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Term insurance plans have become increasingly common in 2021 due to the ever-changing global conditions. The pandemic scenario, economic slowdown and increasing health complications have demanded financial planning with a life insurance plan to secure a future.
Here are five important things to keep in mind when buying a term life insurance plan in 2021.
- Sum assured: The first and the most important aspect to consider when you buy a term plan is a sum assured. You have to ensure that it will suffice for the needs of your family in your absence. You can estimate the amount by considering your daily expenses and the short-term and long-term financial goals. Calculate all the liabilities and subtract them from the liquid assets you possess to get a fair estimate. Account for the inflation rate while looking at the long-term goals as we have seen how an economic slowdown can impact the demand for essential goods in 2021.
- Policy duration: The policy term is crucial in a term plan. The policy term should not be too short because it takes many years for the financial obligations to crop up for managing in the real-life scenario. Also, it should not be too long as the requirement of financial needs may no longer exist if some or all have been achieved. An ideal tenure can be the year of investment at which your liquid assets can pay off your liabilities and slightly more than the sum assured.
- Premium amount: Based on the sum assured and the policy tenure, the insurer will ascertain the premium amount. However, with an online term plan, you can use the calculator to try different combinations of the approximate sum assured and the different feasible policy tenures to decide on the premium amount. Also, based on your steady flow income, you can decide on the mode or frequency of payment, such as monthly, quarterly, half-yearly or yearly. Plan for purchasing a term life insurance plan early because the premium rates will be lower at that age and for the longer term. Also, due to fairly good health and the absence of any medical conditions or pre-existing ailments at a younger age, the probability of death risk is low. As a result, the premium rates get reduced and be available at even cheaper and affordable rates.
- Riders: You can extend the benefits derived from a life insurance term plan by opting for add-on riders. Different rides ensure the sum assured payable to you and your family members at various scenarios apart from an unexpected death. Some prominent riders are the accidental death benefit rider, critical illness rider, terminal illness rider, a total and permanent disability rider, return of premium rider etc.
For example, the critical illness rider will pay for your medical and hospitalization charges if you are diagnosed with a critical illness for the first time in life during the policy term. TATA AIA term insurance offers a comprehensive set of health riders to offer coverage against critical illnesses, terminal illnesses as well as COVID hospitalization and death by COVID-related complications.
The return of premium rider will refund the premium amounts paid if you survive the policy term, and the total and permanent disability rider will waive the future premium payments if you get permanently disabled.
- Claim settlement ratio: After considering your requirements, it is important to analyze the different plans available and choose the best to serve your needs. It is equally important to choose the insurer with a good claim settlement ratio to make your investments reliable. With the increasing demand in 2021, insurers have introduced varied customisable term insurance plans.
Conclusion
Term insurance plans in India have introduced several changes in features for the rising health concerns throughout the world. For example, during the Covid 19 pandemic scenario, people have lost their lives, leaving the family with an extensive financial crisis. Life insurance policies will be the best way to manage such scenarios in the best possible manner. Plan for term insurance early to derive maximum benefits to ensure complete protection for your family.
