Tips to Choose the Best Term Insurance Plan in USA

Tips to Choose the Best Term Insurance Plan in USA

Tips to Choose the Best Term Insurance Plan in USA

Keeping your loved ones protected against unprecedented circumstances is everyone’s priority.  When you have a steady income source, you can create a sound financial plan that enables you to do so. One of the first steps is understanding how to choose term insurance for your family. You can secure their future effectively when you make a wise and informed policy buying decision. So, let’s further discuss about 6 Tips to Choose the Best Term Insurance Plan in USA.

Tips to Choose the Best Term Insurance Plan in USA

If you are new to investments, you may wonder how to choose the best term insurance in USA to make better use of your money. Making efficient financial decisions is key to a stable future for you and your loved ones. Therefore, let’s look at a few tips which will help you learn how to choose term insurance:

1. Consider Your Life Stage and Dependents 

The primary step for learning how to choose term insurance is to assess your life when buying insurance. When you secure life coverage, your age and financial situation set the groundwork for choosing the right policy. It affects the policy duration and, consequently, the amount of life coverage that is more suitable.

Furthermore, each person has distinct financial responsibilities in life. In case you are the sole breadwinner of your family, they may depend on you for an extended period to meet their life goals. On the other hand, an unmarried person may not have several dependents. Hence, you need to consider who needs life coverage and how to choose term insurance appropriately for them. 

2. Assess Current Lifestyle

It is vital to understand how to choose term insurance based on your lifestyle needs. Your lifestyle includes spending habits and a general standard of living. It is crucial to be realistic when assessing your current lifestyle to project the required life coverage from the term insurance.

When you have a clear idea of lifestyle needs, you can secure your loved ones more efficiently. Consequently, they will not have to compromise on their standard of living, even in your absence.

3. Analyze Your Income

A common concern among people is how to decide the term insurance amount that will be enough for their family. It is advisable to analyze your income to get a more practical picture of it. Each of us has a set of financial duties in life that require different portions of the income. When you evaluate the limitations of your income, you can invest better. 

It is important to calculate the financial requirements of your loved ones so that you do not overestimate the life cover. If your income is unable to meet the premium amount, you can end up overburdening your financial situation.  

4. Look at the Existing Liabilities 

Debts and liabilities are other important factors in the process of how to choose term insurance. Often, people have loans to repay over an extended period. In case the policy term does not cover the repayment period or if the amount falls short, it can be financially dreadful for your dependents.

It is painful for any of us to think of our loved ones bearing the burden of debt repayment without adequate support. Hence, it is crucial to understand how to choose best term plan by carefully considering the debts and liabilities in life.

5. Add Riders to the Plan

Not many people are aware of how to choose term insurance and customize its benefits to their particular profile. Riders are additional instrument tools provided by insurers to enhance the coverage of an insurance policy. They can be attached to a base policy at the time of purchase by paying an extra premium.

Some of the standard riders available with term insurance plans are critical illness rider, accidental death & disability rider, and waiver of premium rider. You can expand the scope of the term insurance policy by knowing how to choose term insurance riders.

6. Check Claim Settlement Ratio of the Insurer

The ratio defines the percentage of claims successfully paid by an insurer compared to the total number of claims received in a financial year. It reveals the intent and capacity of an insurance provider to keep their promise of providing financial support in times of need.

From the policyholder’s perspective, it is essential to consider the claim settlement ratio of the insurer. It gives you a better grasp of how to choose term insurance by a provider by looking at their claim settlement ratio. 

Term Insurance Terminology 

India is ranked 10th among 88 countries[1] in the life insurance business. More people are choosing life insurance policies to secure the future of their families. Hence, it is crucial to understand term insurance and its features well.

Now that you are aware of how to choose the best term insurance plan in USA, let’s look at some important terms to remember:

1. Policyholder 

In terms of insurance, policyholder is the one who purchases the policy and pays the premium. This person is the owner of the insurance plan but not necessarily the person whose life is being insured under the plan. The policyholder may secure life coverage for their family members.

2. Life Insured 

The insured person under the term insurance is known as the life insured. In case of the insured’s death during the policy term, the benefits from the term insurance are payable to the nominee. In simple words, a term insurance policy covers the life insured against risks.

It is not necessary that the life insured and the policyholder is the same person. For example, if a husband wishes to secure his wife’s life with term insurance, he will be the policyholder who pays the premium, while his wife is the life insured.

3. Sum Assured

The purpose of term insurance is to offer financial support when the insured’s family has suffered a loss. With a loss of life, there may be a financial loss that the insurer covers with a suitable term insurance plan. 

Sum assured is the amount of money that the insurer agrees to pay in case of an unprecedented event, as covered under the policy terms. Going for the adequate sum assured is a crucial factor for how to choose term life insurance. 

4. Policy Term

The policy term is the duration that you choose to keep the insurance policy active. There are different types of life insurance policies that can provide coverage for up to whole life. It is important to be aware of how to choose term insurance policy period appropriately, depending on your life stage and other crucial factors.

5. Nominee 

Nominee refers to the person/persons that the policyholder chooses to receive the benefits from the term insurance policy. They will receive the sum assured or any other benefits in case of an unfortunate eventuality.

In general, people choose their children, spouse, or parents to be their policy nominee. If the insured passes away during the policy term, the nominee must file a claim to receive the benefits.

6. Premium 

The policyholder has to pay a predetermined amount of premium to keep the life coverage in force. It is up to them to decide the frequency of payments, be it annually, semi-annually, quarterly, or monthly.

7. Claim

On the demise of the insured individual, the nominee needs to file a claim with the insurance provider as soon as possible. The insurer needs to be notified to begin the claim settlement process.

8. Death Benefit

The death benefit of term insurance is the amount payable to the nominee in the event of the insured’s demise. The nominee has to go through the claim settlement process to receive this benefit.