Financial hiccups can come in many forms, and they can’t necessarily be eased with time unless a person decides to sabotage their hard-earned income in the bait of mitigating unexpected challenges in life. But how about we tell you that it’s possible to rise above financial adversities by investing in some financial instruments well before a financially taxing turmoil takes over? That’s right – we’re talking about insurance plans. Just like investments form the backbone of investment planning, insurance plans form the backbone of insurance planning.
Overall, insurance plans play a pivotal role in liability planning and come in various types. Two of the most common types of insurance plans include term life insurance and health insurance. In this article, we’ll uncover the steps that should be followed when choosing a term life insurance policy and a health insurance plan.
What’s a term life insurance?
Term life insurance is a type of life insurance plan that provides financial coverage to the family of the policyholder in the case of the demise of the policyholder within the term of the insurance policy. The policyholder is required to pay some amount periodically toward the insurance plan. These amounts are termed as premiums.
What’s health insurance?
Health insurance provides financial assistance to the policyholder in case of a medical emergency or the need for healthcare services. It typically involves paying regular premiums to an insurance provider in exchange for coverage.
How to choose the best term life and health insurance?
1.Know your options
Various insurers provide a term life insurance plan. Before shortlisting one for yourself, it’s wise to weigh all the options available. Factor in various parameters such as affordability, terms and conditions, reputation of the insurer, and claim settlement time and ratio.
On the other hand, for health insurance, it’s important to weigh factors like coverage for critical illnesses, flexible customization, stable premiums, long-term coverage, a comprehensive hospital network, an efficient claims process, additional benefits like wellness programs, customer reviews, cost-benefit analysis, and policy exclusions for clarity.
2.Know about the commissions
Each insurance plan comes with commissions that are paid to the insurance agent. Getting accustomed to this rationale is important to understand the motivations of the insurance agent who is selling the policy to you.
It can be useful to look toward commission calculator tools that promise transparency to individuals in their insurance planning journey. Commission calculator tools require users to input basic details such as the premium amount and frequency of the payment. The tool developed by a financial advisory service, 1 Finance, uses a set of data-driven assumptions to calculate the commission on each insurance policy.
In their approach, they assess the commission component on term life insurance within the overall premium by factoring in average commission percentages based on the number of years of premium payments. These percentages are as follows:
- For the first year, it’s 25%.
- For the second and third years, it’s 5%.
- For the fourth and fifth years, it’s 2%.
For health insurance plans, a 15% commission rate is applied to the current premium for calculation purposes. To determine the commission component within the total premium, an approach involving average commission percentages is employed. This approach factors in various commission rates based on the number of years of premium payments.
Additionally, they incorporate the current GST rate of 18% into their calculations, adhering to existing regulations.
3.Consult a certified financial planner
Lastly, if you’re unsure about what decision would be best for you, consulting a certified personal financial advisor would help you gain some clarity and 1 Finance is one such financial planner for you, for more information visit – https://1finance.co.in/.
Insurance plays a vital role in liability management. The most common types of insurance include term life insurance and health insurance. When selecting an insurance policy, it’s best to consider the core factors outlined above. It’s also advisable to use commission calculators, as the tools utilise their robust algorithms to provide a breakdown of the commission component on your term life insurance or health insurance policy. Nonetheless, always reach out to a financial advisor in case of doubts.