Here’s How To Buy A Term Plan

Term insurance offers life coverage to the policyholder for the entire policy tenure in exchange for regular premiums. In case the policyholder dies, the nominee receives a death benefit, but there’s no benefit payable if the holder survives the term.

Once you purchase a term plan, the premiums do not increase yearly. So, the earlier you buy, the lower you will pay on your policy. You can also avail of tax deductions up to Rs 1.5 lakh under Section 80C of the Income-tax Act, 1961 on the premium paid. Further, the lump sum payment received by the nominees is tax-free.

1. Compare Claims Paid: Visit the official website of the Insurance Regulatory and Development Authority of India (Irdai) and search for “individual death claims”. Select the current year and compare the “claims paid” percentage or the claim settlement ratio with previous years.

2. Get Into Details: Check if the claim settlement ratio has been consistent across years and successive quarters. Also, check claims pending at the start of the year. More claims at the start indicates the company is older and has a larger customer base.

3. Compare Premiums: Compare premiums from a list of 3-4 companies, for a sum assured that’s 15-20 times your annual income based on factors, such as your future  needs, medical expenses, and loans.

4. Check Turnaround Time: Visit the insurer’s website and check if they have published the average settlement turnaround time. The lower the turnaround time, the better it is.

5. Check Solvency Ratio: Check the insurer’s solvency ratio to see if it can handle a huge volume of claims quickly, such as during events like natural calamities.

6. Buy Policy Online: Contact the life insurer and apply for the product online to get lower premiums. Make sure to disclose your health or habits correctly. It’s better to pay extra premium than hide facts and have the claim rejected later.

7. Consider Riders: You may consider a premium waiver rider in case of disability due to accidents or critical illnesses. Riders, typically, come with disproportionate premiums, and standalone personal accident and critical illness policies may often be a better choice.

8. Check Final Details: After purchasing the policy, verify the details and inform your nominee.