As an earning individual, one of your primary financial goals would be to secure your family’s financial future. And to accomplish this, it is best advised to purchase a robust life insurance policy.
What is term insurance?
In simple words, term insurance is a type of life insurance that provides coverage against the uncertainties of life for a specific period. If something happens to you during the policy period, the insurer will pay the death benefit to the nominee. Thus, it assures you that your family never faces financial hassles even when you are not around.
Over the years, term insurance has evolved significantly. The insurance companies offer a variety of plans with innovative features to suit the varying needs of the people. In such a situation, buying the best term insurance can be challenging as you must consider several features.
So, to help you make the right choice, we list down a few tips to consider.
The reputation of the insurance company
Selecting a reputed insurance company is crucial to ensure a smooth claim settlement process. Furthermore, you should check the claim settlement ratio of the insurance providers before choosing one. Opt for an insurer with a high claim settlement ratio of 80% or more.
Critical Illness Coverage
This coverage provides an additional benefit if you are diagnosed with a critical illness covered under the plan.
The sum assured amount is the amount that your family is eligible to receive in the event of your untimely demise during the policy period. Therefore, it’s crucial to select the right sum assured to ensure the family’s financial security. The amount must help them take care of their needs and last for a few years until the members become financially independent.
Flexibility in choosing the payout option
Generally, the insurance companies pay the death benefit in a lump sum, i.e., they pay the sum assured in a single payment. However, if you think the nominee is not financially savvy, you can choose the payout mode to suit your needs.
- Monthly Payout
As the name suggests, the insurance company will pay the death benefit in smaller instalments every month till the entire amount is fully paid. This is an ideal option for smaller families with no debt; the payout may function as an income replacement.
- Lump sum with Monthly Income
If the policyholder opts for this option, then the insurer pays 50% sum assured as the lump sum payout and the remaining amount as monthly income.
Why Selecting the Lump Sum with Monthly Payout Option can be Beneficial?
Selecting the right payout option is crucial to ensure the dependents are financially secured. The lump sum with a monthly payout option can be helpful in various situations.
For instance, if the dependents don’t have the financial skills to deal with a huge payout, the policyholder shouldn’t opt for the lump sum option.
People should also consider the lump sum with a monthly payout option if all major loans are repaid.
Select the Right Payout Option to Help the Dependents
While opting for the right sum assured is essential, selecting the right payout option is crucial. Therefore, policyholders should understand how their dependents will use the money before choosing the payout option.