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How to Choose a Term Life Insurance Plan | 5 Steps for Selecting Best Term Life Plan - YouTube
Channel: ET Money
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term insurance plans were introduced
with a very basic structure the plan
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will offer a death cover will cover you
for up to 65 years and premiums can be
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paid in only the annual mode then as
more insurers started offering online
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term insurance plans things started to
become a little complex today there is
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limited pay plans increasing cover plans
staggered payout plans return of premium
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plans and dozens of combinations while
this profusion of choices is good news
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it is also becoming a problem as most
Millennials are unable to decide on
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which policy to buy in this video we'll
separate the wheat from the shaft and
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identify the most important variables
you need to consider when buying a term
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insurance plan before we get started
make sure you subscribe to the ETMONEY
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Channel and hit the bell icon for
updates let's get started number one
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identify your needs and the term
insurance coverage you seek your term
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insurance coverage should broadly assess
how much financial resources your
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dependents will need to have to provide
for themselves if you were to meet and
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untimely death and the best way to get
started on this is to grab a piece of
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paper and do the following one estimate
your dependent family's monthly expenses
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and multiply it 150 times this multiple
of 150 factors future inflation and is a
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good way to start the process
to add your liabilities on account of
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home loans credit card bills personal
loans etc 3 deduct any liquid assets
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that you already have like fixed
deposits stocks and mutual funds fourth
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add your expenses planned on account of
important life goals that are likely to
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happen in the next 15 odd years like your
children's higher studies or the
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marriage etc and point 5 finally add the
retirement corpus you want to leave for
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your spouse on his or her retirement the
total of all these will help you arrive
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at how much of term insurance cover one
should be endeavoring for if you want to
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know how to calculate your term
insurance requirements in greater
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details do check out a comprehensive
video on the subject which I have linked
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in the description below
number two determine the tenure of your
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plan once you know how much cover you
need it's important to determine till
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what age you need the cover for you
don't want the tenure to be too little
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as your policy might lapse before you
are done with your financial obligations
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you also don't want the tenure to be too
high because the premium charge from you
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will be high on account of the higher
tenure a very good and scientific way of
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estimating the right tenure for your
term insurance plan is to determine by
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what year will your liquid net worth
that is the total investments that you
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have in mutual funds provident fund and
stocks etc after subtracting your
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liabilities will be more than the life
insurance requirement we have calculated
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earlier the age at which these two
numbers coincide will be the age until
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which you need coverage because for
start your assets will take care of your
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dependents upon your demise
number 3 target to achieve the highest
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peace of mind per rupee of premium paid
the premium is one of the most important
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factors that needs to be considered your
goal should be to get the highest peace
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of mind per rupee of premium the reason
I use peace of mind rather than coverage
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per rupee of premium is because
consumers often value some key
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intangibles in decision-making this can
be things like stability of the
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insurance provider or its reputation in
the eyes of the policyholder since term
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insurance is a long-term contract often
running into 30 40 or 50 years it is
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important for you to be happy with your
decision of insurance provider which
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will be a combination of premium and
your perception of the insurer a useful
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tip here for most insurance companies
term insurance policies that are sold
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online on platforms like ETMONEY are
cheaper than policies sold off line in
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branches or our agents so it makes more
sense to purchase term insurance plans
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online as it gives you a clear premium
advantage number four choose your
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add-ons wisely term insurance plans
offer riders at reasonable costs which
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should certainly be considered by you
even if it might not fit in your
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requirements there are four major riders
that are available which are one
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additional cover for depth due to
accident for an amount in addition to
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your basic depth cover shall be paid if
you were to die in an accident to
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critical illness cover where a lump sum
amount is paid on the diagnosis of one
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of the listed critical illnesses with
the life insurer
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three waiver of premium on disability
where future premiums are waived off if
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the policyholder is rendered permanently
disabled and four waiver of premium upon
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critical illness where future premiums
are waived off on diagnosis of a listed
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critical illness off the four riders the
two waiver of premium riders come at low
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premiums while the critical illness
rider is generally the most expensive
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one you have to run some permutations
and combinations to see if the
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additional benefit match up for the
premium charged and don't forget to read
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the fine print of all these add-ons
which tend to be different for the
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and insurance companies number-5 broadly
look at the claim settlement ratio claim
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settlement ratio attracts a lot of
consumer attention as it indicates the
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efficiency at which the policies are
being settled so when you see a number
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of 95 percent in the claim settlement
ratio column it means 95 out of hundred
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claims reported to the insurance company
were settled a word of caution here the
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claim settlement ratio is merely an
indication and if this ratio is over 95
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percent then the company has been very
efficient about settling claims you
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really don't need to go much deeper into
it as to see who has 99 percent ratio or
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who has 98.5 percent ratio it is
advisable to use the claim settlement
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ratio as a filter rather than a key
decision making criteria term insurance
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are long-term contracts which benefit
your dependents and it is in your
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interest to identify the right plans for
your family with the use of the 5
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considerations explained in this video I
hope you found this video useful if you
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liked this video hit the like button and
share this video with your friends and
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don't forget to check out the term
insurance section on the ETMONEY app
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for more information on everything we
have discussed in this video
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