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Buying a Term Insurance? Here’s a Guide!

?Term Plan Insurance is a type of Life Insurance which gives a risk coverage only.
Dawn Richard loves to read and more than that loves to share his experiences with others.
Dawn Richard loves to read and more than that loves to share his experiences with others.

Term Plan Insurance is a type of Life Insurance which gives a risk coverage only. If the policy insured person dies within the policy term, the nominee or legal heir will be entitled to get the sum assured as a death benefit, provided the insurance plan is operational.

There is no maturity amount payable under this plan if the insured person lives beyond the tenure of the term plan. Usually, people who are interested in a life plan, dismiss the idea of a term plan.

The reason behind this is that people think that whatever amount a person invests in a financial product or a sum assured plan in insurance should bring in good returns.

Have you ever thought what will happen, if you die suddenly without notice? How will your spouse, kids, and other financially dependent family members react?

They will be dumbstruck, unable to bear the shock mentally, financially and physically. Your spouse’s concern will be how to run the house with the passing away of the only earning member.

The immediate concerns are house rent or EMI is for a home loan, car loan, buying the household commodities, which are required every month. Your children’s education, children’s marriage, medical requirements like medicines, doctor’s treatment, etc. the list is endless.

If you do not want such a situation to happen, you must invest in Term Plan life Insurance, which is the cheapest form of life insurance plans with a very low premium but high-risk cover.

Life is uncertain these days, with men and women working at breakneck speed to achieve their life’s ambitions. Stress and other allied medical conditions are prevalent in every house. Accidents, be they road, rail or and terrorist attacks have increased manifold as activities have shifted to top gear in this millennium.

The Term Plan Insurance provides financial security not to the insured, but to the policyholder’s family in the event of death. Your family can be secured with a justifiably significant amount of sum assured amount.

This will take care of their financial requirements throughout their lives. You must plan for investing in a term plan which will give your family members a security of minimum 10 to 15 times your present annual income.

You should invest in this term plan when you start earning money by way of employment or by running a business. If you start earning at say 25 years of age, you can take a term plan for 30 years.

When you take a policy at this age, the insurance company charges you a very low premium. By default, a younger person is medically fit and less prone to serious medical ailments as compared to an elderly person, so the risk coverage for a young person is less.

You can increase the premium amount as you start earning more at later stages, covering your extended family of wife and kids after your marriage. As the low premium term plan insurance gives financial security cover to your dependents on your sudden demise, you become carefree for the future.

You can invest the idle money lying in your account into financial investments which give you a higher return or buy assets, jewellery, travel around the country or enjoy the good life which God has given you, without any worries for the future.

Selecting the Right Term Plan Insurance

There are 24 good life insurance companies, extending their services in India. Among them, LIC is a public sector entity, and the rest are there in the private sector.

All these companies provide a basket of plans, including the Term Plan. You can purchase a term plan offline from the insurance aggregators.

Before you buy a term plan, I advise you to research thoroughly either online or offline to finalize the insurance product you want to invest in. Look for the following aspects in the company:

1. The Reputation of the Insurance Company

LIC the only company from the public sector is the most trusted entity as far as insurance is concerned. It is known for its fair dealings, a large network of offices, and a good claim settlement ratio.

In the private sector, you should always invest in a company which is in the market for at least ten years. The services of the company can be assessed from the reviews on the internet or by word of mouth from your acquaintances, colleagues and family members.

2. Claim Settlement Ratio (CSR)

This is a key index to understand the performance of the insurance company. Claim Settlement Ratio is the total number of customer claims closed by the company divided by the actual number of insurance claims received by the company.

If the Claim Settlement Ratio is more than or equal to 95 %, then people are eager to invest in these company policy plans. An assurance that, in an unforeseen event of the insured’s death, this company will pay the Sum Assured, to his financially dependent nominee.

If the Claim Settlement ratio is less than 95%, then the probability is that the company is regularly rejecting claims. The Claim Settlement Ratio is not the ultimate decision-making point.

As per the IRDA guidelines, no insurance claim can be rejected by an insurance company for any insurance policy which has completed a minimum three years term, due to any reason whatsoever.

3. Term Insurance Plans with Additional Features

You can get additional services from the insurance company, by addition of riders in the existing policy at a slightly higher premium. Some of the riders which are offered as add-ons are an accidental benefit, permanent or partial disability and critical illnesses.

One should weigh the pros and cons of investing in an insurance company, which are offering term plans at meager rates.

The small, nondescript new insurance companies use this strategy to increase their presence in the highly competitive insurance sector and make a foothold in this domain.

Be wary of companies which try to entice you by smooth talking and offering very low premium rates. If you fall into their trap, you may have to continue investing till your term policy ends.

Many companies do not require a medical check-up to be done at the inception of the policy if the sum assured is lesser than or equal to 50 Lakhs.

It has been observed that if an insurance plan is active for more than ten years, the claim rejection is low.

Term Insurance Policyholders have a choice of single or joint life plans, as per their convenience. The policy may be taken for self or jointly with spouse.

Flexible premium payment options are available for Term Plan Insurance holders. One can opt for limited pay, single pay or a regular pay schemes.

People who opt for regular pay or limited pay may pay their insurance premiums monthly, quarterly, half yearly or annually.

Online Term Plan Insurance

Insurance companies are offering online term plans for the customer’s convenience. There are a large number of benefits extended to these online insurance customers. A few advantages are cited below.

Online Insurance transactions are fast, accurate, and available at a lower cost premium as compared to the premiums bought through the traditional offline aggregators.

If you are internet savvy, you can search for the best Term Plan policies being offered by the insurance companies. You can study the product specifications, reviews of customers who have bought this type of product.

By marketing the insurance product online, the company saves a huge amount of money, which is paid by way of commissions, maintaining a record of the insurance salesman’s earnings till the insurance plan ends.

The company saves transaction cost on the intermediaries and in the process offer the same Term Plan at a lower premium by an online transaction.

Online premiums may vary from the amount displayed if risk cover is enhanced. The insurance company may advise you to go for a medical check-up.

If the medical check-up reveals that you are of a higher risk category, you may have to pay more premium. It is advised not to hide any adverse medical abnormalities, at the time of entry into a term policy.

If the insurance company finds out during investigations that you have withheld information regarding any medical irregularities, your claim will be disallowed and policy canceled.

The top 5 best Term Insurance Plans based on their performance.

  • LIC e-Term Insurance Plan. It is a non-participating online term policy, providing financial cover to the insured’s nominee. Anybody 18 years and above can purchase this policy for maximum coverage of 35 years. CSR is 98%.
  • ICICI Pru, I Protect Smart. In this plan, the customer can claim payment on diagnosis of 34 illnesses. Insurance coverage is up to 75 years, and CSR is very high.
  • SBI Smart Shield. It is an insurance product with a minimum sum assured of 25 lakhs. Three riders may be opted at a minimum cost. These are Criticare 13 Non- linked rider, Accidental and Permanent disability rider.
  • HDFC Click 2 Protect Plans. The maximum term of this plan is up to 40 years with no upper limit on the sum to be insured. This Insurance covers you against death, disease, and disability. Four investment options are available like Life option, Extralife option, Income option, Income plus option.
  • Max Online Term Plan Plus. There are three options available Basic Life Cover, Basic life cover monthly and Basic life cover monthly income. The insurance coverage may be up to 75 years.