The central idea behind purchasing term insurance is to safeguard your family against future financial contingencies in the event of any eventuality.  Therefore, if you happen to purchase a term plan that is poorly chosen, the decision often proves worthless when the time comes since you hadn’t evaluated your requirements before buying the policy. So, first, you need to list your financial requirements in a checklist and then make sure that you compare between all available insurance offers. To help, here are some crucial factors that you must consider while buying an online term plan. 

1. Claim Settlement Ratio of Insurer

When looking to buy an online term plan, you must consider the claim settlement ratio of the insurer, which is one key metric that can help you know beforehand whether the insurance company can provide the death benefit to your family without any hassles.

This metric is essentially the ratio between the number of claims that the insurance provider settles in a year as against the number of claims its policyholder’s file.

Naturally, a ratio on the higher side implies that the company is quite responsive in settling the legitimate claims filed. A low ratio, on the other hand, would point towards a tendency of the company not to pay out its policyholders indicating a warning sign you probably need to be wary about. 

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2. Persistency Ratio

An equally important metric that you must be conscious about while making a term insurance comparison is the persistency ratio. It is the best and most accurate summary of how happy the existing policyholders of a term plan are with the insurance provider.

It maps out the fraction of policies that are renewed on an annual basis as against all the prevailing policies. A persistency ratio on the higher side should be an encouragement, whereas a low one should draw a question mark in your mind.

3. The Option of Including Add-on Covers

While you are out there to buy term insurance online, you also must look out for the option of including additional covers that often come at a minimal cost.

Life Insurance riders are very helpful as they help cover additional risks in a very cost-effective manner, albeit with the payment of additional premium. For example, some add-on covers you can look out for include whether there is a premium waiver benefit in case of permanent disability or critical illness support in case you’re diagnosed with the severe health conditions that are a part of the contract.

These small additions can be very significant in case you find yourself to be in any unforeseen circumstance.

4. Pay-out Options in The Plan

Another relevant factor to explore before deciding is the payout options available under the plan. Typically, most traditional term plans include only a lump sum payout in the event of death, if the eventuality occurs within the policy period.

However, if you search online for term plans offered by reputable insurers, you will find several of them offering a variety of payout options. Some insurers like Max Life Insurance, provide a more meaningful payout format such as a monthly income or increasing monthly to help fulfil your financial responsibilities with ease, along with giving the death benefit.

5. The flexibility of Milestone-based Future Financial Planning

Based on the life stage and situation you may find yourself in, another factor that you should look out for in a term plan is how far is it flexible and accommodating of your changing situation and needs.

It is quite intuitive to understand that your financial goals will change and evolve as you reach important life milestones such as marriage, childbirth and retirement. Therefore, any financial security option that you opt for should be in sync with your life goals, which is why analysing the flexibility of your term plan is a must. For example, you can look out whether there is an option to increase the death benefit post marriage or child marriage.

With due diligence and an appraisal of your financial requirements, you can opt for the best plan suits your needs. Irrespective of the insurance provider you pick, one thing you must always keep in mind is that you’re getting the term plan for the protection of your family. This means that you must not compromise on the critical aspects of the plan such as sum assured or policy term. Choose an amount that is sufficiently high to comfortably help your family meet their regular expenses and take care of their future aspirations.

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January 2021