How to Choose the Best Term Insurance Plan
There is no best financial product be it mutual fund or insurance. If they are best today there is no guarantee that they will be best when we will need those most. So as a client you have to stick to some basic principals while choosing the products. So let's check this for term plans.
Important factors in choosing term insurance plan
1) Claim settlement Ratio: The most important criteria of selecting any insurance policy including term plan is claim settlement ratio. Why we are buying life insurance? We buy it so that our family will get the sum assured & have financial security in the event of our death. But what will happen if our claim gets denied - the whole purpose of taking term plan will be defeated! So it's better to check it rather than be sorry.
How can you reduce chances of claim rejection?
Don't allow agent to play checkers. If you are buying term plan there is 90% chance that you called the agent. Don't forget to double-check the form filled out by the agent. Even better, fill it out yourself!
Don't hide anything - if you smoke or drink mention it - if you have any other medical ailment disclose it. (Even if you think it is very small)
Mention which other life insurance policies that you hold - from any insurance company including UPIP & endowment.
If you follow these points there is a good chance that your claim will not be declined.
2) Reputation of the company - There is no definition or cannot be easily explained as it depends on two factors working style/financial health of the company & your past experience. So it is very subjective & changes with the time but still will be considered to increase your confidence. Or take it other way round there are 10-15 good insurance companies & you are not having confidence on 2 of them you can eliminate them from total choices.
3 Low Premium - People think this is the most important criteria but actually it is least important. This criterion should be explored only when you have shortlisted polices on above 2 points.Online term plan have become a huge hit with insurance buyers in the past two years. Every 18 minutes, an online term plan is bought in the country. In the past six months, the seven life insurance companies that offer such term plans have issued more than 14,500 policies with a combined cover of roughly Rs 9,100 crore.
The large cover offered by online plans is good news for an underinsured country like India. In a recent survey of middle-class people in metros, 85% of the respondents said that they felt a greater need to protect their lifestyle. Yet, the average life insurance policy issued in 2010-11 offered a cover of Rs 1.93 lakhs.
In contrast, the online plans sold since April this year offer an average cover of Rs 62.5 lakhs.
The absence of the agent in the entire process pushes the buyer to look at life insurance from a different perspective. It is no longer seen as an investment, but as a risk mitigation tool. It is no longer considered a tax-saving tool, but a way to cover risk.
Easy and cheap
The biggest draw of the online channel is the ease and cost advantage it offers to the buyer. The entire process takes only 15-20 minutes. You just need to key in the personal details, make the payment and your life cover begins. Of course, this is subject to your documents being in order and you being in good health.
The insurance company will collect the documents (PAN, address and identity proof, etc) from you and put you through stringent medical tests.
If an aberration emerges in the medical tests, your premium might be pumped up a bit.
Online plans are clicking with buyers also because they are 40-60% cheaper than the policies bought offline.
Important factors in choosing term insurance plan
1) Claim settlement Ratio: The most important criteria of selecting any insurance policy including term plan is claim settlement ratio. Why we are buying life insurance? We buy it so that our family will get the sum assured & have financial security in the event of our death. But what will happen if our claim gets denied - the whole purpose of taking term plan will be defeated! So it's better to check it rather than be sorry.
How can you reduce chances of claim rejection?
Don't allow agent to play checkers. If you are buying term plan there is 90% chance that you called the agent. Don't forget to double-check the form filled out by the agent. Even better, fill it out yourself!
Don't hide anything - if you smoke or drink mention it - if you have any other medical ailment disclose it. (Even if you think it is very small)
Mention which other life insurance policies that you hold - from any insurance company including UPIP & endowment.
If you follow these points there is a good chance that your claim will not be declined.
2) Reputation of the company - There is no definition or cannot be easily explained as it depends on two factors working style/financial health of the company & your past experience. So it is very subjective & changes with the time but still will be considered to increase your confidence. Or take it other way round there are 10-15 good insurance companies & you are not having confidence on 2 of them you can eliminate them from total choices.
3 Low Premium - People think this is the most important criteria but actually it is least important. This criterion should be explored only when you have shortlisted polices on above 2 points.Online term plan have become a huge hit with insurance buyers in the past two years. Every 18 minutes, an online term plan is bought in the country. In the past six months, the seven life insurance companies that offer such term plans have issued more than 14,500 policies with a combined cover of roughly Rs 9,100 crore.
The large cover offered by online plans is good news for an underinsured country like India. In a recent survey of middle-class people in metros, 85% of the respondents said that they felt a greater need to protect their lifestyle. Yet, the average life insurance policy issued in 2010-11 offered a cover of Rs 1.93 lakhs.
In contrast, the online plans sold since April this year offer an average cover of Rs 62.5 lakhs.
The absence of the agent in the entire process pushes the buyer to look at life insurance from a different perspective. It is no longer seen as an investment, but as a risk mitigation tool. It is no longer considered a tax-saving tool, but a way to cover risk.
Easy and cheap
The biggest draw of the online channel is the ease and cost advantage it offers to the buyer. The entire process takes only 15-20 minutes. You just need to key in the personal details, make the payment and your life cover begins. Of course, this is subject to your documents being in order and you being in good health.
The insurance company will collect the documents (PAN, address and identity proof, etc) from you and put you through stringent medical tests.
If an aberration emerges in the medical tests, your premium might be pumped up a bit.
Online plans are clicking with buyers also because they are 40-60% cheaper than the policies bought offline.
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