Which is the Best Type of Term Insurance Plan for You?

Term insurance is one of the most basic and purest life insurance you can get. With their simple structure and low premiums compared to other types of life insurance products, these plans are preferred by the general public. 

With changing times, several types of term plans are available. Also, there are online term plans too to choose from. While this abundance of choices is great, choosing the best term insurance plan for yourself can be tricky.

Choosing The Right Term Plan

Choosing term life insurance requires you to focus on the significant features that can make a difference to you and your dependents. You will have to evaluate your needs and follow certain processes.

1. Assess your term insurance coverage needs

Before you set out to find the appropriate term plan, assessing your mandatory insurance coverage is essential. First, you must calculate the coverage you and your dependents need and your ability to pay a premium. Then, if your employer offers you a cover, you can reduce that coverage while calculating the requirement.

2. Choosing amongst the types of term plans

Online term plans come with variations. After a need assessment, detailed features, and premium rates, you can choose among these plans. Here is a look at the most common types of term plans available in the Indian market.

• Level term plans: One of the most common and a default type of term insurance wherein the sum assured selected by you at the beginning of the policy term remains constant throughout the tenure.
• Increasing term plan: With this term insurance, you can increase your sum assured at specific points during the policy. The rate of increment is pre-decided by the insurance company. This term insurance is a great tool for beating inflation.
• Decreasing term plan: This plan works in a reverse pattern than the increasing term plan. The sum assured decreases at a pre-decided rate with your growing age. The basic idea behind this plan is that with age, your liabilities decrease, and thus you require a lesser sum assured.
• Term plan with premium return: This is a popular type of online term plan that offers a maturity payout component that is usually not covered under term insurance. If you survive till the policy term, the premiums paid are returned to you, provided you have made no claims during the policy.
• Convertible term plan: This plan can be converted to a different type of life insurance product, such as an endowment or a whole life plan, at a later stage. If you expect your priorities to change in the coming years, you can opt for a convertible term plan.

3. Riders

Apart from death, there are other risks that a policyholder faces. Some of these risks are covered additionally under an online term plan as riders. When choosing the insurance company, look at the insurer's rider options. 

For example, Tata term insurance plans offer riders like critical illness, waiver of premium, accidental death benefit, disability, income benefit, etc. Riders are charged over and above the base premium, so the selection of a rider should be made carefully.

4. Compare the premiums

Premium is certainly one of the major deciding factors for term insurance. A plan with a higher premium need not necessarily mean it offers the best benefits and vice versa. It is essential to weigh the benefits and premiums before choosing term life insurance.

5. Consider the Claim Settlement Ratio (CSR) and Solvency Ratio

Claim Settlement ratio (CSR) defines the percentage of successful claims settled during the financial year compared to the total claims received by the insurer. The higher the CSR, the better, as it reveals the capacity and intent of the insurer to pay if you raise a claim. 

Likewise, the solvency ratio shows whether an insurer is financially capable of settling your claim. The Insurance Regulatory and Development Authority of India (IRDAI) mandates every insurer to maintain a minimum solvency ratio of 1.5.

6. Convenience in buying

When it comes to buying insurance, customers are now looking for online term plans that are easy to access and purchase, are paperless, and offer round-the-clock customer support.

Life insurance is an important component of your financial plan. Thus, it is in your best interest to choose the best term life insurance for your family by considering all the above factors.