When you decide to get a term insurance plan for yourself, you are financially securing the future of your loved ones after your demise. As dark as it sounds, it is a pragmatic life decision that most of us need to make, especially if we are the sole breadwinner of the family or don’t have adequate assets that we can leave behind.

Thus, how do you choose the best life insurance plan when there are so many out there? You do it based on 5 factors:

1. Insurer’s claim settlement ratio

You wouldn’t want your nominee to struggle to get a valid claim passed, would you? A claim settlement ratio of an insurance company reflects how many claims they have passed out of the total claims made during the particular year. A good ratio means the company delivers on what it promises- a smooth financial payout.

2. Insurer’s solvency ratio

No insurance company can keep issuing term plans without having adequate assets that can cover all these plans. Picture this- given the raw number of deaths due to COVID recently, the number of life insurance payouts have increased. However, what would happen if these insurance companies didn’t have the money to pay the nominees? To prevent such unfairness, the Insurance Regulatory and Development Authority of India (IRDAI) mandates that every insurance company maintain a particular solvency ratio. Check the solvency ratio of the companies you are considering before you make a decision.

3. Premium costs

The insured individual must pay a yearly premium to keep their life insurance plan active. The premiums depend on the term cover, tenure, age and income of the insured, and many other factors depending on the insurance company. Consider the tax benefits you can get on your premiums and the possibility of paying monthly premiums rather than yearly premiums before you make a decision.

4. Critical illness covers offered

A critical illness cover along with a term insurance plan means that your family will receive a payout if you are diagnosed with an illness such as cancer or need crucial medical treatment such as brain surgery. This money ensures that your family has enough financial resources for your treatment and sustain their everyday lives.

5. Additional covers offered

Apart from the basic life cover that comes with every term insurance plan, there are additional covers that offer a more comprehensive assurance. Some of these important additional covers include:

• Waiver of premium: In case the insured individual is permanently disabled and unable to work, the insurance company waives off the premium needed to keep the policy active.
• Accidental death: In case the insured individual dies due to an accident, the term cover is increased. 

Some of the other covers include income benefit, increasing monthly income benefit flexibility to increase the sum assured at major milestones, and terminal illness benefit. You can check out products such as the HDFC life term plan to understand the different additional covers offered.

It is advisable to consult your family and your financial planner when deciding on the best term insurance plan for yourself in India.

Joyce Laroche