5 Tips for Millennials to Choose the Right Term Insurance Plan

Term Insurance is basic life insurance that everyone must have, as it offers financial protection to your dependents at an affordable premium. It is a type of life insurance that provides coverage for a certain period called 'term.' In case of the policyholder's unfortunate demise, term life insurance provides financial protection to the policyholder's family. A policyholder is required to pay a premium for a chosen term. However, failing to do so will result in a policy lapse.

The three major factors affecting the premium are the policyholder's age, sum assured, and the policy term. The policyholder's health and medical history are also considered while calculating the premium. The sum assured is offered to the nominee in the form of a death benefit in case of the unfortunate demise of the policyholder within the policy term. You should know that the policyholder is not a beneficiary in this type of insurance because the sum assured is given to the nominee in case of the death of the policyholder. If the policyholder survives the policy term, he/she gets an option to renew the policy with a new term, but the premium is calculated considering the age and health conditions at the time of renewal. Traditionally, Term Insurance does not offer survival benefits. But, nowadays, many insurance companies are offering ample benefits as add-ons that can be purchased by paying an extra premium.

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1. Buy Early:

Buying a life insurance policy at an early stage of life when you are young and healthy is the best way to get maximum life coverage at a lower premium. The premium remains the same throughout the policy term. But as you age, you are more susceptible to illnesses and other ailments, which is why the risk of life insurance companies paying the sum assured also increases. It ultimately results in an increased premium with each passing year. Therefore, it is advisable to buy a term plan as soon as you start earning.

2. Calculate the right life insurance coverage:

Many young individuals opt for life insurance coverage based on what their insurance agent suggests. However, this coverage might not prove to be suitable and sufficient for their needs. Therefore, before buying the term insurance plan, it is crucial to assess your life insurance needs. Your insurance needs differ with your age, income, and lifestyle. For example, a married individual with children will need higher life insurance coverage compared to an unmarried individual. The required life insurance coverage can be calculated with four different methods, viz. Human Life Value, Income Replacement Value, Expense Replacement, and Underwriter's Thumb Rule.

3. Consider critical illness cover:

With a drastic change in lifestyle compared to earlier generations, millennials are prone to ailments like stroke, kidney failure, cancer, and many more. These serious ailments are caused by a host of other conditions like diabetes, obesity, hypertension, stress, poor dietary habits, etc. Critical illnesses may arise unexpectedly and are detrimental to the patient and his/her family emotionally and financially. Critical illness cover provides you financial assistance during such challenging times with pocket-friendly premiums. Hence, it is a good idea to cover yourself with critical illness insurance cover at an early age.

4. Choose the suitable riders and add-ons:

Life insurance riders and add-ons are the additional benefits that you can avail of by paying a slightly higher premium. They allow you to customise your basic term plan by adding certain riders as per your requirements and provide comprehensive coverage towards the specific areas you find high-risk considering your lifestyle. The policy premium increases only in accordance with the riders you choose to pay for. However, it is necessary to analyse your lifestyle, understand the potential risk and then choose the suitable riders and add-ons. While buying a life insurance policy loaded with several riders and add-ons might be convenient, it can unnecessarily increase the premium for the extra features you may never need. Some of the popular riders are - Accidental Death Benefits Rider, Waiver of Premium Rider, Accidental Disability Rider, Critical Illness Rider, and Family Income Benefit Rider.

5. Compare different plans:

Buying a life insurance plan based on the recommendation of social media influencers, friends, family, colleagues, agents, etc., is the biggest mistake that many young policyholders make. As discussed earlier, it is important to analyse your needs and choose the right plan that matches your requirement. For example, a young couple may need a Joint Term Insurance Plan or an Incremental Term Insurance Plan. Apart from this, many individuals are not well-versed with insurance terminologies and often buy a life insurance policy without thoroughly understanding the policy features and terms. If you do not make an informed decision when you buy a life insurance policy, you might end up with a policy that is not suitable for your requirements and pay a higher premium. Hence, it is advisable to do your research by comparing the policy features and benefits, premiums, terms and conditions, customer service, claim settlement process, claim settlement ratio, etc., before choosing a term plan that is best suited for you. Many financial websites allow you to compare various life insurance policies from different insurance companies. You can also read the customer reviews to gain insights into the life insurance company and its policy. This can help you decide the best term life insurance policy for you.

To conclude:

If you are confused between buying a term life insurance and an insurance-cum-investment plan, it is advisable to buy a term insurance plan for life coverage instead of investing in an insurance-cum-investment plan. There are many other investment options that can take care of your long-term financial goals.

Buying a Life Insurance Policy for the first time can be overwhelming. However, the time you spend understanding your requirements and doing thorough research to find out the right insurer and suitable policy is worth it. Buying an online term plan is more convenient and affordable compared to buying it offline. Furthermore, make sure you carefully read and understand all the features, benefits, terms and conditions, list of exclusions and inclusions, policy exemptions, etc., to avoid any disappointment or dispute in the future. Click here to download a free copy of Your Definitive Guide to Buy Life Insurance.

Warm Regards,
Ketki Jadhav
Content Writer