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TERM INSURANCE

How is Term Insurance Right?

Karan Sharma Karan Sharma 10 February 2020

Want to know how to choose the right term insurance plan? Read on.

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What is Term Insurance?

Term insurance is a pure protection insurance plan which provides cover for a specified period of time. Term insurance plans are the least expensive of all the life insurance products when compared against the sum assured offered by them. It is advisable to evaluate your requirements before selecting the right term insurance plan for yourself.

A term insurance plan is the best gift you can give to your loved ones. A term insurance plan will provide financial protection in case of your unfortunate demise. There are many insurance companies operating their business in India which offer different types of term plans. Here are the 4 basic types of term insurance plans:

1. Level Term Plans - This is a level sum assured term insurance plan in which the coverage amount remains fixed throughout the policy term.

2. Decreasing Term Plan - As per the decreasing term plan, the sum assured amount decreases by a fixed percentage each year. It is a renewable term life insurance plan in which the premiums are constant throughout the policy term.

3. Increasing Term Plan - As per the increasing term plan, the sum assured amount will increase by a pre-set percentage on an annual basis. Such plans as useful because the cost of living expenses and inflation also increases every year.

4. Monthly Income Plan - As per the monthly income plan, the sum assured benefit is paid out in regular monthly installments to the nominees in case of death of the policyholder.

Premium under Term Insurance Plans

Premium is cost of the policy cover. It is paid on an annual basis. Premiums charged for a term insurance plan vary from one insurer to another. When you are in the process of selecting the right term insurance plan, you must compare and select the plan which offers the best coverage and benefits. Also, purchasing a term insurance plan online is significantly cheaper than offline purchase.

Are their Riders available in Term Insurance?

Yes, there are riders available which can enhance the overall protection of your term plan. A rider is an add-on benefit which provides protection from certain specific risks and each rider can be attached to the base plan at the cost of an additional premium. It is advisable to purchase a term plan with multiple rider options, only if required. Some of the riders are - accidental death benefit rider, premium waiver rider, accidental death and disability rider, accelerated sum assured rider, critical illness rider, surgical care rider and hospitalization benefit rider.

What is Claim Ratio?

Claim settlement ratio is an important factor which must be considered before purchasing a term insurance plan. Claim settlement ratio is the total number of claims registered versus the number of claims settled by the company. For Example - If an insurer has received a total number of 100 claim and they settled 90 of those claims, the claim ratio is 90%. Higher the claim ratio, the more the chances of claim settlement.

What is Solvency Ratio?

An insurer’s capability depends on its solvency ratio. As per IRDAI, it is mandatory for an insurance company to have a higher value of assets than liabilities. This ensures that the insurance company has sufficient funds to honor claims in times of emergency. In short, always look for a high solvency ratio of the insurance provider.

Customer Service

The entire process of claim settlement is customer specific and service centric. Before purchasing a term insurance plan, ensure that they have an excellent 24x7 customer service department. An efficient customer department will ease the process of claim settlement in case of a claim.

Company Credentials

Apart from checking the points mentioned above, it is advisable to research on additional facts such as the insurer’s reputation, corporate governance record, their assets under management (AUM), along with the number of instances where the insurer has violated IRDAI rules.

Best Insurance Plans

Here are the best term insurance plans.

  1. LIC e-Term Insurance Plan
  2. ICICI Prudential iProtect Smart
  3. SBI Life eShield
  4. HDFC Life Click to Protect 3D Plus
  5. Max Online Term Plan Plus
  6. PNB Metlife Mera Term Plan
  7. Bajaj Allianz eTouch Online Term Plan
  8. Aviva iLife Plan
  9. SBI Smart Shield
  10. Aegon iLife Plan

Conclusion

In short, a term insurance plan is the best gift you can give to yourself and family. Purchasing a term plan will ease your mind as you need not worry about your family’s financial needs in the long run.

Karan Sharma
Written by Karan Sharma
Content Specialist and Strategist, foolishly creative and always ready for a game of 'Call of Duty'.