Different types of life insurance plans were created with a fairly simple structure: the plan would offer a sum promised upon the death of the policyholder, will provide coverage until the age of 65, and payments can only be paid annually. However, it became more complicated as more insurers began to offer online term life insurance coverage. There are now limited pay plans, rising coverage plans, phased payout plans, return of premium plans, and hundreds of other options. While this abundance of options is beneficial, it is also making it difficult for most of us to choose which types of life insurance plan to choose.
In this blog, we will discuss the most significant factors to consider while selecting types of life insurance.
And here are the five things to think about while purchasing types of life insurance.
1: Determine how much term insurance coverage you require:
Your term life insurance policy should broadly assess how much money your family would require if you died unexpectedly. The easiest way to do this is to take out a piece of paper and begin calculating the following.
- 1 calculate your dependent family’s monthly expenses and multiply them by 150. The number 150 influences future inflation.
- Include your responsibilities for home loans, personal loans, and credit card debts.
- Three, subtract any liquid assets you already have, such as FDs, equities, or mutual funds.
- Four, include your projected costs for significant life goals that are likely to occur in the following 15 years.
- Five, include the amount of money you want to leave your spouse when he or she retires.
2: Determine the duration of your plan:
Once you’ve determined how much coverage you require, you should consider how long you’ll require it. The duration should not be too short, as the policy may lapse before your financial responsibilities are met. At the same time, the term should not be too long, as the premium paid would be excessive due to the longer tenure.
3: Aim for the maximum Peace-of-Mind per rupee premium:
We use the phrase Peace-of-Mind rather than coverage per rupee of premium since consumers often place a premium on some intangibles when making a purchasing choice.
These criteria could include the insurance provider’s stability or reputation in the eyes of the policyholder while selecting a term plan. Term life insurance is a long-term contract that typically lasts 30 to 50 years. As a result, it is critical that you are satisfied with your decision regarding the insurance plan you have chosen, which is a combination of the premium you pay and your perception of your insurance provider.
4: Pick your add-ons wisely:
Different types of life insurance provide riders at a reasonable cost that should be considered even if they do not meet your needs.
5: Examine the claim settlement ratio in broad strokes:
Consumers are usually quite interested in the claim settlement ratio. It represents the insurance company’s efficiency in settling policies.
A word of caution, however. The claim settlement ratio is only a guideline. If a company’s claim settlement ratio is greater than 95 percent, it has been exceptionally efficient in paying claims. You don’t have to dig too deep to find out who has a 99 percent or 98.5 percent ratio. The claim settlement ratio should be viewed as a filter rather than a key decision-making criterion.
