Four tips to choose the best term insurance plan

How to pick the best term insurance plan? Keep these important points in mind while choosing an insurance policy.

4 tips to choose the best term insurance plan

Having a term insurance plan is one of the most efficient and effective ways to protect your family from the uncertainties of life. It allows you peace of mind and takes care of your financial liabilities in the case of an unfortunate event. Moreover, a good life insurance term plan will allow your dependents to meet their needs should something unforeseen happen to you.

Then, why do so many people remain uninsured? It's not always because people mistakenly assume that term insurance plans are a pointless expense. Sometimes it's also because they struggle to pick the best term insurance plan . There are so many on offer in the market, and choosing the one that works for you can be difficult. Hence, this article. We have identified four proven tips to help you select the best term insurance plan .

1. Check how much coverage you need in your term insurance plan

Before going through various term insurance plans available in the market, decide the cover you need. Take this decision by creating a proper financial plan that your family would follow in case of your sudden death. A common thumb rule is to consider your 10 years' income as your required cover.

However, there are also other factors that you should take into consideration while deciding the amount. Some of these factors include whether you have a house or property, your liabilities, the income of your spouse or other family members, the number of children you have and their future needs, and so on.

All these factors will ultimately decide whether you are adequately insured or underinsured.

2. Find the claim settlement ratio of companies providing term insurance plans

The claim settlement ratio is a significant consideration when it comes to buying term insurance plans . What is the claim settlement ratio ? You may ask. Well, this ratio shows the number of cases where the insurance company has paid the sum assured, out of the total number of claims received by the company.

For example, a claim settlement ratio of 95 per cent denotes that the company has honoured 95 cases out of the 100 claims filed. So, consider this ratio while checking an insurance company's claim for providing financial security to your family in your absence.

3. Never mix insurance with investments

Term insurance is different from the endowment and unit-linked policies (ULIPs). Endowment and unit-linked policies are also savings plans, and the premiums paid towards them are accumulated over time.

In the case of ULIPs, the premiums are invested in the stock market. On the other hand, while term insurance provides a large cover, you will not get your premiums back. This makes many investors think that endowment policies and ULIPs are better than term insurance plans . However, that's not the case.

The primary function of term insurance plans is to provide protection. The insurance products that double up as investments fail to deliver both - the insurance cover is inadequate, and the investment returns are disappointing.

Therefore, as a general rule, don't mix insurance and investment . For investments, buy pure investment products. For protection, buy term insurance plans .

4. Save on your tax outgo with term insurance premiums and additional riders

You can claim the premiums of your life insurance term plan as a deduction under Section 80C of the Income Tax Act. Besides, you can consider additional riders for your term insurance plan . Additional riders are good because the additional premiums that you will pay for all these riders will enable you to save on the tax outgo .

For example, if you opt for any life-related rider like 'accidental death benefit', your premiums will be eligible for deduction under Section 80C. On the other hand, if you go for any health-related rider like a 'critical illness benefit', then your premiums will come under Section 80D.

This section gives an additional deduction of up to Rs 25,000 (Rs 50,000 for senior citizens) to the premium paid for a health insurance policy.

The following table lists the best term insurance plans in India , along with their features.

Term insurance plans

Min entry age Max entry age Max maturity age Min policy term (yrs) Max policy term (yrs) Min sum assured (₹) Annual premium (₹ 1 crore)
Reliance Nippon Life Protection Plus 18 60 75 10 40 25 lakh 9067
Bajaj Allianz Life Smart Protect Goal 18 65 85 10 85 minus age at entry 50 lakh 9431
PNB MetLife Mera Term Plan Plus 18 60 99 10 99 minus age at entry 25 lakh 9558
(1) Premiums are for a 25-year old healthy non-smoker male for 35 year policy term; (2) The plans have been selected based on insurers track record of honouring claims (claim settlement ratio) and ability to continue honouring claims (solvency ratio) meeting a minimum threshold and ranked based on premiums. Plans under consideration were only those plans offering sufficient flexibilty in (a) sum assured (b) policy tenure (c) regular premium-payment option and (d) online plans; Max sum assured: No limit.


What is a term insurance plan?

A term insurance plan is a type of life insurance that provides financial coverage for a defined period. Under this plan, you will get protection, and for that, you need to pay a small premium periodically . If anything happens to you, your term insurance will give financial security to your family.

Who needs term insurance?

Everyone who has dependents should go for term insurance plans .

Do you need a term plan if your employer provides life insurance?

While buying an insurance plan, always ensure it can take care of your personal requirements. Life insurance plans provided by your employer may not suit your and your family's requirements. So, more is needed, and you should also buy a term plan.

Can you split your cover into two different term insurance plans?

If you plan to buy a huge term insurance cover, it will be better to split your cover between two insurance companies. It will help you diversify your risk.

Which payout option should you select while buying a term insurance plan?

While buying a term insurance plan for yourself, you will have to select the payout option . Remember that your payout decision should be based on your nominee's ability to manage the situation, their financial understanding, future goals and, of course, your financial liabilities.

Suggested read: How to buy the right health cover?

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