Claim Settlement Ratio of 99.23%~

Term Insurance Comparison in India

Life can be uncertain when you least expect it to be. 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.

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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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.

5. Inflation

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.

● Between 30s 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.

Comparison Of Increasing And Decreasing Term Life Insurance Plans

Decreasing term insurance 

Increasing term insurance 

The sum assured reduces per predefined criteria. For instance, it might reduce every year by 10%.

The sum assured increases per predefined criteria. For instance, it can increase every year by 10%

The plan is suitable if your liabilities reduce with age and you require a lower sum assured in older ages

This plan is suitable if your liabilities increase with age and you need a higher sum assured at later ages

 

 

The premium payable might be lower than increasing term insurance plans, as the coverage reduces over time.

The premium payable might be higher than decreasing term plans, as the coverage increases over time.

Comparison Of Single And Joint Life Term Insurance Plans

Single Term Insurance

Joint Life Term Insurance 

The policy is taken on a single life, i.e., a single individual is insured.

The policy is taken on joint lives. Two or more individuals can be insured under the same policy.

For instance, a joint life policy can cover a husband and wife under a single plan.

If the insured passes away during the tenure, the death benefit is paid.

If any of the insured individuals passes away during the policy tenure, the death benefit is paid.

Comparison Of Individual And Group Life Term Insurance Plans

Individual term insurance

Group term insurance 

The policy is taken on a single life, i.e., a single individual is insured

The policy is taken on the life of multiple individuals who form a part of a group. For instance, employer-employee groups wherein one policy covers the employees of an organisation

The policyholder can pay the premium

The master policy holder, for example, the employer  pays the premium  . In certain cases, part of the premium may also be paid by the members of the group, for example by the employee in an employer-employee scheme.

A higher sum assured can be chosen

Usually, very high sum assured levels are not allowed

The policy terminates if the insured individual passes away during the policy tenure

The policy does not terminate if any one member passes away. The death benefit for the insured member is paid but the policy continues for other members

You can choose a long-term tenure for the plan

Group term plans are usually offered as one-year plans which are renewable

Comparison Of Online And Offline Term Life Insurance Plans

Online term insurance

Offline term insurance

You can buy the plan online through the insurance company’s website or through other online channels

You can buy the policy through an insurance agent, broker or through the nearest branch of the insurance company

The policy issuance is usually quicker since the documents can be uploaded with the click of a button.

You can get your queries resolved from the representative of insurer in person without having to understand everything on your own. Also, in offline term plans, the policy service issues are taken care of by the agent.

You can compare term insurance plans and their premiums across insurance companies and then choose a relevant policy

Comparison can be provided by your agent, who might also be able to select your plan, in case you are unable to decide your plan.

 

Conclusion

 

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.

 

FAQs

 

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.

References:

1. https://securenow.in/insuropedia/insurance-sector-in-india-past-present-and-future-of-insurance/

BJAZ-WEB-EC-05340/24

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Disclaimers:
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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information. 

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Disclaimer

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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