Term life insurance is an amazing product that can help you secure the future of your family. It’s one of the most popular types of life insurance. However, there’s a lot of information about term life insurance that can lead to confusion. We all need truthful information in order for us to make an appropriate decision.
In this article, InsuredGoals will talk about how you can get the best term life insurance plan. Which policy to buy and what are the things you need to consider when buying term life insurance.
This is a step-by-step guide to help you decide which term life insurance plan will suit your needs. So, without further ado, let’s enjoy reading the 5 easy steps in selecting the best term life insurance plan.
1. Identify The Term Life Insurance Plan That Suits Your Needs
When looking for term life insurance coverage, you need to assess it carefully. The financial resources your beneficiaries will need to have in order to sustain themselves if you pass away. You can grab a paper to write these steps down or you can bookmark this page for future reference.
- Estimation of family’s monthly expenses – Once the estimation is done, multiply it by 150. The product is the future inflation. This is the first step to start the process.
- Addition of liabilities – Examples of these are card bills, home and personal loans, etc.
- Deduction of liquid assets – fixed deposits, mutual funds and stocks are the examples of liquid assets.
- Addition of expenses – Future expenses or your life goals, example of this is child’s education.
- The retirement corpus – You need to add the retirement corpus you want to leave for your beneficiaries.
Take note that the total of these steps will help you arrive at how much term insurance cover you should aim for.
2. Determine How Long You Need Term Life Insurance Plan
Now that you already compute how much cover you need. The next step is to determine how long you need the cover. People don’t want their term to be too short because their policy might lapse. In addition people also don’t want their term to be too long because of the high premium.
A proper way of estimating the right term for your plan is to determine by what year your liquid assets after subtracting your liabilities will be more than the life insurance requirement you had calculated from the 1st step. When these two numbers coincide, it’ll be the age until we need the coverage.
3. The Goal is To Achieve A Peace of Mind
One of the important factors we need to consider is the premium. Term life insurance is a long term contract often running from 30 to 50 years. So, it’s important to decide which insurance provider will give you peace of mind.
4. Choose The Add-ons You Need
The 4th step is to choose the add-ons you need, not the wants. Term life insurance plans offer add-ons with reasonable costs. Considering add-ons is a must, here are the 4 major add-ons that are available with your term life insurance plans.
- Additional coverage for death due to accidents. This is an amount which will be added to your basic death cover if you pass away in an accident.
- Critical illness coverage. It’s a lump-sum amount paid when the insured is diagnosed with critical illness.
- Waiver of premium on disability. Future premiums are waived off if the insured is rendered permanently disabled.
- Waiver of premium upon critical illness. Future premiums are waived off if the insured is diagnosed as critically ill.
5. Check The Claim Settlement Ratio
Claim settlement ratio usually attracts a lot of client’s attention, the ratio indicates the efficiency at which the policies are being settled. So, if you ever see 90% in the claim settlement ratio column, it means 90 out of 100 claims are settled properly.
Take note that the claim settlement ratio is merely an indicator. If this ratio is over 90% or 95% then the insurance company is very efficient about claims settlement. In addition, you don’t need to go deeper into this, just to see who has a 99% ratio.
Hope this article will help you choose the best term life insurance plan. If you are also curious about whole life insurance you can check it here. In addition, you can also check these article that tackles the difference between whole life insurance and term life insurance in order for you to determine which type of life insurance suits you well.