To lead a stress-free life, there are a few things that must be in your basket – your family, your good health, a roof over your head, enough food and? The answer to that is – security for your family. This last bit confirms that the first four things are always in place. The best way to secure the future of your family is to get a term insurance policy which is a basic type of life insurance. But how do you shortlist the best term insurance plan for yourself? Let’s learn about it in detail.
What is Term Insurance?
Term insurance is the purest form of life insurance, and also the cheapest as well. As the term says, the term insurance is for a pre-decided term or duration, i.e., it is only for this term that the policyholder’s family is secured. If the amount is claimed after this term, the claim will be rejected. Thus, it is best to take term insurance for a longer duration rather a shorter one to save money.
How to Choose the Best Term Plan in India?
To shortlist the best term insurance plan, it is imperative to know your own needs as per your current and future situations. This means taking into account the following questions: What amount of money will be enough for your family to lead a comfortable life? What is your current life stage and prospective future additions, i.e. to get married or stay single with only your parents as dependents? How is your current lifestyle? How much is your income? What are your current liabilities?
What is the premium amount and premium payment frequency?
Take a look at your liabilities, current as well as in the near future. A good premium amount will be one that does not disturb your finances.
For instance, Now, once you’re satisfied with the premium, you need to look at the frequency at which you can pay the premium. Check if the plan offers only an annual payment option or if it offers a range of options such as monthly, semi-annual and annually. Some plans also come with a limited premium payment option as opposed to the traditional regular payment option. With a limited premium payment option, you can pay the premium for a set period of time.
For example, you’re 30 years old and you’ve taken a term plan for 50 years. If you take the limited payment option, you can choose to pay the premium for a duration of 20 years only (it may differ). So, by the time you’re 50 years old, your premiums will be over but you will continue to be covered for the remaining 30 years. Currently, there are many companies that offer limited premium payment options with their term plan like Max Life Smart Secure Plus Plan, ICICI Pru Life term plan, TATA AIA and more.
Also, you must enquire about the modes of payment, i.e., will you be able to pay the premiums online or is the option open only for offline modes. In today’s times, we hardly have time and going digital saves us a ton. So make sure to choose a plan that offers a digital premium payment option along with the traditional modes.
Have you analyzed the insurer thoroughly?
What is the Claim Ratio Settlement of the insurance company?
Claim settlement ratio is the number of times the insurance company paid the claims out of the total number of claims made in one year. The higher the claim settlement ratio, the higher the chances of your loved ones getting the sum assured, when needed. For instance, last year Max Life Insurance had a whopping (and the highest) 99.51% claim settlement ratio (in FY 2022-23). This means that the company paid 99.51% of the claims made to them.
Make sure that the company you select for your term plan has a high claim settlement ratio. This is one of the very important factors to look for when choosing the best term insurance plan.
Check the table given below for the individual death claims paid by some of the major life insurance companies in India in 2021-22, as per IRDAI data:
|Life Insurance Company||Total Claims Made||Total Claims Paid||Claims Paid Ratio|
|Max Life Insurance||31,035||30,830||99.34% (Updated to 99.51 in FY 2022-23)|
|TATA AIA Life||8,069||7,950||98.53%|
|Aditya Birla Sun Life||10,008||9,815||98.07%|
|PNB Met Life||8,586||8,357||97.33%|
As we can conclude, Max Life Insurance has paid 30,830 individual death claims out of 31,035 total claims raised by its clients in FY 2021-22. This makes for a whopping 99.35% death claim ratio, which is by far the highest claim settlement ratio in India (for individual death claims) – both private and public sector life insurance companies. It’s also noteworthy to know that in FY 2022-23,Max Life increased its individual death claims paid ratio to 99.51% to the previous 99.34%.
LIC, with the biggest market share in the life insurance sector, falls short of its claims paid ratio or claims settlement ratio of 98.74%.
As per the data published in the Annual Report of IRDAI, Future Generali has the lowest individual death claims ratio of 96.15%.
Is the claim rejection ratio less than 1%?
Claim rejection ratio is the number of claims rejected by an insurance company out of the total claims made. This number should be less than 1%. It means that the company is standing by its customers in times of need. The lower this ratio, the better it is for you.
What is the number of Assets Under Management (AUM) of the insurer?
Assets under Management means the total amount that an insurance company is currently handling of its customers. Another way of saying this is the market value of the investments that a company is managing on behalf of its clients. A higher AUM means that a large number of customers trust this company. And trust is of prime importance in any sort of deal, especially when it’s about the financial security of your loved ones.
What is your current income?
Your current income plays a significant role in choosing the sum assured (i.e. the amount of money your family/nominee will receive in your absence). As a thumb rule, the sum assured should be ten times your current annual income – at least. It can and should be more if you can afford the premiums for it. But ten times your income is the least you should take into account.
This way, you will be able to strike out plans that offer lesser a sum assured.
What are your current lifestyle habits?
Depending upon your lifestyle habits, your premium cost is decided. Your profession, alcohol & smoking habits etc. amount to your mortality rate. If you are a civil engineer working in construction sites or a pilot, your premium can be higher than someone with a desk-job. Similarly, if you are a smoker, your life expectancy shrinks down. Choose a term plan that gives you higher coverage and also includes riders like a critical illness rider. This is to ensure that due to alcohol or smoking, if you succumb to a serious illness, your family keeps on getting financial aid required for a decent lifestyle.
Take a look at the following insurance companies offering critical illness riders that can be attached to their term plans:
|Insurance Company||No. of Critical Illnesses Covered||Illnesses Covered|
|Tata AIA||40+||Cardiac conditions, cancer etc.|
|Max Life Insurance||64||Cancer of specified severity, cardiac related illnesses, brain aneurysm, open chest CABG, Major organ or Bone Marrow Transplant, Kidney failure, Parkinson’s disease, Alzheimer’s disease, major burns, HIV*, Elephantiasis, TB meningitis, Aorta graft surgery, third degree burns, feet amputation due to diabetes, paralysis, Aplastic Anaemia and heart attack (stroke) etc. + Total Permanent Disability|
|Bajaj Allianz||10||Aorta graft surgery, cancer, CABS, first heart attack, kidney failure, major organ transplant and stroke etc.|
|ICICI Prudential||34||Heart attack, kidney failure, cancer etc.|
|SBI Life||36||First heart attack, open heart replacement, kidney failure and multiple sclerosis etc.|
|Reliance Nippon Life||25||Coma, stroke, kidney failure, major aorta surgery, cancer of specified severity, etc.|
*HIV due to blood transfusion and occupationally acquired HIV
You can easily analyze from the tabular information presented above that in terms of covering major critical illness, cancer, kidney failure, cardiac conditions are covered by most of the insurance companies in their critical illness rider. IF you compare, you’d see that Max Life Insurance covers the maximum number of critical illnesses – 64 in number as opposed to 34 by ICICI Pru, 10 by Bajaj Allianz and 40 by Tata AIA. SBI Life has a huge market share but still it provides coverage against 36 critical illnesses only.
So if you’re someone with any of the listed diseases in their family or are a smoker, taking a term plan with a much higher comprehensive critical illness cover must top the list of your priorities.
Are there any additional covers available?
It’s okay to get a simple term plan but isn’t it better you get the best deal out of it? There are many plans available in the market currently where you can buy riders like a critical illness rider where you get coverage against 64 critical illnesses.
Once you have checked all these questions, you will come to a solution to your main question, i.e. How to select the best term insurance policy to safeguard the future of your family and loved ones.
How to Shortlist the Best Term Plan: FAQs
A good term plan will have the following: enough life coverage for your family/nominee, affordable premiums, convenient premium payment frequency options and payment modes, terminal illness coverage included in the base premium, option to add riders and amp-up the benefits.
Ask these questions before finalising a term plan: What is the premium amount and frequency?; What is your current annual income?; Have you analyzed the insurance company thoroughly?; What are your lifestyle habits?; What are the additional covers/riders available?
Once all these questions are answered to their full capacity, you’ll come to a much better conclusion.
Max Life Smart Secure Plus, Tata AIA SRS Plan, Bajaj Allianz eTouch Smart Plan, HDFC Life Click 2 Protect Plan and ICICI Pru iProtect Plan.
Currenlty, in 2023, Max Life Insurance ahs the highest claims paid ratio of 99.51%.