What’s Term Insurance? Which is the best Term insurance?

Term insurance, as the name itself suggests, it covers for a term/years. Term insurance is a type of life insurance that covers for a specific term, as in years. These term insurance policies charge premium at a specific amount per month. They life cover would be very high usually. This provides financial benefit to the nominee in case the policy holder dies unfortunately during the policy term.

Everyone must have a Term insurance. Young people, married couples, business people, even the retirees. To add on top, there are also the provisions to declare the invested amount under Section 10D. This provides us with the other opportunity to save tax while covering the life without paying the same amount to tax otherwise.

How to buy a term insurance?

Below are the points one should consider while planning for a term insurance. Do not aim to buy in a cover with less premium, it will be of no use. Rather, plan it accordingly. Sit back, analyse and then decide what’s needed.

1.       Term insurance premium: Though it is not always recommended to buy an insurance cover with less premium, it is also not good to buy one with the highest. Analysation is important.

2.       CSR (Claim settlement ratio) : This is very important thing to consider while buying a term insurance. You always need to look out for the claim settlement ratio of the company. It defines the total number of claims settled in a year to the total claims raised. It should always be as high as possible. Some insurer just reject the claims for some vague reasons, those insurers should be avoided.

3.       Claim Rejection ratio: This represents the claims rejected by the company to the total claims received. This should be as low as possible. Claim rejection ratio is not exactly as opposite of Claim settlement ratio. People often get confused with it. Claim settlement ratio does not include those that  are under process, so they both are different.

4.       Riders: Riders in term insurance represents the additional benefits offered by the insurer. It comes up and above the insurance premium. Some of them are accidental insure, critical illness, permanent disability etc.

5.       Sum assured: This is the amount that the nominee gets in case the client falls in to an unfortunate death. I always recommend people to go with the Sum assured that increases drastically over time. Static amount of sum assured should not be bough considering the inflation, market conditions etc.

How to decide the sum assured amount? 

The sum assured amount should at least be 15-18 times of one’s annual expense. For eg: If your annual expense is 10 lakh, then the sum assured should be 1.5 to 1.8 crores at the least.

You all must now be wondering as to why the Max life is placed at three, while the settlement ratio is the highest among others. But, As i said earlier, all the other things collectively matter. The sum insured is very limited in Max as compared to others.

I am not recommending any particular brand here. To simplify, just download all the life insurance plan in an excel file, then start filtering the things out. First should be claim settlement ratio, pick top five, and then claim rejection ratio and so on. Then, finally decide yourself which one is the best.

You are always free to pay the premium monthly, yearly, half-yearly, quarterly as you wish. Having a term insurance is the first way towards the financial independency for our family. Life being so uncertain, Term insurance acts as the back-up or buffer for our own family. So, do not wait for things to happen and regret. As it is always said, “Defence is the first attack “ “Prevention is better than cure”. Go ahead and buy a term insurance for each one of you and your family.

Together!!