a multitude of term insurance plans with specific and specialised riders being on offer. However, one must carry out a term insurance comparison before purchasing term insurance in order to ensure that the term insurance policy you are investing in allows coverage against all your necessary requirements. You can use our Human Life Value calculator to help you assess the ideal life cover amount required as per your needs.
ABSLI Life Shield Plan is a non-participating traditional term insurance plan. (UIN: 109N109V05)
ABSLI DigiShield Plan is a non-linked non-participating individual pure risk premium life insurance plan; upon Policyholder’s selection of Plan Option 9 (Level Cover with Survival Benefit) and Plan Option 10 (Return of Premium [ROP]) this product shall be a non-linked non-participating individual life savings insurance plan. (UIN: 109N108V05)
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