Things to Keep in Mind when you compare term insurance

A term insurance plan is called the essence of life insurance. The plan allows you to buy a substantial amount of Sum Assured at affordable rates thus securing your family’s financial future. Since term plans are so important, there are varieties of plans in the market. Every plan boasts of attractive features. Among hundreds of plans available in the market, all of which promise something beneficial, do you know how you can compare between the available plans?
There are certain things or pointers which should be kept in mind when you compare term insurance plans so that you can choose the best from the rest.

Let’s see what these points are:

• The coverage available and the plan type

Usually, term plans do not restrict the maximum Sum Assured which you can avail. So, choose the optimal level of coverage as per your needs. Besides the coverage, you should also ascertain the type of plan you are comparing. There are level term plans which pay a uniform Sum Assured, increasing term plans where the Sum Assured increases every year and decreasing term plans with decreasing levels of Sum Assured. Return of premium plans refund the premiums on plan maturity. So, first, understand which type of plan you would need and then compare between similar types of plans.

• Riders available with the plan

Riders are additional coverage options which enhance the scope of the plan’s coverage. By paying a minimal amount of additional premium you can attach a rider to your basic plan and increase its scope of coverage. Some popular riders include:
o Accidental death and disability rider which pays an additional Sum Assured if you suffer accidental death or disability.
o Critical illness rider which pays an additional Sum Assured if you are diagnosed with any critical illness covered by the rider during the plan tenure.
o Premium waiver rider which waives future premiums in case of disability, etc.
Look at the available riders when you compare. The more the riders, the higher is the scope of coverage. Some plans also have inbuilt accidental death and disability and terminal illness riders. These plans are better as they provide higher coverage.

• Plan tenure

Term plans pay your family the benefit only in case of death during the plan tenure. As such, you should, ideally, choose a plan with the highest available tenure. By choosing the maximum tenure, you can ensure that the cover runs for a longer duration and thus provides a longer risk cover.

• The payout options promised by the plan
Recently, more and more term plans are being offered as monthly income plans. These plans pay the benefit partly in lump sum and partly in monthly incomes. In fact, some plans also have increasing monthly payouts. If monthly payouts appeal to you, choose plans with such options or you can also go for conventional term plans which pay a lump sum benefit. Whatever you do, compare the benefit payout structure before settling in on the plan.

• The insurance company’s Claim Settlement Ratio (CSR)
Claim Settlement Ratio depicts the percentage of claims settled by the company against the total number of claims raised in a year. A higher ratio means that the insurance company settled higher claims during a year. This increases the chances of your claims being settled. A high CSR is, thus, better for you as it increases your probability of claim settlement. So, when you compare term insuranceplans, compare the insurance company’s CSR with other companies and choose the company with the highest CSR.

• Premium rates
After you have compared the above-mentioned parameters, look at the premium charged. The premium should be compared vis-à-vis the coverage and the features of the plan. Do not compare plans on the premium alone.
These five points should be your mantra when you compare term insurance plans. Running after the premium rates is foolish as you should also consider the coverage extended. Needless to say, the plan with a more comprehensive coverage feature would be priced a tad bit higher. So, do not compare apples to oranges. Compare apples to apples. Look at all the features of term plans and choose a plan based on your requirements and suitability and you would never go wrong. After all, the term plan is bought for financial security and you wouldn’t like to end up with a wrong one, would you?

Author: Robin Gupta