Essential Factors to Consider When Choosing Term Life Insurance

Multiple vital aspects come into play when choosing term life insurance plans. A few of them are given here for your understanding.

Key Aspects Worth Noting While Selecting Term Life Insurance Plans

Here are a few things that you must never neglect while evaluating and choosing term plans.

What’s Your Ideal Coverage Amount?

This is something that people often take for granted, and they end up choosing by the thumb rule, i.e., coverage that is 10-15 times their yearly salary. Yet, it may end up as insufficient once you take your family’s projected future living costs (with inflation), costs of goals like higher education, and your current debts and liabilities into account. Additionally, not all assets or savings may be immediately accessible to your family. Once you have the amount that your family will need, deduct only the liquid assets or easily accessible savings. The net amount is your ideal coverage for term insurance. Consider inflation-adjusted riders offered by some policies to ensure adequate future coverage.

Can You Afford the Coverage You Want?

In many cases, people end up opting for high-life coverage that they cannot afford to pay for, considering their current financial circumstances. Hence, use online term insurance calculators to work out the premium payable for the coverage you want. If you can afford it, fine, but if not, consider striking a balance between the life coverage amount and premium payments. Some policies allow you to increase coverage at key life stages, such as marriage or childbirth, without fresh underwriting. This flexibility can help you manage both premium costs and future needs.

What’s a Good Policy Tenure?

This should be based on your age, financial goals, and the time remaining till you retire. Ideally, select a policy duration that covers your family’s needs but not necessarily the maximum available. For instance, if you are in your 20s, a 40-year tenure may be suitable, while for those in their 30s, a tenure of 30 years could work. If you are in your 40s to 50s, a 10-20-year tenure may suffice, depending on when you plan to be financially independent or debt-free. If there is no retirement plan in place, consider taking the policy for the maximum available tenure.

What Are the Payout Choices?

It is possible to select term plans offering lump sum payouts to your family members in case you, unfortunately, pass away within the policy tenure. However, not all plans offer flexibility in payout options. Some policies may offer a combination of lump sum and monthly income options, while others may provide only one option. Evaluate which would work best for your family, considering their financial management needs and your own preferences. Monthly income payouts can ensure regular support for a fixed duration, while lump sum payments might be more suitable for large expenses immediately.

Are You Choosing the Right Insurer?

You should also choose the best possible insurance company for your plans. Ensure that you examine the company’s claim settlement ratio, solvency ratio, and track record. Additionally, other factors like customer service, ease of the claims process, policy flexibility, and any value-added services that may come with the plan, such as health check-ups or premium waiver options in case of disability, should be considered.

Make sure that you keep these pointers in mind while evaluating term life insurance.