Tips to choose the right term insurance plan

The main objective of choosing a term insurance plan is to ensure the financial security of your loved ones in case of an untimely demise. A term insurance policy is a pure life cover and has no investment-related advantage. Under this policy, a person is covered against death for a certain period or term. It is the cheapest form of life insurance and the premium is quite low as compared to other types of insurance covers.

There are a variety of term insurance plans available in the market. Here are a few tips to help you choose the right one:

1. Human Life value: The human life value includes the income of a person as well as liabilities like loans. The main purpose of a term insurance plan is to cover the financial needs of the dependents in case of death of the insured. Hence you must make sure that the life cover amount is adequate.

2. Reputation: It is necessary to do a back ground check of the insurance company before you buy a term insurance plan. A good reputation indicates expertise in handling of funds, which will ensure appropriate returns on your investment. One can easily check the ratings of the company on financial rating websites.

3. Claim-settlement ratio: Another method to judge term insurance plans is through determination of its claim-settlement ratio. This ratio indicates the number of settlements that have been done per 100 claims. Go for companies with a high claim-settlement ratio as it implies that most claims have been settled by the company.

4. Enhanced insurance cover: This feature offers a term insurance plan holder, the flexibility to enhance life cover during different stages of life. For example, in the event of marriage the policy cover can be increased by 50% and in case of becoming a parent it can be increased by 25%. This allows a policy holder to enhance his policies as he goes through the various stages of life.