Purchasing a term insurance plan is an essential financial decision aimed at protecting your family’s financial future. However, before committing to a plan, it is important to ask the right questions to ensure that it aligns with your specific needs.
If you are looking to buy a new term life insurance policy to protect your family financially, here are some of the key questions you should ask.
1. What is the sum assured or coverage amount?
The primary purpose of term insurance is to provide adequate financial protection. It’s essential to determine whether the coverage offered will be enough to support your family in the event of your untimely demise. If you are wondering what sum assured is right for you, start by calculating your annual income, multiply it by a factor of 10, and add your liabilities to it. Any future expenses you may have to support can also be included.
2. What is the policy term?
A key factor in life insurance plan is determining the duration of the policy. The term should ideally cover the years when your family is most dependent on your income. You can consider factors such as your retirement, the age of your children, and other foreseeable financial obligations.
3. Which riders are available and which ones should you choose?
Riders are add-ons to a basic life insurance policy that provide extra coverage. Some common riders include:
- Accidental Death Benefit
- Critical Illness Rider
- Waiver of Premium
Having the right riders can significantly enhance your policy by covering specific risks, but they also come at an additional cost. Choose ones after considering their suitability to your specific scenario.
4. What is the Claim Settlement Ratio of the insurer?
The claim settlement ratio (CSR) is a crucial indicator of an insurer’s reliability. It refers to the percentage of claims that the insurance provider has successfully settled. You can look for insurers with a CSR as high as possible, preferably above 95%, to ensure a smooth claim process for your family.
5. What are the premium payment options?
Before choosing a life insurance, it’s important to ask about the premium payment options. Insurers often provide different payment schedules, such as single premiums, regular premiums at monthly, quarterly, or annual intervals, as well as limited premium payment terms.
Depending on your financial situation, you can choose the payment method that suits you best.
6. Are there any tax benefits?
Term insurance plans offer tax benefits for the premiums paid as well as the death benefit received. Ensure that your plan qualifies for these benefits and understand the extent to which premiums and payouts are tax-deductible.
7. Does the plan offer flexibility?
Some policies offer flexibility in terms of increasing the cover amount or modifying the premium structure based on life changes such as marriage, having children, or nearing retirement.
Selecting the right term insurance plan requires thorough research and careful consideration of your financial situation and family needs. By asking these questions, you can ensure that you’re making an informed decision, securing not just coverage but peace of mind for your loved ones.
