Term life insurance is one of the key protection instruments that you ought to invest in. Life can take a turn for better or worse any moment, so it is only prudent to pick the suitable term plan in India as early as possible. Let us begin by answering the basic question — what is term insurance?
What is term insurance?
Term insurance gives a death benefit to your nominee or legal heir in the event of your death during the policy term. As the name suggests, a term plan is valid for a specific term, which could be usually anything from 5 years to 40 years depending on the terms and conditions mentioned under the respective term plan. Term insurance premiums are relatively lower as compared to other insurance plans, and coverage is higher. These plans usually do not give maturity benefits in case you outlive the policy term. However, there is a new concept of return of premium in term plans, which is doing the rounds where one can also avail benefits on surviving the policy term.
How does term insurance work?
How much a term plan costs would depend on your age, health status, smoking and drinking habits, family’s medical history, and sum assured. Term insurance plans also come with riders or additional benefits, which are optional. With just a small amount of extra money, you can buy yourself a critical illness cover, accidental death benefit cover, and various other riders.
Now that you know what term insurance is, let us look at how to choose the best term plan in India that could possibly suit your needs.
How to select the best term plan in India
Here are the factors that you must keep in mind while comparing different plans to pick out the single best term plan for yourself and your family.
1. Claim settlement ratio
In case of an exigency, your beneficiary will have to raise a claim, which the insurer will then settle by paying them the sum assured. The claim settlement ratio of an insurance company is the total number of claims approved by them divided by the total number of claims applied for. A company with a higher claim settlement ratio would surely be a better choice as it would mean easier claim settlement.
2. Solvency ratio
Solvency ratio reflects the capability of your insurer to settle your claim. As per the IRDAI, all insurance companies are required to maintain a minimum solvency ratio of 150%.
3. Critical illness cover
With this rider, you will receive a lump sum amount if diagnosed with a critical illness covered under the rider. It ensures that your medical treatment is taken care of while your family’s other expenses remain unaffected.
It is important to add an adequate critical illness rider so that your policy supports you in all kinds of life-threatening situations.
4. Additional covers
Riders are technically optional, but they are quite useful. Apart from critical illness cover, the most important riders, which can be opted with a term plan, are –
• Accidental death benefit
• Waiver of premium
• Accidental Permanent Total/ Partial Disability benefit rider
• Family Income Benefit Rider
You can buy these additional benefits as per your specific needs and lifestyle.
5. Premium cost
Once you have considered all the above factors, you can let the costs decide your final choice. However, you should not have to compromise on any of these factors because of the need for a lower premium cost. Remember that you can opt for monthly payments and auto debits to make it easier. In addition, premiums paid for term insurance policy are subject to tax exemption up to Rs.1.5 lakh per annum under Section 80C of the Income Tax Act, 1961. The tax benefits are subject to provisions of Income Tax Act, 1961, as amended from time to time.
Now that you know how to choose the best term plan in India, here is how you can buy yourself a suitable plan.
How to buy term insurance online
Buying anything online is always convenient as you can do so by just sitting at home with a few clicks. Considering the ongoing pandemic due to COVID-19, buying online is something what is preferred now. You can buy a term plan online as well. They are affordable, hassle-free, and convenient. These are the steps to avail one.
1. Log-in to the insurance provider’s website
2. Fill the application/proposal form
3. Choose options based on your needs
4. Pay the premium online
5. Submit the necessary documents
How to buy term insurance offline
If you wish to buy your policy offline also, you can make it more convenient by checking your eligibility, premiums, etc. online first. This way, you will know exactly what to ask for when you approach the insurer’s representative. You will have to fill up an application form, appear for a medical test (in some cases), submit the necessary documents and choose your premium payment mode as per the respective process of the life insurance provider.
The sooner you buy a term plan, the better your plan and coverage would be. At the same time, do not buy a plan hastily; consider all the above factors carefully before making your decision.