Term insurance policies were pretty basic when they were first introduced. Now, insurance providers offer multiple options for customizing these plans. When buying an online term plan, you must know how to maximize coverage while minimizing monthly premiums.
Given the many choices available in the market, such as increasing cover plans, limited pay plans, return of premium plans, and more, you must understand which are the best features to check for before buying the right term plan.
What is a Term Plan?
A term plan provides excellent financial protection for your family for as long as you want. If the risk for insurance providers is lower, you can get an insurance policy with higher coverage for lower premiums.
Choosing the right coverage is vital to ensure financial stability for your family. Before you determine the suitable amount of insurance coverage, you should consider your liabilities and expenses, as well as the financial requirements in case of your untimely demise. Irrespective of the income, if you have many liabilities, you must ensure that the term insurance helps your family meet those expenses.
Features to Watch For
Most term insurance policies offer protection. You cannot expect to invest or save a lot of money with term insurance because there is no guaranteed payment when the policy expires. It provides financial security if the primary income earner suddenly passes away.
If you outlive the policy term, you can extend the tenure or convert it into whole life insurance based on your needs. However, customization is possible only if you choose certain options while purchasing the policy.
Here are five features a top-term plan would have:
#1 Provides Coverage
Generally, term insurance provides high coverage. It is not uncommon to find term insurance plans with an average coverage of ₹1 crore. Insurance providers can offer higher coverage because they assume minimal risks with term insurance.
Getting higher coverage is also better for securing your family. Some term plans can be customized to provide increasing or decreasing coverage over the term period. You must evaluate your financial situation and predict your future needs to choose the right coverage.
#2 Policy Duration
Term insurance plans generally have a duration of 10 to 30 years. Some insurance providers also provide short-term insurance for just five years. The duration determines the size of the premiums you must pay.
If you buy term insurance at a young age, you can buy the insurance for a more extended period. However, you must consider purchasing the flexibility of changing coverage as your family grows.
It is ideal to buy term insurance that lasts until your retirement age. After retirement, you will not be the primary income source for your family, you will not have many dependents, and your wealth will have grown to meet your dependents’ needs.
#3 Additional Riders
Base-term policy coverage may not always be sufficient to cover your financial needs. In this case, you can purchase additional riders to customize your coverage. Many riders such as accidental death benefit riders, critical illness riders, and waiver of premium riders, help you support your family better.
You should ask the insurance provider about the different types of riders available before purchasing your policy. You can buy certain types of additional coverage later when you anticipate the need. However, you must choose your insurance riders carefully because buying too many riders can increase your premiums.
#4 Return of Premium Plan
Term insurance benefits include a guaranteed death benefit. Beneficiaries can get a death benefit payout if the insured passes away before the term insurance policy expires. By choosing a return of premium plan, you can get back the premiums you paid after the policy expiry. This flexibility is available for a premium fee. Thus, you may have to pay higher premiums to receive periodic payouts after maturity.
#5 Customisable Payout Options
Insurance payouts are usually made as lump sum payments at the time of maturity. However, many insurance providers now allow you to customize payment options based on your family’s needs. If you feel that your family will benefit from staggered payouts, you can choose that option.
In short, the best-term insurance plan should have five key features: affordability, flexibility, extensive coverage, ease of purchase, and timely payouts. These features will ensure that your needs are met and that the policy provides the necessary financial security for your family in case of any unforeseen events.
It is important to remember that choosing the right term insurance plan requires careful research and consideration of various factors such as your age, lifestyle, and financial goals. However, with the right plan in place, you can have peace of mind knowing that your loved ones will have financial protection in the event of an untimely demise.
Remember, you can use online resources to buy the best term insurance plan. Use a premium calculator to determine the size of the premiums you will have to pay for different plans. Instead of choosing a policy with the lowest premium, you should balance coverage and premium to ensure adequate financial support for your family.