6 Factors That Matter in an Ideal Term Plan and Which Plans Have Them

6 Factors That Matter in an Ideal Term Plan and Which Plans Have ThemFactors That Matter in an Ideal Term Plan and Which Plans Have Them


We never want our dear ones to suffer at any expense. But desire alone won’t protect them against all sorts of uncertainties. The responsibility of giving our family financial security and safety always relies on us. Nobody can anticipate uncertainties. Thus, it is extremely crucial to insure ourselves against any unfortunate incident. Here comes Term Insurance Plan. The term insurance plan is a simple risk coverage plan which would protect your family in your absence and with low premiums. This article would provide more details about the Term insurance plan, the factors that would matter in an ideal term insurance plan.

Also Read: Which are the best mutual funds to invest for short term of 1 month to 3 years?

Overview about protecting your family with Term Insurance Plan


No one could predict about a health condition of a person. If the person is the only earning member, the absence of such member could be a disaster for the family. Nonetheless, there has to be a backup plan, just in case the unexpected happens. We must look out for ways that secure the future of our loved ones. The good news is that there is a reasonable and beneficial tool that is widely available everywhere – ‘Term Plan’. Now the question arises what is term plan?

Well, it is a simple form of insurance plan that offers a death benefit in the form of an assured amount to the family of the policyholder. Nominal yearly premiums are required to be paid out by the insured to sustain the policy. However, when it comes to choosing an ideal term insurance plan, there are certain factors that must be considered. Read on to know more.

6 Factors That Matter in an Ideal Term Plan


1) What Benefits are Available?


Every insurance company has different benefits that they provide to their customers. These benefits can be lower premiums, premium payment options, premium waiver option, additional riders (critical illness, accidental benefit, the return of premium) or other benefits. You must always opt for a policy that provides maximum benefits at minimum cost.

2) What are the Payout Options?


Payout options are one of the most important things to consider while purchasing a term plan. You must find out if the company pays the sum as a lump sum amount or monthly payment to nominee in case of demise of the policy holder. By doing this, you can completely ensure that your nominee will receive benefits according to his/her needs.

3) Coverage of Policy Term


The tenure of the term insurance is as crucial as the amount of cover. The policy purchased should cover the buyer until the age he/she wants to work. Till recently, this was 60 years. However, in today’s time, people may wish to work beyond the age of 60. So, it is definite that a person will require a cover till at least 65 years of age.

4) Insurance Claim Settlement Ratio


It is the ratio of claims settled by the insurer in case of death of the policyholder. Thus, if the insurer has a claim settlement of 90 percent, it means the insurer has settled 90 claims out of 100. Leading insurance companies like LIC, Max Life Insurance, ICICI Prudential and others, are well-known for their high claim settlement ratio. All of these companies have settlement ratios above 97 percent. 

5) Persistency Ratio


Persistency with respect to the insurance industry is a measure of the total business that the insurance company can retain in a financial year without policies being lapsed or premium amount being lost to other insurers. The measure is estimated by a ratio known as the persistency ratio. Insurers like Max Life Insurance (81 percent) and ICICI Prudential (80.5 percent) are the leaders when it comes to this factor.

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6) Claim Settlement Process


Claim settlement process is defined the complete process from the filing of the claim to its settlement process or payout. Faster claim settlement process reduces the cost of processing any claim whereas multiple stages in the process should be avoided since it increases the cost of claim settlement. LIC India, ICICI Pru Life and Max Life Insurance are the leading institutions when it comes to faster claim settlement.

Summary: Term Insurance Plans provide adequate coverage at affordable prices. It is, however, essential for you to first evaluate your requirements with respect to age, money, cover and future needs of your family. You also need to assess the factors mentioned above before you purchase a policy. These factors will help you in finding a policy that suits your requirements and provides you value for money

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Suresh KP

3 Comments

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  1. Sir

    Sorry for deviation from the above topic..I feel u can help me in below queries regarding to NPS.

    As of my Knowledge ,when we reached the age of 60, 40% of the accumulated corpus utilized for the purchase of the annuity is tax-exempt. Of the remaining 60% corpus withdrawn by the NPS subscriber at the time of retirement, 40% is tax-exempt and 20% is taxable.

    1} Am I correct with the above points applicable to NRI too?
    2} Now I heard that,the tax exemption is extended to the entire 60% (w.e.f April 2019).

    Can u please clarify these?

    1. Hi Albin, Your understanding is correct. However, though it is announced, the IT guidelines are yet to come

      1. thank you for immediate reply

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