How to choose the best term insurance plan in India?
The market is full of insurance providers providing a variety of term insurance plans with distinct benefits. Picking up the best plan amidst these can be a tricky process. While most people take money as the primary comparing factor, there is much more that adds value to a project. Payment can be one of the essential elements, but certain aspects hold value while safeguarding your family's financial security.
Why do investors prefer TERM insurance?
Term Insurance works quite like a saving bond. You invest the money in a fund and get returns proportional to your paid premiums in case of a claim. Also, you get a lump sum amount at the time of claim that can provide a huge relief to the family in your absence.
Moreover, some benefits can be claimed even if the policyholder survives the specified tenure. Variants of term plans available in the market allow the policyholder to get returns of the premium paid.
Along with the tax benefits enjoyed by the policyholder on buying a term insurance plan, these aspects qualify as benefits that attract many investors to opt for the term insurance.
Term Insurance Features:
Term Insurance plan comes with some salient features. Let’s discuss them below:
1. Affordable: One of the most spectacular features is the affordability of the plan. A term plan provides life cover for a specified tenure. In case the policyholder dies during that term, the insurer has to pay the claim to the nominee. However, there is no maturity benefit payable in case the policyholder survives the tenure. So, the simplicity of this plan provides benefits to both the parties as the insurer has to pay the death claim only.
2. Easy to Buy: Unlike other insurance plans, the term plan is relatively simpler to buy as it does not require the insured person to look into the other aspects such as what return it will offer, what the company will do with my money. The simple framework of the term plan makes it accessible and extremely easy to buy.
3. Term Plan with the return of premiums: There is a variant of term plan available in the market that returns the paid premiums in case the policyholder survives the specified term. Such plans can be slightly expensive but provide extra benefits.
4. Staggered claims payout options: Term plans provide a lump sum amount in the event of a claim. However, they also offer staggered claims payout options in the case in which a partial amount is paid as a lump sum during the time of crisis and the rest of the amount can be provided monthly to take care of the monthly expenses.
5. Flexibility in Paying Premiums: The term plan provides flexibility in paying premiums. You can pay annually, quarterly, or monthly as per your convenience.
Things To Remember While Buying Term Insurance
We have listed below five critical factors that you should keep in mind while choosing the term insurance plan that best suits your needs.
1. Claim Settlement Ratio: Term life insurance serves the purpose of securing your dependents' future. Claim settlement ratio is the percentage of claims that are paid out of the total filled year. The rate needs to be higher to make it easy for your family to claim the insurance in your absence. Your family's chances of claiming the insurance comfortably depend on this claims settlement ratio.
It is advised to look after the total number of claims settled by the insurance provider. A certain amount of applications should be paid to acquire significance for the claim settlement ratio. So, while choosing the insurance company, ask for the number of claims they have settled before.
2. Solvency Ratio: This is another crucial aspect to take into consideration. Insurance Regulatory and Development Authority (IRDAI) has mandated a solvency ratio of at least 1.5 for every insurance provider. The solvency ratio tells you whether the company is financially stable to settle your claim when the need arises.
Why is it important? Now suppose that the unfortunate demise of the policyholder took place in a natural disaster, the insurance company will receive a considerable number of claims during that time. In such scenarios, the company needs to settle the claims quickly. This paves the way for the importance of the solvency ratio. The higher the rate is, the more capable a company is to settle claims in emergencies.
3. Critical Illness Cover: A term life insurance provides financial security to your family in the future. But a financial crisis can happen anytime. With the hectic lifestyle in the metro cities, the constant stress takes a toll on people's health. This has led to the rise of critical illnesses such as hypertension, heart disease, cancer, etc. the treatments for such diseases costs enormous amounts of money and cripple the family's savings. For such instances, there are critical illness plans available that pay for the cover immediately on the diagnosis. One just needs to submit the required medical documents and the bills. The essential illness plans provide the cost of treatment and ensure a smooth procedure of the patient. This is one of the reasons that critical illness covered with term insurance plans are gaining high popularity. Customers are looking for such projects to secure the finances of their family.
4. Additional Covers Available: Term insurance plans are equipped with a basic life cover. We all are aware that term life insurance serves the purpose of securing your family's finances in the future. And to add to its value, choose a term insurance plan that comes with comprehensive coverage and benefits. Look out for these benefits and compare the programs before choosing one.
- Waiver of Premium: In case of permanent disability, life insurance cover will continue without the need to pay a premium.
- Accidental Death: Most of the term insurance plans offer unintentional death benefits that are equal to the assured sum. In case of death, due to an accident, this benefit increases the guaranteed amount that is paid to the family.
- Income Benefit: Some of the term insurance plans provide assured sum to the family as monthly income rather than a lump sum amount. This benefit can be useful as it can provide for monthly expenses in a limited way.
- Others: Terminal illness benefits, flexibility to increase the assured sum, and increasing monthly income benefit.
5. Premium Cost: Once you are done with evaluating your plans on the aspects as mentioned above, you can finally come to the comparing costs in the chosen projects. List your priorities; don't compromise on the vital elements due to cost. If paying the lump sum amount is a cause of concern, you can anyway opt for a monthly payment option. The amount can be auto-debited from your account, so you don't have to worry about paying the premiums manually, and neither will you miss the date.