Finance

Best Term Insurance Plan: Know Why it is the Need of the Hour

Term Insurance Policy

Published on September 5th, 2022

Do you sometimes worry how your family will manage their expenses and live a comfortable lifestyle in your absence? If these thoughts bother you, buying the best term insurance plan should be a step forward. But if that’s not your plan, read on to know why it’s an important thing to have, especially if you are the breadwinner of your family.

So, before we understand the many layers of a term policy, let us start with the basics and know what it is essentially.

A term life insurance is the simplest form of life insurance that provides financial security for a specific duration to the insured person’s family against a modest premium. The premium’s affordability can be best estimated using the term insurance premium calculator.

Here are some of the best features of a term insurance plan that make it the need of the hour.

Features of Best Term Insurance Plan:

With the current insurance market cluttered with various term policies and insurance providers, there are some features you can look for when searching for the best plan. These are:

Broad Scope of the Term Plan:

Once you have prioritized what you want in the policy and figured out the approximate premium rate against the desired life cover with the help of the term insurance premium calculator, it’s time to look at the individual USPs of various policies.

A good term plan must have a significant life cover (ideally covering your active loans and must be 8-10 times your annual salary), add-ons like accidental death and disability cover, the payout for critical illness, a modest premium rate, and longer validity.

Flexibility:

The best term insurance plan should have flexibility at multiple levels. For example, the option to pay the premium lump sum or at regular intervals. Similarly, its money disbursal method can be a one-time full payment or a staggered payout, which means multiple payments over several years.

Maturity Benefit:

While the basic term plans might not have the return of premium option, you can go for policies that offer a maturity benefit. This monetary benefit is usually closer to the sum assured at the end of the policy. If you take the help of the term insurance premium calculator, you will find that the premiums for such policies are slightly steeper. However, it’s safe to say that these policies are worth the somewhat expensive premiums, mainly because these give the benefit of an investment policy.

Policies with Rebates and Discounts:

One of the features of the best term insurance plans is that they offer discounts to a specific category of policyholders. Women, non-smokers, and other identified segments are offered policies on discounted premium rates.

Availability of Add-ons:

A standard life insurance policy comes with additional benefits, known as riders, that are available at a higher premium rate. These add-ons can be handy in certain contingencies. The riders may include accidental death cover, the payout for critical illness, and cover for disability. The best-term insurance plan must have the option to add these services.

Tax Benefits:

Term plans help policyholders save up to INR 1.5 lakh for the premiums paid for a life cover. This provision offered to Indian taxpayers falls under Section 80C of the Income Tax Act, 1961. Note that you can claim these savings only if you pay the premium for yourself, your children, or your spouse. These benefits can’t be enjoyed if you pay the premium for your parents or parents-in-law.

Things to Check Before Buying the Best Term Insurance Plan

Once you are satisfied knowing that your selected term policy offers all or most of the features mentioned above, it’s time to look deeper into the insurance provider’s profile.

Solvency Ratio:

It shows that the insurer has enough liquidity to settle your claim speedily. Insurance Regulatory and Development Authority (IRDA) dictates that the insurance provider’s solvency ratio should be 1.5. Going with an insurer having a solvency ratio lower than that might not be a wise decision to make.

Claim Settlement Ratio:

It reflects on the number of claims the insurer approves. A claim settlement ratio (CSR) of over 80% is considered good. A CSR of around 90% will be viewed as the best. It must be remembered that the premium of such policy providers may be on the higher side but you can check them using a term insurance policy calculator.

Reliability of Insurance Provider:

Make sure you do your research about the credibility of your potential insurer. Extensive information can be learned from the insurance provider’s web portal.

Parting Words

A term insurance plan is vital if you want to look after your family, even during an unfortunate event. However, much thought and research need to be put in before finalizing the policy which best suits your need.