How to choose Best Term Insurance Plans in India


How to choose best term insurance plans in India-2013

How to choose Best Term Insurance Plans in India

Do you know the best term insurance plans in India? Do you think buying a term insurance plan from best insurance company would be sufficient? Do you have all the information on which you can decide the best term insurance plans? Today we would discuss about the factors which contributes in choosing the term insurance plans which are best.

What is term insurance plan?

Term insurance plan is life insurance which provides coverage at a fixed premium for a limited period of term. After the period expires, coverage at the previous paid premiums is no longer guaranteed and customer would forgo coverage unless renewed.

Why you should buy term insurance plan?

Term insurance plans are available with low premiums. Since there is no maturity amount attached, these term insurance plans are available with low premiums. These plans would provide coverage for higher insurance with low premium.

You can also read: My friend's friend who has been keep on investing and taking insurance, but missed to keep the family updated and they are now suffering.

How to choose best term insurance plans in India

Broadly there are 3 factors which would effect in choosing the best term insurance plans

1)   Check high claim settlement ratio: The important factor of selecting any term insurance plans or any other insurance plans is claim settlement ratio. Claim settlement ratio is nothing but the no. of claims the insurance company has settled over the total claims received. Say if an insurance company has received 100 claims, but settled only 90, it would be 90%.

  • If you are not there and your family is supposed to receive the insurance claim, but insurance company has rejected this. Then why you need to buy the term insurance plan? Hence it is important that you check the claim settlement ratio before taking the policy.
  • However there are various factors which would affect your claim rejection.
  • When you buy an insurance policy, do read all the terms and conditions. Your agent might be hiding certain conditions where later the claim might get rejected.
  • Disclose all factors like whether you are smoker and drinker. If you hide this and it would get detected later on when you are not there, there are 100% chances that your family claim gets rejected
  • When you are taking multiple insurance policies, you better disclose them. There are chances that the data might be incorrect in some of the policies and it would be a positive point to insurance company to reject any such claims at a later point of time.

​You can get the claim settlement data from IRDA website –> Annual reports (www.http://www.irda.gov.in). The latest report was released in Nov-12 pertaining to 2011-12 and below is the snapshot from the report. 

best term insurance plans in India-Claim settlement ratio-FY2011-12

2)   Do not look just low premium term insurance plans as best: If you are thinking of choosing a term insurance plan which offers with low premium, then you might be wrong. Low premium could be a factor but cannot be only factor. Low premiums term insurance plans might have several conditions attached to process the claim. Know them upfront, else your family would be trouble at later point of time.

3)   How good the insurance company is? There are several private insurance companies which came in the last few years. People still trust Life Insurance Corporation. If you see above data it says claims settlement ratio is 97.42% for LIC. Now you believe why people believe LIC. I do not say you should not go for private insurance companies. But how the companies are able to build trust among the insurers is the question we should ask. One of the methods of check is looking at the growth in insurance policies taken the insurers from an insurance company.

4)   Comparison of terms and conditions: Another factor can be, to look at the terms and conditions of various insurance companies offering term insurance plans and choosing the best one among them. This is a tricky one as there are no standard rules as to what is the impact of such terms and conditions.

5)   Take two term insurance plans: One way of diversifying the risk is taking two term insurance plans from two different insurance companies. In case there is a rejection from one company, you can still hope to get claim from another insurance company.

Conclusion: Choosing a best term insurance plans is easy once you know the factors which would affect it. I feel the above 5 factors would definitely help in choosing the good term insurance plans.

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Suresh
Topic: How to choose best Term insurance plans in India

 


There are 81 comments left Go To Comment

  1. Abdul Samadh /

    Dear Sir, If I should go for 2 term plan, should i start at the same time now or i have to take 2nd plan after 10 years. My age is 35, which company I should opt for a 30 years term. according to my age which is better 30 yrs or 35 years term.

  2. prashant /

    sir my age 25 running n net slary is 18000pm.i I smoke only one cigarette a day or in two days and drink once in a month I plan to buy max life policy for 50l for 35 years as non smoker is it OK coz max will hav med test if I clear med test as non smoker. can I be 100 % sure that ll b no probllen in future. what else u suggest also plz tell me if I should take riders seperately or with same policy.

  3. c naik /

    HI Suresh Sir,

    Kindly give your valuable suggestion on below…

    I have 6 nos of lic policies which i want to discontinue and planning to buy some good term plan/medical insurance plan and balance amount wants to invest in Mutua fund through SIP and Bank FD.
    I am not sure which from below policy to continue and whch one to discontinue…..your advice will help me to take corect financial decision.
    1) Jeevan Anand—1 lack SA and policy start dt: 2004( QTLY premiu-1539/-)
    2)Child carier—–1.5 lacs SA and policy start dt: 2008(QTLY premium-3792/-)
    3) Jeevan chaya–2.5 lac SA and policy started dt: 2008( HYL premium-7053/-
    4)jevansurabhi (20 years )-0.7lac SA and policy started dt:2007( HLY premium-3308/-)
    5)jeevan surabhi(25 years)-0.5lac SA and policy started dt: 1999(QTLY PREMIUM-991/-)
    6)Endownment ass.policy-0.6 lac SA and policy started dt: 1999(QTLY premium-585/-) surabhi

    1. Suresh KP / Post Author

      Naik, You are the best judge for surrending the policies. Total policies SA is Rs 7L which you can get with Rs 3,000 to Rs 4,000 yearly premium. You are paying Rs 47,500. Invest balance of Rs 43,000 per annum in mutual funds or bank FD’s, you would get good returns.

  4. rajkumar /

    Hi Suresh! Great to read your blog. I am presently an NRI. I am going to switch over my job. S I will be there in India for 3 months break as ordinary resident. After that, again I will become NRI for around 10 years. I want to take LIC onlne E term policy while I am in India for 10 years.Is this possible? Will there be any problem for my family if any claim during my NRI status? And also medical will be covered for my wife and one daughert under 16  by my company insurance policy. My elder daughter will not be covered. Is it better to go full family medical insurance in India because my family mostly ( around 8 months) live in India?

    1. Suresh KP / Post Author

      Rajkumar, LIC eterm can be taken by resident Indians. currently this policy is not clear about NRI’s. You should stay away without having clariting on this. Please take full medicla insurance in India for your family.

      1. rajkumar /

        Thanks Suresh! Can you favour me which one I can go for in term and family medical?

        Regards.

        1. Suresh KP / Post Author

          Rajkumar, Check my article on best term insurance plan. Also for medical insurance, you can look for Star health insurance and Apollo munich health insurance.

          1. rajkumar /

            Thanks Suresh!

  5. Dr Jain /

    My financial adviser hasrecommended Kotak Assured Savings Plan for my son aged 26. I am not sure if this is the right plan for him. Please help me in deciding and suggest a suitable alternative in case it is not appropriate.

    1. Suresh KP / Post Author

      Hi Dr.Jain, If you are conservative investor, you can invest. However the returns would be nominal between 4% to 5.5%. But you need to ask one question to your advisor that what happens if you take term insurance plan and invest balance amount in any bank FD or mutual funds ? Just check this and let me know the reaction. Many of us knowingly or unknowingly get trapped into such plans. 

      1. Dr Jain /

        I did ask him and he said that the Kotak plan has the advantage of being tax exempt under sectrion 80c and 10(10D). In fact, he has suggested an additional term plan for 1 crore. 

        1. Suresh KP / Post Author

          Hello Dr.Jain But one point he missed to update is all money back plan insurance plans would have this feature i.e. 80C exemption in every financial year about premium paid and 10D about maturity benefit exemption and this is not just limited to Kotak. Regd your second sentence, you should have asked him why he is suggesting child plan when you are taking term plan for Rs 1 Cr. I would love to hear his response on this. Pls update. It is not just for fun, but your hard earned money you are investing.

          1. Dr Jain /

            I meant that in comparison to bank FD and mutual fund, Kotak Assured Savings Plan is more tax efficient. Don't you think so?

            And what do you mean by 'child plan'?

          2. Suresh KP / Post Author

            None of the insurance savings plans are tax efficient. They provide 4% to 5.5% returns per annum. Bank FD’s would provide 9% pre tax returns. Child plans would provide risk coverage in absense of working parent. Alternatively you can consider term insurance and invest balance amount in bank FD or mutual funds which are low risk investments.

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