How to Get The Best Term Insurance Plan?

The growing awareness about the importance of having a term insurance plan has led to a surge in the number of individuals looking for the policy plan. To cater to the growing demand, the number of insurance policies and insurance providers has also surged. While this has given individuals more options to choose from, it continues to overwhelm many. This is because many are unsure of what to look for in a policy to get the best term insurance plan, or how to approach the application process. However, the key to accessing the best policy lies in comparing the features of different policies to find the one that fits the best.

Read along to learn more about the best term insurance plan.

Things to Compare When Looking for a Term Policy

A term insurance plan provides financial protection to the insured for a specified period. The ultimate goal of obtaining the best term insurance plan is to provide robust financial security for the insured’s family in case of their death.

1. Critical Illness Cover

Term insurance plans are designed to safeguard policyholders’ financial future in the event of their death. However, this is not the one case when a family’s financial situation may be strained. For instance, getting diagnosed with a terminal illness or seeking treatment for a critical illness can also havoc one’s financial standing. To account for this, individuals can avail of term insurance plans with critical illness covers. They can help policyholders who are diagnosed with a serious illness by providing financial assistance for treatment and hospital expenses. It can also help ensure that the family has enough money to continue living their current lifestyle. The premium paid for critical illness insurance is eligible for deductions under Section 80D, which can help protect the policyholder’s financial resources.

2. Additional Covers

Term insurance provides a basic life cover, but allows individuals to add multiple additional coverages to protect themselves and their beneficiaries against financial strain arising due to several factors. Additional coverages or riders provide several benefits such as accidental death cover, disability cover, critical illness coverage, and even waiver of premiums.

Let us check the riders in detail:

1) Income benefit: Some term insurance plans allow the insured’s family to avail of a regular stream of income from the policy instead of a lump sum payout. This can prove helpful for families who seek financial support each month to pay for mortgages, groceries, rent,  or child care.

2) Waiver of premium: This benefit ensures that the insured’s family won’t have to pay any more premiums if the policyholder becomes disabled. This can help to ensure that financial security remains uncompromised.

3) Accidental death benefit: This rider increases the sum assured of the term insurance policy if the insured dies due to an accident. This benefit can provide additional financial aid to the family in the event of unexpected death.

Besides these basic rider benefits, leading term insurance plans also offer add-ons that can extend additional protection. These riders can include terminal illness benefits, the option to boost the sum assured on crossing milestones, and the option to raise monthly payout benefits.

3. Premium Cost

Only after individuals have considered the features of popular term insurance plans and selected a few of them they should compare their premium amounts. While the cost of premium is a vital factor to consider, it should not be the one that decides the virtue of a policy.

4. Tax Provision

Individuals can claim tax benefits under Section 80C for the premiums they pay for a term insurance plan in a given year. They can also check the tax deductions that are available under the subsection 80CCD to boost their tax savings. Notably, when selecting a term insurance policy, it is vital to compare different policy plans and then pick one that meets their budget and needs. They should also consider a policy plan that will help financially secure the insured’s family’s future and help them build a corpus for their future needs.

5. Claim Settlement Ratio

It is a measure of the percentage of claims an insurance provider settled out of the total number of claims they received in a year. It serves as a good indicator of the insurance provider’s overall financial stability and efficiency in handling claims. Individuals can find the claim settlement ratio on the insurer’s official website. Typically, a higher ratio indicates the company is likely to settle a claim. Therefore, it is essential to check the ratio when choosing term insurance.

6. Solvency Ratio

It is a measure of an insurer’s financial strength and is calculated by dividing the insurance provider’s total assets by its liabilities. Usually, a higher solvency ratio shows that the insurer is financially secure and likely to pay its claims on time. The IRDAI mandates all insurance providers maintain a solvency ratio of at least 1.5, which means that for every Rs.1.5 of assets, they must have Rs.1 of liabilities. Hence, it is recommended to choose an insurer with a higher solvency ratio, to ensure the success of claim settlement.

However, it is a wise move to first evaluate one’s financial standing and subsequently pick a plan, as often leading term insurance plans with extensive coverage come at a high premium cost. This could pressure policyholder’s payment capacity and increase the chances of them missing the premium payment date. Such a habit will only attract late fees and other penalties, which would further inflate the premium burden. If this continues for a longer time period, it could lead to the termination or lapse of the policy plan.

This makes it important not to compromise on features and coverage but at the same time, they must ensure that they are capable of paying the premium amount on time and without putting pressure on their monthly income. Individuals should also consider choosing the best term insurance plan that allows the auto debit facility so that they don’t miss payment dates or initiate payments manually.