5 factors to consider before choosing the ideal term insurance plan

A term plan is the most inexpensive and potent tool to secure the financial future of your loved ones. Term life insurance is a straightforward risk cover product where the insurer pays out a benefit (sum assured) to the policyholder’s family in the event of their untimely demise. It would be prudent to safeguard your interests with term insurance coverage if you have dependents or liabilities.

Various online term plans are available at different price points and with varying features and benefits. The question of how to choose a term life insurance policy should therefore be evaluated based on your insurance needs.

Here are 5 features to consider if you are wondering how to choose the best term insurance plan in India.

Premium cost
 

Affordability is an important criterion, given that you will be servicing premiums for the next 20-30 years. Consider variables such as sum assured and tenure while comparing plans offered by insurers.

Look for an insurer that offers flexible premium paying options that fit your budget. Many insurance providers also offer discounts when you buy a term insurance plan online. The service provider is able to save on intermediary costs and commissions and pass on the benefit to customers in the form of discounts on premiums. Buying a term plan online also allows you to pay premiums on a half-yearly, quarterly, or even monthly basis, which can help you spread the payment over a financial year.

Availability of add-on coverage
 

Add-on covers (also called ‘riders’) can help to increase the effectiveness of your term insurance plan by insuring risks not protected under a standard term policy. The critical illness rider, for example, offers an immediate payout if the policyholder is diagnosed with a life-threatening disease, allowing them to use the money for immediate medical aid. The income benefit accidental disability rider protects against loss of income due to disability that can affect livelihood.

Various add-on riders, such as accidental death benefit rider, waiver of premium, women’s critical illness rider, etc., can provide robust coverage against unexpected events and cost only a fraction compared to the base premium rate.

Milestone-based insurance planning
 

Experts recommend buying a term plan at an early age so that you can lock in cheaper premiums. However, over time responsibilities and priorities change. Your family will grow, lifestyle needs will change, and you may acquire liabilities in the form of a house mortgage or business loan. 

Buying separate insurance cover later will only prove to be more expensive. Thus, your term insurance plan must have the provision to accommodate your evolving financial needs. A milestone-based term policy allows you to increase your sum assured at different stages in life – getting married, having children, etc. Some step-up plans allow you to almost double your coverage in a phased manner.

Flexible payout options
 

Traditionally, term insurance plans pay the nominee the full benefit as a lump sum. Families sometimes do not need the entire corpus upfront unless there are liabilities to settle. This could also create an issue of fund mismanagement and/or discord among family members.

You should ideally choose a term insurance plan that offers flexible payout options based on your family’s needs. For example, a lump sum payout works fine if you are young, unmarried, or old and without responsibilities. However, if you are married with young children and liabilities, you will require a combination of a lump sum payout (to settle liabilities) along with a regular income option that helps your family meet their expenses.

Many insurers now also offer a combination of part lump sum benefit and a step-up monthly income option that corresponds to your family’s increasing financial needs and counters inflation as well.

High claim settlement ratio
 

An insurance company’s claim settlement ratio (CSR) is a percentage of claims settled vis-à-vis the total number of applications made in a financial year. Term insurance is supposed to secure your family’s financial future, so you should choose an insurance provider with a high CSR for peace of mind.

While a CSR of 95% or above is considered good, you should compare it with the industry average based on the numbers shared by IRDAI, the authority for insurance in India.

Conclusion
 

Different term plans offer different features and benefits. Before you commit, it is important to make a side-by-side comparison and conduct a cost-benefit analysis to help you figure out the ideal policy and coverage for your family’s needs.

IDFC FIRST Bank simplifies this process by enabling you to compare and choose from the best life insurance companies in India on a single platform. IDFC FIRST Bank has partnered with ICICI Prudential, HDFC Life, and Bajaj Allianz, three of the largest private life insurers, to bring curated term insurance products that are affordable and easy to buy.

Choose from a variety of term plan options with whole life cover till the age of 99, a host of add-on riders such as critical illness cover, accidental death benefit, waiver of premium, and many others. Get expert advice on your insurance needs, or use the calculator to better understand your needs.

You can readily trust IDFC FIRST Bank and its insurance partners to secure the financial future of your loved ones.

Disclaimer

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