Today, the Indian life insurance market is overcrowded with options. With so many insurance companies offering different plans with a multitude of options, selecting the best one becomes a challenge. However, it is crucial to sift through the clutter and find the perfect plan that suits your specific requirements.
A term plan is a conventional life coverage that provides pure insurance, without any frills. Term life plans provide financial support to your family and loved ones in case of your untimely demise. It is known to be the most affordable and popular life insurance options. Let us understand how to find the best term insurance plan for you and your family.
How to choose the best term insurance plan?
- Select a cover that best fulfils your financial needs: The first step is to estimate the amount of cover required. The figure should reflect the standard of living of your family. Moreover, the existing liabilities, number of dependents, income, etc. will also heavily influence the amount of plan. Post this evaluation, another determinant is the type of plan. Generally, there are four types of term insurance plans:
- Level plan: A regular plan in which the premium is fixed for the entire policy term
- Decreasing plan: A flexible plan in which the sum assured decreases by a set percentage each year, corresponding to the diminishing liabilities with age
- Increasing plan: In this version, the sum assured increases by a pre-determined percentage each year to account for inflation in the long run
- Monthly income plan: This plan divides the sum assured into monthly payouts to help manage recurring costs every month
- Choose a policy that provides adequate benefits at an affordable premium: The premium amount heavily influences the term plan purchase. But premium alone should not be the sole factor of evaluation. Not every expensive plan is good and vice versa. But payouts are not a reflection of the company’s reliability or the efficiency of the plan. Hence, it is best to compare a policy in terms of its benefits versus premium.
- Opt for an insurer that has a high Claim Settlement Ratio (CSR): This is the prime factor to evaluate while choosing the term plan. It is a percentage that denotes the number of claims paid out by the insurer in a financial year against the total claims raised. A good insurance provider will have a higher claim settlement ratio. This will imply that the provider is reliable, and if the need arises, the family can claim the benefit easily and continue to live comfortably in your absence.
- Do not opt for a company that has a solvency ratio lower than 150%: Another factor which must be assessed to secure the best term insurance plan is the solvency ratio. The Insurance Regulatory and Development Authority (IRDA) of India, stipulates every insurance provider to maintain a minimum solvency ratio of 150%. Hence, while evaluating the policy, check for the solvency ratio of the provider. The ratio indicates if the insurance company is in a financially sound position to fund your claims. This aspect assumes more responsibility when multiple claims are made together, such as in the case of natural disasters.
- Register for a plan that offers multiple add-ons and riders: Death is not the only uncertain event. Events such as accident, critical illness, disablement, etc. of the bread earner can also make the family financially vulnerable. Thus, while selecting, choose a policy that provides riders, which offer more coverage in addition to the basic life insurance plan. Riders can include accidental death, waiver of premium, accidental disability, critical illness, etc.
- Engage with an insurer that provides exemplary customer service: To ensure you apply for the best term plan, select a provider that has a positive customer service record. For this purpose, you can evaluate various online reviews and also connect with the executives. Moreover, the buying process of the plan must not be overly complicated and cumbersome. Convenience rules the market.
The policy you select will set foundations of your family’s future in your absence. So, be judicious and choose only the best term insurance plan in the market that effectively and completely meets your needs.