Despite being well educated, tech-savvy and having access to all the information online, millennials still rank low when it comes to money matters. The number of millennials who are aware of the importance and options in insurance domain is very low, and the number of millennials who have invested in insurance policies is even more scarce. This is mainly because this generation, who believes in the concept of YOLO that is you live only once, focuses more on tangible investments. For example, buying a new car, new home, or going on a trip, basically things that bring instant gratification. But they forget that even though the term plan won’t look important at the moment, it proves to be beneficial in many ways in the long term.
As soon as a person starts earning, parents, especially Indian parents, will remind him/her about the importance of buying a good term insurance policy. After that will come the point where friends and colleagues will too start informing about the benefits of buying a term plan. Most of the conversations will start with the tax benefits that come with term plans under Section 80D of Income Tax Act and draw to the conclusion that every person must invest in a good term insurance plan at the earliest. Not to forget how easy it is to buy term plans online.
Here are some expert tips that will help you to choose a term plan wisely.
1. Claim settlement ratio – Claim settlement ratio is the percentage of settled claims by the insurance provider. The higher the ratio, the more trustworthy is the insurer. Thus, it is very important to check the claim settlement ratio of the insurance company before you select the term plan.
2. Solvency ratio – As per the Insurance Regulatory and Development Authority of India (IRDAI), every life insurance company should maintain a minimum solvency ratio of 1.5. This ratio will tell you whether the insurance company is capable of settling the claim or not. There are instances like a natural calamity when the insurance company might get too many claims. At such a time, the insurance company should be financially ready to settle all the claims smoothly. This is where the solvency ratio plays an important role.
3. Critical illness cover – Generally, a term plan provides financial security to the family of the policyholder in case of his/her death. But death is not the only time when the family might face a financial crunch. In case the policyholder is diagnosed with a critical illness like cancer, kidney issue, etc., then the treatment may cost hefty bills. Thus, shaking the family’s finances. At such times, a term plan must come with an option to provide the policyholder with financial aid that will give some relief to the family members.
4. Add-ons available – A term plan is a basic life insurance cover that will pay off sum assured amount to the family of the policyholder if he/she dies during the term of the policy. If the policyholder needs coverage against specific risks, then he/she must select suitable add-ons which are available by paying a little more amount on the premiums. There are various types of add-ons, like the waiver of premium, income benefit, accidental death, etc.
Cost of premium – If you are done checking all the parameters mentioned above and have shortlisted a few term plans, then it is time to move to the next step. Which is to check the cost of premiums of those plans as it is the amount that you will have to pay every month. Thus, it should fit in your budget. Not being able to pay premiums may lead to lapse of your policy.