Picking the right plan for your family’s protection might seem like a pretty big task. You want to guarantee your loved ones’ security in case you are not around. A term insurance policy, therefore, becomes an essential part of your planning. At its core, it is a very straightforward contract. You pay a small premium, and the company undertakes to pay your family a large amount of money if you pass away.
However, with the number of companies in India, how do you choose the best one? The answer is a quick and smart term insurance comparison. You don’t have to be a math whiz to do this. You just need to keep an eye on a few simple things.
Give the “Trust Score” a Look (CSR)
The thing that weighs the most is trust. You want to be sure that the company really pays the money when a family asks for it. In India, the Claim Settlement Ratio (CSR) is the measure we rely on.
- What it is: This is a percentage. It indicates how many claims the company paid out of every 100 they received.
- What to look for: You should opt for a company that has a CSR of 98% or higher.
- Check the trend: Do not only consider one year. Look at whether they have been consistently good for the last three to five years.
A company boasting a high score is a sign that they are supportive and trustworthy.
Look at the Amount of Cover
How much money will your family require? This is also referred to as the “Sum Assured.”
An easy tip is to choose a figure that is 10 to 15 times your annual salary. So if you make ₹10 Lakh a year, a cover of ₹1.5 Crore is a reasonable starting point. This amount should be sufficient to:
- Settle any mortgages or car loans.
- Provide for your children’s education.
- Ensure your spouse maintains a decent lifestyle.
The Cost of the Plan
Performing a term insurance comparison will reveal varying rates. These rates are termed as “premiums.”
- Buy Early: At an early age, the cost is really low. After buying it, the price generally remains the same throughout your life.
- Don’t Just Pick the Cheapest: Sometimes, the least expensive plan might offer poor service. So, consider a mix of reasonable price and good reputation.
How Long Do You Need Cover?
There is no need to have insurance for the entire duration of your life. The only time you need it is until your family is financially independent. The majority opt for cover up to 60 or 65 years of age. By that time, your children are usually earning, and your debts are cleared. Selecting a very long term (like up to age 85 or 100) will make the plan significantly costly.
Additional Features (Riders)
One way to think about “riders” is like extra toppings that you add on top of a pizza. That is, by adding riders, you can make your term insurance policy work harder for you by giving you more protection. For instance, a very common rider is the Accidental Death benefit which provides your family a larger amount of money in case of the death of the insured due to an accident. Similarly, the Critical Illness benefit is another usual rider that offers the policyholder a lump sum if he is diagnosed with the illness the rider covers most often including cancer. Another option will come in very handy is the Waiver of Premium; with this rider, the premium can be totally waived upon inability to work due to the covered disability without annulling the insurance contract. However, you should choose only those that are most useful to you so that the overall premium doesn’t become very high.
Payout Method
How do you want your family to receive the money? There are three main options:
- Lump Sum: They receive the entire amount at one go. This is ideal for settling large loans.
- Monthly Income: They receive a fixed portion of the money every month. This is considered as a salary and would help them with regular expenses.
- A Combination of Both: This one is a point to most of the time a win-win solution for families.
Health Exams and Truthfulness
While signing up for a policy, it is possible that the company asks you to get a medical examination. In fact, this is a good thing because it is your evidence that you were healthy at the time of inception.
Very Important: Never lie. For example, if you are a smoker or have an existing medical condition, just be truthful about that. If you conceal information, the company can even deny the claim. Therefore, being truthful today keeps your family protected tomorrow.
Summary Checklist
Use this short list to help you compare before you make a purchase decision:
- Is the minimum CSR 98% or more?
- Is the sum insured about 10-15 times my annual earnings?
- Will I be able to comfortably pay the premium every year?
- Does the company have a reputation for efficient service?
- Have I selected the appropriate riders/supplementary benefits for my lifestyle?
Though comparing plans might take one or two hours, you will have peace of mind for years. So take your time, look through the simple facts and choose the program that makes you feel secure. Your family’s future really is worth the challenge.
