Compare Term Insurance

One of the best investments you can make to financially protect your family is a term insurance plan, especially when they depend on your income.

There are a plethora of term insurance plan options available in the market. While there is no ‘best plan’ as such, different plans cater to different needs. They vary on several factors like premiums, features, benefits, and drawbacks.

You need to conduct in-depth research about the various plans and finalise the one that fits your family’s needs the best. The plan should align with their goals and lifestyle.

In this article, we’ll discuss some important factors you must consider while you compare different plans - so you can make a well-informed decision.
 

First, Why Do You Need A Comparing Term Insurance Policy

A term insurance policy guarantees your family’s financial security. It gives them the cover amount as a death benefit if something unfortunate happens to you. This money can help them meet their financial goals and meet everyday expenses. It’s a cost-effective option that comes with high coverage and low premium rates.
 

Why Should You Compare Term Insurance Policies?

Buying an insurance policy is a crucial financial decision you make for yourself and your family. If you pass away, a term insurance policy will replace your income with the claim amount. It promises financial stability and comes with various benefits, features, add-ons, etc. It, thus, becomes vital to compare different policies so that you can buy the one that suits your and your family’s needs perfectly. “Research, compare, and conclude” should be your mantra to buy the right policy.

Let us now look at a few factors that help you compare various term insurance policies available.
 

Factors To Consider When You Compare Term Insurance Policies

When you are planning to buy a term insurance policy, the first thing you need to do is research the available options and choose the best fit for you and your family. Here are some factors that you should keep in mind -

• Premium Payable
  When you select a sum assured for your term insurance plan and fill out all the details, you will see a wide range of plans offered by different insurance companies at different premiums. Compare the premiums and check which insurance company offers the plan at an affordable rate. This will give you an idea about the cost of the plan and whether you can afford it.

• Features And Benefits
  The next thing you should look at is the features and benefits offered by various plans in the market. For instance, you should compare -

  • Increasing Cover Option
    If you choose this option, your plan’s sum assured will increase by a specific percentage till a predefined limit is reached. Opt for this feature if you foresee increasing financial obligations over the years like your child’s higher education, wedding, etc. or if you want a cover that can beat inflation.

  • Claim Payout Options
    With a term plan, you also get to choose how your nominee will receive the claim amount. The claim payout can be made as a lump sum, monthly payments, or a combination of both. For instance, if you think your family cannot handle huge sums of money, you can choose the monthly payout option. So, compare and check which plans offer the monthly claim payout option.

• Policy Term
  Term insurance policies are critical financial decisions that you make to provide a future safety cushion for your loved ones.
  • To decide the policy duration, jot down your current income, savings, and future expenses.
  • Then, estimate the age by which you expect to fulfil these financial responsibilities and accrue enough wealth to take care of the rest of your life.
  • This will give you the policy duration you need. Compare and see which plans offer the policy duration you want to opt for.
     
• Premium Payment Options
  When you buy a term insurance policy, you can also customise the premium payment options. You can choose among the following -
  • Limited Pay Option: You pay premiums only for a limited number of years and enjoy benefits over the entire policy tenure.
  • Regula Pay Option: You pay premiums throughout the policy tenure.
  • Single Pay Option: You pay premiums only once as a lump sum amount at the time of policy purchase and enjoy policy benefits over the entire policy term.

You can also select the premium payment frequency according to your choice - quarterly, half-yearly, yearly, or monthly. Compare and choose a term insurance policy that gives you the best combination of these options.

For Example,
Abhishek is a salaried employee interested in buying a term insurance policy with a cover amount of Rs. 60 lakhs. The best option that would suit him is term insurance which has the regular pay option paired with monthly premium payments. So, he should look for a plan that offers both of these options.

Akash is a businessman with an erratic but large income. He plans to buy a term insurance policy with a cover amount of Rs. 80 lakhs. The best option he can choose is a single-pay option or a limited-pay option. So, he should look for a plan that offers either option.

• Riders
  Riders are add-ons that you can customise your policy with. They are available at additional prices and enhance the coverage of your policy.

  For Example,
  Suresh buys a term insurance policy with a cover of Rs. 70 lakhs and customises his policy by adding an accidental death benefit rider with a cover of Rs. 15 lakhs. He passes away in an accident while on a road trip. Therefore his nominee will receive a claim settlement of Rs. 85 lakhs from the insurance company.

  While you compare different term insurance policies, check the various riders offered, like accidental death benefit rider, critical illness rider, waiver of premium rider, etc. And, check if the riders you want to purchase are available with the plan you are considering buying.

• Claim Settlement Ratio
  Another significant ground of comparison of term insurance policy is the insurance company’s claim settlement ratio (CSR). CSR is calculated as the number of claims settled by the insurance company divided by the number of claims received in a financial year. In simpler terms, it is the percentage of claims that the insurer settles in a financial year.

  CSR = Number of claims settled/ Number of claims received X 100

  For Example:

  Suppose XYZ insurance company receives 200 claims in a year. It accepts 198 claims and rejects 2 of them. Now the claim settlement ratio of the insurer is:

  CSR =198/200 * 100

  = 99%

  It shows that the claim settlement ratio of XYZ insurance company is 99%

  Generally, the higher the CSR ratio of the insurer, the higher the chances that your claim will get settled in future. This record can help you assess if the insurance provider is trustworthy and reliable when it comes to paying claims.
   

Conclusion

Buying a term insurance policy that is backed by research and analysis will never fail you. You should take enough time to validate and compare the available policies in the market to make an informed decision. Choosing the right term insurance policy will ensure that your family is financially supported during untimely situations.