Term insurance plans were introduced with a very basic structure the plan will offer a death cover that will cover you for up to 65 years and premiums can be paid in only the annual mode then as more insurers started offering online term insurance plans things started to become a little complex today there are limited pay plans increasing cover plans staggered payout plans return of premium plans and dozens of combinations while this profusion of choices is good news it is also becoming a problem as most millennials are unable to decide on which policy to buy in this video we’ll separate the wheat from the shaft and identify the most important variables you need to consider when buying a term insurance plan.
let’s get started number one identify your needs and the term insurance coverage you seek your term insurance coverage should broadly assess how many financial resources your dependents will need to have to provide for themselves if you were to meet an untimely death and the best way to get started on this is to grab a piece of paper and do the following one estimate your dependent family’s monthly expenses and multiply it 150 times this multiple of 150 factors future inflation and is a good way to start the process to add your liabilities on account of home loans credit card bills personal loans etc.
3rd deduct any liquid assets that you already have like fixed deposits stocks and mutual funds fourth add your expenses planned on account of important life goals that are likely to happen in the next 15 odd years like your children’s higher studies or the marriage etc and point.
5th finally add theretirement corpus you want to leave for your spouse on his or her retirement thetotal of all these will help you arrive at how much of term insurance cover oneshould be endeavoring for if you want to know how to calculate your terminsurance requirements in greater details do check out a comprehensivevideo on the subject which I have linked in the description belownumber two determine the tenure of your plan once you know how much cover youneed it’s important to determine till what age you need the cover for youdon’t want the tenure to be too little as your policy might lapse before youare done with your financial obligations you also don’t want the tenure to be toohigh because the premium charge from you will be high on account of the highertenure a very good and scientific way of estimating the right tenure for yourterm insurance plan is to determine by what year will your liquid net worththat is the total investments that you have in mutual funds provident fund andstocks etc after subtracting your liabilities will be more than the lifeinsurance requirement we have calculated earlier the age at which these twonumbers coincide will be the age until which you need coverage because forstart your assets will take care of your dependents upon your demise number.
6th target to achieve the highest peace of mind per rupee of premium paidthe premium is one of the most important factors that needs to be considered yourgoal should be to get the highest peace of mind per rupee of premium the reasonI use peace of mind rather than coverage per rupee of premium is becauseconsumers often value some key intangibles in decision-making this canbe things like stability of the insurance provider or its reputation inthe eyes of the policyholder since term insurance is a long-term contract oftenrunning into 30 40 or 50 years it is important for you to be happy with yourdecision of insurance provider which will be a combination of premium andyour perception of the insurer a useful tip here for most insurance companiesterm insurance policies that are sold online on platforms like ETMONEY arecheaper than policies sold off line in branches or our agents so it makes moresense to purchase term insurance plans online as it gives you a clear premiumadvantage number four choose your add-ons wisely term insurance plansoffer riders at reasonable costs which should certainly be considered by youeven if it might not fit in your requirements there are four major ridersthat are available which are one additional cover for depth due toaccident for an amount in addition to your basic depth cover shall be paid if you were to die in an accident to critical illness cover where a lump sumamount is paid on the diagnosis of one of the listed critical illnesses withthe life insurer three waiver of premium on disabilitywhere future premiums are waived off if the policyholder is rendered permanentlydisabled and four waiver of premium upon critical illness where future premiumsare waived off on diagnosis of a listed critical illness off the four riders thetwo waiver of premium riders come at low premiums while the critical illnessrider is generally the most expensive one you have to run some permutationsand combinations to see if the additional benefit match up for thepremium charged and don’t forget to read the fine print of all these add-onswhich tend to be different for the and insurance companies number-5 broadlylook at the claim settlement ratio claim settlement ratio attracts a lot ofconsumer attention as it indicates the efficiency at which the policies arebeing settled so when you see a number of 95 percent in the claim settlementratio column it means 95 out of hundred claims reported to the insurance companywere settled a word of caution here the claim settlement ratio is merely anindication and if this ratio is over 95 percent then the company has been veryefficient about settling claims you really don’t need to go much deeper intoit as to see who has 99 percent ratio or who has 98.5 percent ratio it isadvisable to use the claim settlement ratio as a filter rather than a keydecision making criteria term insurance are long-term contracts which benefityour dependents and it is in your interest to identify the right plans foryour family with the use of the 5 considerations explained in this article.