Tarun wanted to buy a term insurance plan when his agent stressed the importance of having one. He asked his agent to suggest him a plan. At his agent’s suggestion, Tarun bought a plan and was happy at his decision. Tarun felt it was his duty to educate his friend too on the importance of a term insurance plan. With this sentiment, he visited his friend and told him how he bought a term plan for himself. To Tarun’s surprise, his friend was already aware of the necessity of a term plan and had bought one last year. However, when Tarun and his friend discussed their relevant plans, Tarun was in for a shock. He found that his agent sold him an expensive policy compared to his friend. Was he duped?
He wasn’t. He simply overlooked some things when buying the plan.
Though you understand the importance of buying a term insurance plan, you might overlook certain details when buying one. This oversight proves disadvantageous and, like Tarun, you may end up paying a higher premium. Here are some common things you overlook when buying a term insurance plan:
- The availability of term plans online
Though agents sell you a term insurance plan, it might not be the best for you. If like Tarun, you buy a term insurance plan from an agent, you overlook the online marketplace, which promises you varied plans at a lower premium rate. When you go online, you can compare between the different available plans and buy the plan with the best cover and features vis-à-vis the premium rate.
Solution – always go online to buy a term insurance plan. You can buy the plan from online brokers or from online web aggregators after comparing.
- The coverage feature of the plan
What do term insurance plans cover? Your most obvious response must be the risk of premature death. But, aren’t there any other features in a term insurance plan? Gone are the days when term insurance plans were offered as plain vanilla covers. Today, insurers provide many inbuilt benefits in the plan. You can find inbuilt riders (like – critical illness rider, personal accident rider, etc.), structured death benefit and even a maturity benefit or return of premium is offered by some term insurance plans. However, many usually overlook these features.
Solution: always understand the scope of coverage of your term insurance plan before you buy one.
- The suitability of the Sum Assured opted
Experts recommend that you should choose a Sum Assured based on your financial requirements. Yet, how many of you actually assess whether you are choosing the optimal Sum Assured or not? Sadly, not many! When choosing a Sum Assured, most people randomly buy a plan and overlook the need to match it with their requirements.
Solution: when buying a plan, work out the Sum Assured suitable for you. There are term insurance calculators available online, which let you determine the optimal coverage level. You can also use any of the Sum Assured calculation methods to assess the coverage level.
- The available riders
Riders are additional protection clauses which enhance the coverage of your term insurance plan. Since riders entail paying an extra premium, it is largely overlooked by many individuals when buying a term insurance plan.
Solution – riders allow you better protection in your term plan. The premiums required are marginally low and easily affordable. Since riders provide additional coverage, you should consider the riders available with the term insurance plan you are buying. Choose riders as per your requirement and add them to your base plan. Some popular riders include accidental death and disability benefit rider, critical illness rider, waiver of premium rider, etc.
- The Claim Settlement Ratio of the insurance company
The Claim Settlement Ratio (CSR) of an insurance company is the proportion of claims honored by the company against the total claims raised in a year. A higher claim ratio ensures that the company diligently tries to settle your insurance claims. While you might consider the coverage and the premium of a term insurance plan, the CSR of the insurer is usually ignored.
Solution: look at the insurer’s CSR when you are buying a term plan. A higher CSR is better. So choose a company, which promises a higher CSR.
These were the common things overlooked when buying a term insurance plan and also their respective solutions. Tarun also committed these oversights and ended up with an expensive plan. But you are warned. The next time you buy a term insurance plan be vigilant of these points and buy the plan after careful consideration.