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Whenever we are investing in or purchasing a financial instrument, a lot of things are hovering in our minds. We do in depth study about the same and compare Term plan against the plans of other companies. Similarly when we take a loan, we compare interest rates of various banks and lenders when we apply for loan, similarly we compare rate of returns of various investment schemes when we plan to invest our money. Buying a term is no different; you need to analyze how much cover you need to replace your income after paying off your liabilities and then compare Premium of various companies.
Like any other investment scheme or financial instrument the amount payable i.e. the premium is not the only thing you should ponder upon. There are many other factors that you should consider like, the term of the policy, Claim settlement ratio (CSR) of the company and its market reputation. You buy a term plan so that your family does not suffer financially if unfortunately something happens to you. Thus, you should buy from a company having a good reputation of settling claims without complications and tantrums. To access this one needs to compare the claim settlement ratio i.e. the number of claims the insurance company settles out the total number of claims registered with it during the year. The CSR closest to 100% is best, considering that you won’t be around to get the claim from the company, the claim process should be very easy and convenient for your family to recover the money. Complex claim process might discourage them and they may feel harassed. It is very likely that they may be going through a lot of emotional stress from your death. In that scenario you won’t want them to struggle getting the claims.
Another important thing is to compare the term or duration the company is providing. It is always advisable to go for the maximum term. Your earning life i.e. life prior to retirement should be covered as till then there would be loss of income from your death, post retirement there would be no such loss. If you are in business or profession where there is no defined retirement age, you should go for the maximum term you can get to increase the chances of your family getting the claim.
When we are choosing a term plan there cannot be one best product for every person as each of us differ in our needs and preferences. Some people are comfortable with paying annual premium; some are better paying a monthly, quarterly or semi-annual premium. Thus, on the companies that offer them premium paying mode of their choice is the best for them.
Similarly, the payout of companies differ, some companies pay a lump-sum whereas others pay periodically. There are companies that provide option for both. If you think your dependents are mature and can manage a lump-sum amount without carelessly spending it, then you can go for lump sum option or else periodic is better for you.
Also, you may know that term plans are highly customizable. There are many extra features called Riders that you can add to your term plan to enhance its utility and Coverage by paying a little extra on premium. You may sit with your agent or study these riders online to assess what all riders suit your life requirements. You can compare companies on whether they provide the rider you are looking for. Attaching such riders you can strengthen your term plan so that it best serves your requirement at the minimum price possible.