The major goal for any term insurance is to provide emotional support to dependents in times of need rather than providing hefty funds. And to ensure this, every policyholder must first understand the policy they are committing themselves. It will give them a better knowledge of the plan’s outcomes. But because there are several plans available these days, it might be tough to select the most suitable one for your requirements. The best method to overcome this obstacle is to compare specific features. Given below are five of those specific features that need a comparison to find the perfect term policy.
Comparison of Assured Sum
The assured sum paid as the mortality benefits is the only direct return from term insurance. Even though the chances of no claim request exist, due to the survival of the policyholder, the returns in case of demise are important to the dependent. So, one must not make compromises on the assured sum of the policy.
Always choosing plans belonging to the high returns category ensures that the nominee gets more than adequate funds. It also helps them lead a financially peaceful life even during the emotionally disturbed phase they are going through.
Comparison of Premium Amount
Comparing the premium amount is also equally important. It is due to the burdens it can cause on the monthly budget when not planned accordingly. There is no provision of money repayment or maturity benefit at term-end in a term insurance policy. This means the policyholder will not receive back the invested premium amounts ever.
The only way there are returns from the plan is during the sad demise of the policyholder. But that situation is likely, and the money you invest in term policy can be unfruitful. So, one must always make sure that they do not put excess funds towards term insurance premiums.
Also, having a huge premium amount will disturb your finances and can cause some cutbacks on the lifestyle or other necessary commodities. It is advisable to have a lower premium to avoid these adverse effects on the personal budget.
Comparison of Payment Frequency and Flexibility
The payment frequency affects the assured sum a lot. Some common payment frequencies for the same term policy are monthly, quarterly, semi-annual, and annual. Among these, the annual payments have the highest returns, and the monthly payments have the least returns for the plans with otherwise similar features. Compound interest and larger at-a-time premium amounts lead to this stark difference in the returns.
Similarly, premium flexibility is also important to ensure the policyholder has enough payment windows to pay the premium in time. It will keep policy deferring at bay. And even if the policy becomes void due to lapses in the premium payments, a flexible insurer will allow renewal windows with as low as possible late fees or fines.
Comparison of Rider Covers and Add-Ons
Covers and add-ons make term insurance more useful and, at the same time, much cheaper. When bought separately, the same plans have a larger total premium amount than a plan with combined covers.
Currently, only two rider covers are available to term insurance policyholders, viz. Accident Benefit Rider in insurance and Permanent Disability Benefit Rider. However, the available add-ons can vary depending on the insurer and can include critical illness and other crucial add-ons.
Comparison of Insurer Credibility
The insurer’s credibility is also of importance. The best method to compare an insurer’s credibility in India is through the claim settlement ratio annually provided by the IRDAI. A higher ratio is equivalent to a trustworthy insurer that respects the customers’ claim requests.
The knowledge of these five comparison methods will come in handy the next time you purchase a term insurance plan. Through this, you can ensure the term policy, which comes out as the most preferred one in all the comparison criteria, will be extremely beneficial. The returns from such plans will always be much better than the remaining plans. But before you start a comparison of the plans, make sure they all belong to a trusted insurer to make your job much easier.