A Beginner’s Guide On How To Choose A Term Insurance Plan

Getting term insurance is a huge decision that must always be addressed with consideration. In addition to offering a lump sum payment when needed or after maturity, a term insurance policy also fulfills the wishes of your family members.

Your life is covered by the simple term insurance plans as long as you continue to pay your fixed-term insurance payments.

What is Term Insurance?

Term insurance is a kind of life insurance that offers protection for a predetermined number of months or years, called a term. It is the most cost-effective type of life insurance. These policies were created with a relatively simple structure: they accept annual premium payments and provide coverage up to 65 years after the policyholder’s death.

In the event of the policyholder’s unfortunate death within the policy period, the term insurance provides a lump sum death payment to the policyholder’s family. The policyholder’s family is taken care of and given assurance of their financial stability. However, if the policyholder lives the whole policy term, neither the insured nor the beneficiaries receive any payout from the insurer.

Basic Terms Related to Term Insurance

Before getting a term insurance policy, you should know the basic terms related to it, such as the following:

Sum Assured

Sum assured, also referred to as cover, is the fixed amount of money that the insurance company promises to pay the nominee upon the death of the life assured under a term insurance plan. This amount is only paid if the policyholder dies within the policy’s term.

Claim Settlement Ratio

The Claim Settlement Ratio (CSR) is the ratio of the overall number of claims filed in a given year to the number of claims resolved by an insurance company in a year. The greater the number, the more trustworthy the insurance provider is, as the possibility that your family’s claim would be denied becomes lower.

Term Insurance Premium

Term Insurance Premium is the amount the policyholder must pay the life insurance company in exchange for the term plan’s life coverage. Depending on the plan selected, the premium can be paid as a single payment (in the case of single premium plans) or by regular installments made on a monthly, quarterly, semi-annual, or annual basis.

Policy Term

The duration of the term insurance plans’ validity is known as the policy term. Only within this time frame is the life insurance coverage provided by the term plan considered valid.

Premium Payment Term

The premium Payment Term is the period during which you need to pay premiums for your term insurance plan. This time duration may be less than or equal to the policy’s term length.

Free-Look Period

The free-look period is the period in which you can terminate your term insurance policy without penalties. You can cancel the policy during the free-look period if you are unsatisfied with the term plan’s terms and conditions. For the term insurance plans acquired offline, the free-look period is typically 15 days from the date of purchase, while it is 30 days for plans purchased online and through distance marketing. The best term insurance plans are those which can fulfill all the requirements.

Term Insurance Riders

Normal term insurance plans primarily provide only death benefits. With the help of additional term insurance riders, you can increase the financial protection the term plan provides. When you purchase your term plan, you can add these riders as additional covers with some additional term insurance rider premium.

Factors to Choose a Term Insurance Policy

While choosing from the term insurance plans available in the market, one should consider the following factors to get the best term life insurance policy:

The Coverage Amount

The first step to getting an insurance policy is to determine the coverage needs. There isn’t a single, universal approach to this. Choose the coverage you think your family will require in the upcoming years, and then look for term insurance plans that meet that demand. Make sure it is sufficient to pay for your family’s everyday expenses, the expense of their goals, and any unsecured debt in your name.

The Policy Period

The next step in selecting the best term insurance plan for you is determining your policy period. As previously stated, the policy term should be long enough to meet your working years, your prolonged life objective, and your oldest debt. This will provide complete financial security for your family.

Add-On Riders

Aside from death, various problems such as accidents, severe illness diagnoses, accidental disability, and so on can endanger your family’s financial security. When choosing a provider, consider those term insurance plans that provide a variety of rider alternatives.

Solvency Ratio

The solvency ratio determines the strength of a company’s cash flow. The better the solvency ratio, the more likely it is that the term insurance plan provider will pay your loved ones’ legitimate claims.


The best-term insurance policy is a long-term agreement that gives your loved ones a safety net financially to rely on in the event of any unfavorable life events. Before choosing which term insurance policy to purchase, you should look through your alternatives, evaluate the various options, and become familiar with each policy’s features and advantages.

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