The good aspect about opting for a term insurance policy is that one can opt for the maximum sum assured at the lowest premium possible. No other insurance plan offers such a high level of coverage at such low rates of premium.
Since term insurance plans only promise a death benefit, the lack of any return on the plan’s maturity is a common dilemma. However, do understand that the role of insurance is to provide the financial security should the bread earner no longer be around or in a position to do so.
Shehnaz Ali from Policyx has some suggestions to keep in mind.
- Term insurance is the cheapest form of life insurance and extremely simple to comprehend. The insured is covered for a defined period of time. If s/he expires during the term of the policy, the death benefit is payable to the nominee. If the plan completes the stipulated term and the person insured is alive, the plan matures and on maturity, no benefit is paid as the insured is alive.
Having said that, in some cases, depending upon the policy and insurance company, the insured might get the maturity benefits. Some plans with maturity benefit are – Aviva i-Shield Plan, TATA AIA iraksha TROP, and Aegon Life iReturn Insurance Plan.
- Some term plans come with riders. So you can buy a rider like a critical illness cover, accidental death cover or disability cover by paying a small additional premium. If you take a rider and opt for premium waiver benefit, then you need not pay the future premiums in case of any eventualities for which you have taken the rider.
- The term of the policy varies from a minimum of 5 years with the upper cap generally at 30 years, but can even go up to 35.
- The premium to be paid will vary depending on the individual’s age and the sum assured, which can range from a few lakhs to a few crores. This is a very individual decision and will depend solely on the earnings of the bread winner, the number of dependents, the number of family members earning, the number of loans being serviced and the amount of premium that can be afforded.
- The minimum age to opt for a term insurance is 18 years, with a maximum age limit of 65 years. The premium of the term plan increases with age and people who are looking for a term policy for a longer period should opt for the best term insurance plan when they are relatively young.
- Premium can be paid in a single payment or one can opt for a regular plan in which premium can be paid either monthly, quarterly or annually.
- While choosing a term insurance plan, compare costs across insurance companies. Do note, buying online is much cheaper as there is no intermediary involved in the process. Policyx is one such website which can help you in this regard. Look at other factors regarding premium costs. Some companies even offer a discount on the premium amount for non–smokers and teetotalers.
- Besides costs, consider the reputation of the insurance company in the market as the relationship with an insurer is based on trust. Also, check out the Claim Settlement Ratio or CSR. The latter indicates how many claims a company has settled against the number of claims received. The Insurance Regulatory Development Authority, or IRDA, publishes this data in its annual reports available on its website.