subject: Factors To Assess When Investing In A Term Insurance Policy [print this page] Term plan is a popular choice for future investments. This plan is specifically designed to provide your loved ones with the financial security they would need in your absence. It takes care of the greatest worry of a bread winner of the family. In case of an eventuality with the policy holder, the policy amount is handed to the nominee. There are several providers in the market who make their product attractive with different features and benefits. The choice can be baffling. Hence, consider a few factors before you settle on any term insurance policy
What sum assured should you opt for?
The sum assured you opt for is the amount your family receives in case of an eventuality. So make sure to choose an appropriate amount. You dont want to be over insured or under insured. As a rule of the thumb, you need to opt for 15 times the annual income if one is less than 40 years of age, 10 times the annual income if one is between 40 and 45, and 5 times the annual income if one is 45 or more. Another method that you can choose to decide the amount is Sum Insured = (total loans outstanding+ amount required for children's education and wedding) + (average annual consumption related expenditure) *10. Remember that your earning potential and expenses will increase over the years. Also, the inflation will play its part.
What should the tenure for the policy be?
The younger you are the longer is your term plan period. Synchronize the policy period with your retirement age or the age by which you think youd be free of your financial liabilities. Policies now-a-days offer a term period ranging from 10-30 years!
Should I opt for riders?
Riders are basically additional covers that you can buy to attach with your term insurance policy. Mostly, a term plan pays out only in case of death of the policy holder, and situations like critical illness or a severe accident that can affect the economic conditions of the family remain uncovered. Riders like Critical Illness riders or Permanent Total Disability riders cover such aspects to give you a complete cover. They ensure that the policy holder is paid the sum assured in case of other unfortunate situations not covered by the policy.
Which provider should I choose?
The huge variety of providers in the market can confuse even the smartest of all consumers. Since the competition is very tough, every provider tends to offer a product with better features and benefits. To make the right choice, you need to research on the different term plans currently offered by different providers in the market. Read up their benefits and see if they match your requirement. It is advisable to opt for well known providers. Compare policies for their sum assured, tenure, claim settlement rate etc. Settle on a term insurance policy that matches your criteria completely.
by: Jenni Kundu
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