Term Insurance Made Simple: A Step-by-Step Guide to Getting Covered Today

Having a term insurance policy in place is an effective way to ensure your dependents’ financial security in your absence.

Amidst the uncertainties of life, more people are now drawn towards purchasing suitable life insurance policies, particularly term insurance plans that assure the financial security of their dependents in case they pass away untimely. However, purchasing a suitable term insurance plan requires a close analysis of a few crucial factors that eventually lead you to the best one for your family. So, if you are planning to purchase a term insurance plan, this blog is for you.

How Does a Term Insurance Policy Work?

Through a term insurance policy, your dependents, such as children, spouse, and older parents, receive a large sum if you pass away. The sum is paid to the beneficiaries to protect them from facing financial crises and successfully fulfilling their financial commitments.

However, before diving into term insurance policies, you must know how they work. 

● The beneficiaries of the term insurance plan can only receive the sum assured if the policyholder dies within the policy period, which is called the policy term. 

● The policyholder can decide how the beneficiaries will receive the financial assistance. It can be in the form of a lump sum or paid monthly as a source of income. 

● If a term insurance plan includes the return of premium rider, the policyholder can get back the paid premiums on survival at the end of the policy period.

Moreover, term insurance policies are further subdivided into types, allowing you to select the one that best aligns with your financial requirements. These include the following:

● Level Term Plans

These are the term insurance plans where the sum assured of the policy is predetermined and remains fixed throughout the policy period.

● Increasing Term Plans

Under this type of term insurance policy, the sum assured increases by a certain percentage every year within the policy period.

● Decreasing Term Plans

This type of term insurance plan is mainly purchased to cover any outstanding loan liabilities. Thus, in this case, the sum assured decreases every year to align with your financial needs with time.

● Term Plans with Return of Premium

Term plans with Return of Premium assure the policyholder of getting back all the previously paid premiums if he survives the predetermined policy period.

How to Opt for a Term Insurance Coverage?

You can refer to the following steps to purchase a term insurance coverage:

Step 1: Evaluate your financial requirements thoroughly.

Step 2: Compare multiple plans based on coverage and premium amounts.

Step 3: Connect with a reputed term insurance provider and select a term plan that suits your financial preferences

Step 4: Carefully go through the terms and conditions of the plan.

Step 5: Proceed with the purchasing process by filling out the form and selecting your desired sum assured and policy duration.

Step 6: Provide the required details, including your current annual income, health status, etc.

Step 7: Provide the necessary documents as asked.

Step 8: Once the term insurance provider verifies the documents, your term plan will come into effect.

What To Consider Before Purchasing a Term Insurance Policy?

There are a few essential points you must take into account before purchasing a term insurance policy. These include the following:

● Required Sum Assured

You need to choose a realistic coverage amount to ensure your absence does not create an immense financial burden on your dependents. Thus, consider certain factors like your long-term financial goals, kids’ education, their marriage and any other liabilities you may have. You can also consider your family’s usual expenses to determine the sum assured.

● Life Cover Duration

Policy duration is also referred to as the life cover duration. It is the number of years through which your term insurance policy will remain active. Make sure to select a term period based on your years left to retire from work, the expected duration of your financial liabilities, the age of your dependents, etc.

● Claim Settlement Ratio

Claim settlement ratio is one of the key indicators of a term insurance company’s reliability. You must ensure the term insurance provider you choose is reliable by checking their claim settlement ratio. The higher it is, the better.

● Additional Benefits

Policyholders are allowed to include additional benefits such as critical illness coverage. However, adding such benefits can impact the premiums you pay for the plan.

Final Words

Having a term insurance policy in place is no luxury but a need of the hour. It is an effective way to ensure your dependents’ financial security in your absence. So, make sure to assess your financial requirements and opt for a suitable term insurance plan today.