Do you have a life insurance? If not, have you considered the benefits of getting one?
Ideally, one should buy life insurance once they start earning and have external liabilities or dependants. However, life events signalling greater responsibilities like marriage or the birth of a child serve as a trigger for most individuals. While choosing a term insurance for the first time, one might be tempted to buy the cheapest available insurance. However, buyers need to be aware that, as in any other product, a term insurance providing coverage for the lowest premium per month is not necessarily the best.
As a first step, an individual needs to calculate the insurance cover. As a ballpark, one should take into account the monthly living expenses and all future liabilities. This Coverfox page is helpful in calculating the coverage suggested for you after providing certain basic parameters like age and annual income.
Low-Cost Term Plans: Tread with Caution
There are several insurance providers that offer term insurance. Most of them have certain conditions in the fine print of their offering which you should understand entirely. A low-cost plan might seem like a steal now, but it might be offered by a company with a dubious record in claim settlements.
Hence, besides the cost of the life insurance plan, there are several factors you should consider to make an informed decision.
#1. Maturity Age Offered
Some companies provide a cover only up to 65 years of age while others provide an insurance coverage till you turn 80 years old. A policy which covers you up to a greater age is desirable as the probability of a pay-out increases.
#2. Duration of Policy Term
Insurance companies offer a term insurance policy for up to 35-60 years. A longer term is better as you will not have to buy a second term policy if the duration of the first one ends.
#3. Claims settlement Ratio
Claims settlement ratio for insurance companies is defined as the percentage of claims made by clients of the insurance company that were rejected during the reporting period relative to the total claims submitted during the same period.
This is an important parameter which is often overlooked by first-time term insurance buyers. A company may charge the lowest premium, but if it has a high rejection ratio, the financial plans laid out for your loved ones might go for a toss. Paying a little bit extra might save your family from difficult times later.
#4. Simple Claims Process
Several insurance companies have a long list of pending claims against them. This implies that the beneficiaries of the deceased have to go through a tedious process to get the claim approved. It would be prudent to study the past records of your insurance provider regarding claims under process.
How to Get the Most out of Your Life Insurance
You can include add-on clauses in your term insurance by paying a small additional premium to cover for certain specific conditions and/or events.
#1. Cover for Critical Illness or Terminal Illness
Most life insurance plans have an option to add a Critical Illness clause to the existing cover which the policyholder can encash if he is diagnosed with one of the specified critical illnesses and deemed curable by doctors. This amount is intended to reduce the policyholder’s burden of medical expenses, although it can be spent by him as he wishes. Once the amount is disbursed, the policy premium reduces and is converted into a normal term policy.
The Terminal Illness clause too can be added to an existing term insurance policy. This can be claimed if a person is afflicted with a condition and is expected to survive for less than 6-12 months. In this case, the insurance amount is paid out during the life of the policyholder rather than waiting for his death. The policy terminates at this point. If the person survives beyond the said time, the insurance company is not liable for any additional pay-out.
It is important to note that only one of these two amounts is disbursed by the insurance company at a point in time. For example, if a person is terminally ill due to a critical illness, he will be treated as terminally ill and receive the amount of total coverage once the claim is made and the policy will end at this point.
#2. Accidental Death
Accidental death benefits or the ‘Double Indemnity Rider’ are paid to nominees over and above the normal policy cover. This is paid out if the policyholder dies in an accident.
If you work in a hazardous or potentially dangerous environment like handling heavy machinery, building construction sites, etc., you might consider adding this clause to your policy.
#3. Pay-out Options
Pay-out options in a term insurance help you best manage your family’s needs. You can choose a lump sum pay-out to cover huge liabilities, monthly payments in case your nominee is young and might not manage a huge sum of money efficiently, or a combination of both.
Take the Time to do this today!
Choosing the right life insurance cover to protect your family and yourself might seem like a time-consuming task. But it is one of the most important weapons in your financial arsenal to protect your family and yourself. To compare and buy the best term insurance plans, visit Coverfox.com today!