Key factors to consider before buying a Term plan in India
Before investing in a term insurance plan in India, you have to make sure you consider a few key factors to ensure you choose the right plan for your needs. And we’ve written this expert guide to help you navigate the complexities of term insurance and make an informed decision
This article is divided into two parts. You have insurer-specific features that tell you how to shortlist a life insurance company and policy-specific features that you may need while buying a term plan.
Insurer Specific Features
Insurer specific features that tell you how to shortlist a life insurance company
Check the Claim Settlement Ratio
When you’re buying a term policy you want to make sure that the insurer is paying out your claims in a time bound manner. To do this, you need to check the claim settlement ratio averaged over 3 years and the proportion of claims paid out in under 30 days.
If both numbers are above 97%, then you have a winner on your hands. And can find this information in IRDAI’s annual reports or you could talk to our advisors.
Check the Volume of Complaints
If the total complaints received (per 1000 claims registered) is higher than 20, then it’s time to reconsider your insurer. You can find these figures in public disclosures as companies are liable to report this on their website. Or once again, you could talk to our advisors.
You need a high amount settlement ratio too
Some insurers pay out the smaller claims while declining to pay out the few higher-value claims in a bid to improve the claim settlement ratio. So you will need to look at the total amount settled as a percentage of the total value claimed. A number above 90% should be good enough. You can find this information in IRDAI’s annual reports or you could talk to our advisors.
A number above 90% should be good enough.
Must have - Policy Specific Features
In Policy-specific features we help you understand the must have and good to have features while buying a term plan.
Critical Illness Benefit
If you’re diagnosed with a debilitating disease, you might be at risk of losing your job and your family will have to make do without your income. However, if you opt for the critical illness benefit, the term policy will make a payout to deal with the crisis. Just remember that not all critical illness benefits are the same and you have to dig a little deeper.
Payouts for critical illnesses usually aren’t made immediately. Instead, most policies expect you to survive for a certain duration before they make the payment.
So make sure to buy a policy that pays out this sum the moment the diagnosis is confirmed
Some policies will pay out the critical illness (CI) benefit from the total term cover available (Accelerated payout) while also offering you the option to avail it on top of the total term cover available.
Ideally, you’d want the policy to pay out the critical illness sum on top of the term cover available.
Most policies impose a waiting period before they make the Critical Illness Benefit available.
You want to make sure that the waiting period is less than 6 months.
Accidental Death Benefit
Some policies offer you the option of adding extra protection for accidental deaths. In which case, you get the option of choosing your death and accidental death cover separately. And while we recommend customers choose a comprehensive cover without worrying about the specifics of death precisely, it’s nice to have this option on top.
Terminal Illness Benefit
Some policies will disburse the entire cover amount the moment you are diagnosed with a terminal illness. So even in the absence of death, you can still get the money and use it any way you wish. This is another benefit that’s nice to have.
Increasing Cover Benefit
Some policies automatically increase your cover by a certain amount (usually inflation) to always provide you with the necessary protection as you grow older. And you can check to see if your policy offers this benefit.
Good to have - Policy Specific Features
Zero Cost Option
Some insurers will return all your premiums if you forego your policy before maturity, during a period specified by the insurer. So in essence, you get all your premiums back, while also being protected under the term plan during this time. Check to see if your policy offers this option and if the provision to exit the plan is convenient. You can talk to our advisors to know more.
Waiver of Premium
Some policies waive all future premium payments if you are ever disabled or diagnosed with a critical illness. Ideally, you’d want a policy that does this for both events.
Top - Up
Some policies extend the option of increasing your cover at a later date, subject to a medical evaluation. And you definitely want a policy that extends this benefit.
Life Stage Benefit
Some policies extend the option of increasing your total term cover when you achieve significant life milestones i.e. when you get married, when you have kids etc. This is a nice add-on to have.
Frequently asked questions
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