Get covered at unbelievably low premiums for high sums. It can't get any better.

Finding The Best Term Insurance: What To Look Out For?

For a long time, public sector insurance companies dominated the market for term plans. With standardization in insurance segment followed by the online boom, situations have changed for good. Now, several well-known private players have included useful term plans as a part of their offering. In this piece, we will learn how to choose the plan that will provide a secure future for your loved ones ensuring complete peace of mind.

Understanding Term Insurance

Term plan is a no frill life insurance product that offers to cover you for a particular period or a defined "term" of years. While the premiums are lower compared to other life insurance policies, your nominee will be benefited only in the unfortunate event of your death.

Features of Term Insurance

  • Flexible Policy Term: One of the most beneficial features of term insurance coverage is the flexibility it offers in its duration. You can get covered for as little as one year and as long as 40 years.

  • Death Benefit: Your nominee will be paid the Sum Assured only in the event of your death.

  • Low Premiums: Compared to various other life insurance plans, the premium for term insurance is reasonably low-priced.

Difference between Term, Life & Health Insurance

  • Health Insurance, as the title suggests, is meant to take care of your medical bills when you are not in good health. It ensures you breathe stress-free & don't have to dig large holes in your pocket when there is a medical crisis.

  • Life Insurance policies appear in many forms- Endowment, Unit Linked Plans or Money Back. These are basically investment plans that pay a lump sum to your nominee in the event of your death or offer you a maturity benefit if you survive the policy period.

  • Term Insurance is purely a death benefit that is paid to your nominee if you die during the policy period. If you outlive this period, the insurance company will not pay any survival or maturity benefit.

Criterion for Buying Term Insurance Plan

  • Cost : Cheaper the better? Yes, sometimes. However, that should not be the only deciding point.

  • Claim Settlement Ratio: Obviously, greater, the better. Your belief in the insurance company's capacity to honor your genuine claim relies heavily on its claim settlement ratio.

  • Average Time For Claim Settlement: The speed of claim servicing will hugely boost your faith in the insurance company. After all, your loved ones do not have to struggle for anything that rightfully belongs to them.

  • Solvency Ratio & Financial Strength : The financial health of your insurance company to pay off all its liabilities, especially claims, should be one of your deciding factors. However, with an active insurance governing body (IRDA), this should not be a cause for your concern.

  • Inflation : As inflation affects our life very significantly, you should weigh it suitably while choosing the cover for term insurance. Things that are affordable today might cost you a fortune ten years later.

Why Term Insurance? The Need of the Hour

Whether you should buy a term insurance or not should entirely depend on your individual needs. However, it is worthwhile to note that term insurance has several perks when compared to other types of life insurance. Let us analyze them in detail to help you make your mind.

  • Simplicity: Other insurance plans such as endowment policies are a bit complicated as they blend risk cover with savings. On the other hand, term insurance is the essence of simplicity - spend on premiums and get covered for the chosen period.

  • Competitive pricing: Term policies can be precisely compared with each other by price as they are structurally similar. This feature has resulted in a highly aggressive market where term plans are fast turning into a "commodity" offering higher sum assured at cheaper premiums.

  • Flexibility : Several term plans are convertible and renewable.

    • During the policy period, should you decide to change your mind, you can convert your term policy into an endowment plan for the same cover at additional premium.
    • Likewise, you can also opt for another term plan without a medical checkup at the end of the first term policy.
  • Tax Benefit When you purchase a term plan, you are eligible for tax benefit u/s 80C (Income Tax Act, 1961) on the premiums paid.

Determining the Premium in Term Insurance

The amount of premium you will pay towards your term insurance depends on the following:

  • The cover amount
  • Your age at the time of policy purchase
  • Your current annual income, and
  • The policy period

Additional Riders Offered in Term Insurance

Several term insurance plans provide extra benefits called riders that can enhance your coverage if wisely opted. They come at an added premium and below are a few for your reference.

  • Accidental Death Benefit Rider: If an accident leads to your untimely death, you will get added benefit in the form of raised sum assured

  • Waiver of Premium: The insurance company will exempt you from paying any future premiums if you become permanently impaired.

  • Critical Illness: During the policy period, if you suffer from any of the defined critical illnesses, the insurance company will disburse an amount equivalent to your sum assured.

Click to know more about riders in term insurance.

To conclude, term insurance is the simplest kind of life insurance. Based on the guidelines shared in this article, if you choose to buy a suitable term plan, it will only mean a significant step towards the long-term financial planning of your future.

How to buy term insurance plans easily?

Individuals have the option of purchasing term insurance plans either via the online or offline route. If one prefers to avail term insurance plans through the web, all that the applicant needs to do is visit the official website of the insurance company or a trusted insurance broker, fill out the necessary details in the online application form like personal details, health conditions, address, choose from the available policy options like the policy term and sum assured, agree for a medical check-up, if applicable and finally make the premium payment. Once these steps are taken care of, the insurance company will send across a soft copy of the term insurance plan which will be followed by a hard copy. In the offline route, the applicant would either have to visit one of the branch offices of the insurance company or wait until an agent is sent over to assist with buying a term insurance plan. It is generally recommended that users choose the online route to avail term insurance plans considering that the premiums offered for online plans are lower and there is more flexibility at the time of comparing policies and making the purchase.