Term Insurance Plans are simple to understand but it can be difficult to pick one because there are so many to choose from. Here we give you the top 5 Term Insurance plans.
Term Insurance is an insurance policy that offers financial coverage to the insured person’s family in the unfortunate event that the insured is not around anymore. One can opt to receive a lump sum or monthly payments. Usually, the cover is offered for a specific term. This is the reason why the policy is called a Term Insurance policy.
What do you get with a Term Insurance cover?
- Lump sum in case of death
- Lump sum in case of critical illness
- Payments in case of critical illness or disability
- Option to take additional sum assured for accidental death
What about the premium?
Yearly, half-yearly, quarterly or monthly payments are accepted. Some plans allow you to purchase the policy after making a lump-sum payment for the whole term.
What should you look at?
There are two main factors that you should consider before choosing a Term Insurance plan. They are:
Claim Settlement Ratio
Insurance is actually all about claims. Imagine a situation where your family has to run from pillar to post to get the claim amount despite giving all the documentation to the insurance company, only to find that the claim has been rejected. That’s the reason why the best insurance policy is perhaps one that is from a company that settles claims fairly and swiftly.
The Insurance Regulatory and Development Authority (IRDA)’s annual report, every year, reveals who has been settling claims in the right manner. As investor awareness has gone up, claim settlements have risen in the last couple of years. A few years ago, hardly one or two firms had claim settlements at over 90%.
Additional Reading: What Is Claim Settlement Ratio?
Top 5 insurance firms in terms of their Claim Settlement Ratio:
|Tata AIA Life||98%|
*Source: IRDA’s annual report for 2017-18
Apart from this, it is important to read online reviews and ask your friends and family about their experience with the insurer. Ideally, speak to someone who has already got their claim settled.
The premium for your sum assured
Does Rs.1 crore seem like enough cover? It might. But to decide the best sum assured, you need to look at your income, the number of dependents who will suffer if you aren’t around and the number of loans on your hands. Experts believe that your life cover should be at least 20 times your annual income. So, an Rs.1 crore sum assured might be enough for a bachelor earning Rs.5 lakhs per year, with a single dependent and no loans. The sum assured will go up if you have more dependents or take on loans. Considering these factors, it is important to determine the right sum assured and check which insurer will provide the lowest premium for this amount.
If both you and your wife are working you can consider a joint cover. Also, check if the firm will provide you with riders at a low cost. This could include a critical illness rider, disability rider, hospitalisation rider and accidental death rider.
Additional Reading: 6 Tips To Reduce Your Health Insurance Premiums
Learn About Some Term Plans
Let’s assume we are looking for a term plan for a 30-year-old healthy male (non-smoker) who needs a life cover of Rs.1 crore and has a single dependent. These are the results.
LIC eTerm is an online plan offered by LIC. Premiums will be lower as no intermediaries are involved. It is a pure term plan and offers different rates for smokers and non-smokers. The minimum sum assured starts at a good Rs. 50 lakhs. The minimum entry age is 18 years and the cover will be available only till you turn 75. You will pay annual premiums for this policy. The minimum income that you need to earn, to purchase this policy, is Rs.3 lakhs.
Highlights: Once the premium is decided it will remain the same for the entire tenure of the policy.
|Minimum Sum Assured||Rs. 25 lakhs and Rs. 50 lakhs for non-smokers|
|Premium Payment Option||Annual with a grace period of 30 days|
|Minimum Annual Premium||Rs. 2,875|
Under this plan, ICICI Prudential offers its buyers the following benefits.
- Death/Terminal Illness/Disability benefit equal to a sum assured chosen by you (i.e. plain insurance cover).
- An additional sum assured for accidental death and critical illness.
- You can choose to receive the amount as a lump sum or monthly income
- You can either pay the premium once or throughout the term of the policy
Highlights: ICICI Prudential will waive the premium in case of permanent disability.
ICICI Prudential iProtect Smart
|Policy Term||5-40 Years|
|Sum Assured||Minimum subject to the minimum premium being paid, no maximum limit.|
|Premium Payment Option||Single Pay, Regular Pay, Limited Pay.|
|Minimum Premium||Rs. 2,400 p.a|
HDFC Life Click2Protect Plus
HDFC Life provides four options for your life cover. They are:
- Life – This will give you a lump sum payout as a death benefit.
- Accidental Death Benefit– Under this option, you will get an additional sum assured in case of death by accident.
- Income – The death benefit will be paid partly as a lump sum and partly as monthly payments for 15 years.
- Income Plus – This is the same as the Income option but here you can choose to receive the monthly income as equal payments or increasing at 10% per annum.
HDFC Life also offers permanent disability and critical illness riders along with this policy. You can choose to have regular, limited or a single premium payment plan for your policy.
Highlights: HDFC Life allows you to increase your insurance coverage when you hit key milestones such as marriage and childbirth.
|HDFC Life Click2Protect Plus|
|Policy Term||40 Years (max)|
|Premium Payment Option||Annual/Half-yearly/Quarterly/Monthly|
|Minimum Annual Premium||Rs.3,000|
|Minimum Sum Assured||Rs. 25 lakhs|
|Online Discount||5.5% on premium|
SBI Life Smart Shield
SBI Life – Smart Shield is a term plan offering several riders. These include Accidental Death Benefit Rider, Accidental Total and Permanent Disability Benefit Rider and Accelerated Critical Illness cover option. The sum assured needs to be in multiples of Rs. 25 lakhs. You have the option of paying the premium once or regularly throughout the policy term.
Highlights: SBI Life offers you changing sum assured plans. You can choose to have an increasing sum assured. This will help you in case you are planning to get married and have children. You can also opt for a decreasing sum assured. This is ideal for those who might want to take on loans, such as a Home Loan, and might not be able to pay high premiums.
Additional Reading: Do You Know How Much Life Insurance You Need?
|Policy Term||30 Years (max)|
|Premium Payment Option||Annual/Half-yearly/Quarterly/Monthly|
|Single premium||Rs. 15,000|
|Regular Premium Yearly||Rs. 5,000|
Max Life Online Term Plan
Under the Max Life Online Term Plan, you have the choice of adding a Max Life Comprehensive Accident Benefit rider. However, for this policy, the premium can be paid only annually.
Highlights: This plan offers two options along with the basic cover. One is the Life Cover Plus Monthly Income option. Here, 100% of the sum assured will be paid as a lump sum, plus a monthly income of equal amounts will be paid out for 10 years. Max Life says they will pay 0.4% of the Sum Assured as monthly income. Another option is the Life Cover Plus Increasing Monthly Income. Here, you get 100% of the policy Sum Assured, plus an increasing monthly income for 10 years. The monthly income will increase every year by 10% per annum (simple interest) of the monthly income you receive in the first year.
|Policy Term||35 Years (max)|
|Premium Payment Option||Annual|
|Minimum Annual Premium||As per the minimum sum assured chosen|
|Minimum sum assured||Rs.25,000|
Learn more about the right Term Plan based on your needs and financial situation.