Compare Term Insurance Policies Online in 2023
Life can be uncertain when you least expect it to. While there are some things that you can predict or foresee, other emergencies may occur all of a sudden, in an unexpected manner. This is why it is always a good idea to be prepared for contingencies as much as possible. Insurance is a financial product that can help you fulfil this goal. Term insurance, which is one of the most affordable form of life insurance, is one of the preferred options for people keen on securing their financial future.
To understand how to compare term plans before making a purchase, it is necessary to first get to know the answer to this question: "What is term insurance? That is where we will begin.
What Is Term Insurance?
Term insurance is a type of life insurance where the insurance company offers the insured person a purely protective life cover. In exchange for this life cover, the insured person or the policyholder pays term insurance premium to the insurer. As the name clearly suggests, the life insurance cover provided by a term insurance plan is valid for a specified period. This is known as the term of the policy.
If the insured person passes away during the term of the policy, the insurance company pays a death benefit to the nominees or the legal heirs of the insured person. Since term insurance plans are purely protective life covers, it means that the insurer is not liable to pay any amount to the insured person if the latter survives the term of the policy.
Since term insurance plans offer a pure life cover, they are generally much more affordable than other kinds of traditional life insurance policies.
Why Is Term Insurance Important?
The insurance industry in India has grown significantly over the past few decades1. As a result, many insurance companies are available for people to purchase term plans from. In addition to this, each insurer once again offers different term plans, thereby making the choices available to interested buyers quite extensive.
If you are in the market shopping for term insurance, you may find that there are many parameters like the life cover, the frequency of premium payment and the mode of purchase, among other things. This is why it becomes important to compare term plans and find the policy that suits your own individual needs. You could also make use of a term insurance calculator before purchasing a term plan, so you can get a better idea of the right amount of life cover you will need.
How To Choose The Suitable Term Plan For Yourself?
Now that you know why comparison is needed, the question is to choose the suitable plan for yourself, you need to look into many factors like the life cover, the tenure of the plan, the premium and the needs of your family, among other things.
Here is a closer look at some of the factors that you need to consider in order to compare term plans –
1. Your Family’s Needs
Your family’s needs and life goals play an important role in helping you choose the suitable term plan. The benefits paid out to your nominee(s) in the event of your unfortunate demise must be sufficient to fulfil their needs and help them meet their life goals at various stages of life. Whether it is your aged parents and their post-retirement requirements or your children and their life goals like education, these needs can help you compare and choose the suitable term plan.
2. The Amount of Life Cover You Need
When it comes to choosing a term insurance plan, one of the key things that you should consider is the amount of sum assured or the life cover that your family members will need to carry on with their life in your absence. You can get a better idea of this amount by factoring in the number of dependents in your family and their current as well as future needs. A term insurance calculator can also help you get a good idea of the amount of life cover needed.
3. The Insurer’s Claim Settlement Ratio
Before you buy a term plan, it is also important to compare the claim settlement ratio of different insurance companies. This ratio essentially indicates the number of insurance claims paid by the life insurance company in proportion to the total insurance claims they received in a year. A higher claim settlement ratio is naturally a good sign, because it means that the insurer honors the contract.
4. The Mode of Purchase
Comparing term plans according to the mode of purchase is also essential. Some plans may only be available for offline purchase, while others may be available for purchase online as well. So, before you choose a term plan, determine if you are more comfortable buying a policy online or offline. Once you have figured that out, you will be able to make a smarter choice.
To choose the suitable term plan, you also need to factor in inflation. Your family’s needs today will not be the same as their needs tomorrow, and the amount of money needed to meet those needs will increase with time, primarily due to inflation. Therefore, in addition to comparing term plans and using a term insurance calculator, you also need to account for inflation and make sure that the life cover you choose will be sufficient for your family 10 or 20 years later.
How Much Term Insurance Costs for Different Ages?
The premium of a term insurance policy depends on the age of the life insured, among other factors. It is higher for higher ages. Here’s how the premium changes across ages –
● In the 20s:
In your early adulthood, you may usually be healthy and have a low mortality risk. As such, premiums may be lower at these ages.
● Between30s to 50s:
As you age, your mortality risk may increase. You might also develop health conditions. So, premiums may be higher compared to your 20s, and if you have any medical condition, the premium may be further affected.
● In your 60s:
Some insurers may restrict the entry age beyond 60 and some may offer lower tenures with a maximum maturity age criterion. So, premiums may be higher than younger ages and existing illnesses, if any, may increase the premium further.
Term Insurance Comparison
Based on the many comparison factors available, there are different types of term insurance plans. Let us look at the many kinds of term insurance policies in the context of different parameters, and compare how they match up against each other.
1. Decreasing Term Insurance Vs. Increasing Term Insurance
A decreasing term plan operates on the assumption that your liabilities tend to decrease with age. So, the need for insurance coverage also tends to go down correspondingly. Because of this, the sum assured in a decreasing term insurance plan decreases according to predetermined criteria. However, the term insurance premium tends to remain constant.
An increasing term insurance plan, on the other hand, is developed on the assumption that your liabilities may increase as you age. Therefore, the sum assured increases every year by a predefined amount. As for the term insurance premium, though some insurance companies may decide to increase the premium along with a higher sum assured. The premiums for increasing term life insurance may change or remain constant throughout the tenure depending on the terms and conditions of the policy.
2. Single Term Insurance Vs. Joint Term Insurance
A single term insurance plan is a policy that offers a life cover to one life assured. However, the cover is made available for a single life only.
A joint term insurance plan, on the other hand, provides a life cover to you - the policyholder and your spouse, under a single contract. If any one of the two insured people dies during the policy’s tenure, the insurer pays out a lump sum death benefit to the surviving member of the policy. However, in the unfortunate event that both the insured parties pass away, their nominees or the legal heirs will receive the sum assured as death benefits.
3. Individual Term Insurance Vs. Group Term Insurance
An individual term insurance plan, as the name suggests, is a kind of policy that provides the life cover to an individual policyholder only, whereas, a Group Term Policy, is term life insurance policy provides life coverage to a group of people. These people may be employees of an organization, members of a society or a group of borrowers from a common lender etc. Under a Group insurance policy, members of the group can get life, annuity, and superannuation, and gratuity, leave encashment or loan cover, among others.
4. Online Term Insurance Vs. Offline Term Insurance
This one, as you may have deciphered, is simple enough. Online term plans are available for purchase online, through the website of the insurance company or on aggregator websites. As for offline plans, they can be purchased through an insurance agent or from the branch office of the insurance company.
Now that you know more about term insurance, you will find that it is easier to compare term plans before you make a purchase. In addition to this, tools like term insurance calculators also make comparison and decision-making easier for purchasers.
1. Can I extend the existing term plan duration?
No, the extension of the policy tenure during the coverage duration is usually not allowed under term insurance plans.
2. Is it secure to buy online term insurance plans?
Yes, it is secure to buy term insurance plans online. You can visit the insurer’s website or any insurance web aggregator’s platform to purchase your policy online.
3. What is the difference between term and endowment insurance plans?
Term insurance plans offer coverage against premature demise. They usually don’t have any maturity benefit, and even if they do, the premiums are refunded.
Endowment plans along with a death benefit in case of the unforeseen and untimely demise of the life insured, also offer a maturity benefit in case you survive the policy term, as per the terms and conditions of the plan. They might also offer bonus additions, if any, that enhance your corpus.
So, while term insurance plans are aimed at providing financial security against premature demise, endowment insurance plans are savings-oriented policies.
4. What are the payout options in term life insurance?
The payout options depend on the type of term life insurance plan that you have selected. They are as follows –
- Lump sum payout – In this case, the sum assured is paid in a lump sum
- Income payout – In this case, the sum assured is paid in regular installments for a specified tenure.
- Lump sum and income payout – In this case, a part of the sum assured is paid in a lump sum, and the remaining is paid in installments over a specific tenure.
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