5 Factors to Compare When Buying Term Insurance

For a primary earning member of a family, ensuring the long-term security of the dependents is one of the top priorities from a financial perspective. To accomplish these needs, insurance providers offer term plans at affordable costs, which you can easily purchase online. 

However, it is common to get confused about which term plan can be of best use to a family. Hence, we have chalked out an analysis of how to compare term insurance policies and why it is necessary to draw a comparative study. Please read on to know more.

Term insurance is the most basic type of life insurance product that provides coverage for a specified period, known as the "term." If the insured person passes away during the term, the policy pays out a death benefit to the beneficiaries. It offers pure protection and is thus, more cost-effective than other life insurance types. 

Term Insurance Plans do not have any savings component and hence you can’t compare them on returns. However, you must compare other factors like premium for a given sum assured, claim settlement, insurer reputation etc., to make an informed purchase.

Term life insurance comparisons are necessary to avoid high insurance premiums, opt for the optimum tenure and returns, enhance, and optimise all other benefits. The best practice is to choose a plan providing sufficient life cover to sustain all your liabilities. 

Moreover, many insurance providers offer term plans with added benefits like coverage against serious illness, waiver of premium, option of adding riders to at a minimal cost etc., even when you go for basic term insurance plans. 

As a thumb rule, financial advisers recommend opting for a term that offers a cover close to eight times your estimated income per year. To analyse the parameters mentioned above, we recommend you compare term insurance online.

1. Term Period

Before buying a particular term plan, one must calculate the time for which their loved ones need financial protection. Based on this expectation, a person approaches insurance company who approves the life cover period depending on certain aspects. These include the applicant’s age, lifestyle, outstanding expenses, etc. 

For instance, chances of getting a high cover for a given premium amount become significantly low if you are approaching your mid-50s or have a regular smoking habit. While you can definitely buy one, the premium would increase as you approach the more riskier life stage.

2. Benefits

After finishing the term plan premium comparison, the next important factor is the benefits. We must evaluate the benefits of various term policies to buy the best suited one. 

As we have discussed earlier, there is no one size fits all scheme regarding term life plans. Hence you need to understand the unique perks of different plans, understand their benefits and check which of them are aligned with your financial goals.

3. Company Background

As fraudulent schemes continue to crop up, term policy seekers must be extra careful while relying on a particular insurance provider. All genuine companies are supervised by IRDAI and operate under regulations to ensure consumers receive maximum benefits.

Thus, we advise you to check the company history before laying your expectations. Again, this does not mean new contenders in the insurance sector are inferior to long-drawn players.

Also, its not just about the fraud. You must also check the company history with respect to the claims settled, the speed and process of settling the claims etc.

However, regardless of the company’s age, it is essential to study the advantages and disadvantages of buying their customised plans to ensure the best purchase.

4. Type of Term Insurance

While conducting a term policy comparison, you will realise that each type has unique benefits. For instance, those willing to pay a low premium while ensuring their families receive an assured sum through the quoted tenure, can go for basic term plans.  

On the other hand, TROP plans assure the company compensates the policyholder with all the premiums paid to date if they live past the policy term. Likewise, additional term plans like increasing term plans, convertible plans, and rider-focused plans serve specific purposes. Therefore, you must understand the nuances of each before buying.

5. Claim Settlement Ratio

The basic intention around buying a term plan is to provide financial coverage to the dependent family in case of unfortunate demise of the policyholder. In such struggling times, the most important assistance that is required from an insurer is a hassle-free claim settlement. 

Hassle free and timely claim settlement is reflected in the claim ratio of the company. In simple terms, the claim settlement ratio describes how frequently the insurer settles claims in a year. This is usually a good indicator of the insurer’s reliability regarding approval of claims.

Insurance providers present their own online calculators where potential term policy buyers can enter their personal information to get details on sum assured and premium. 

During this calculation, you also need to specify whether you consume alcohol or smoke regularly. Then, based on all these factors, the estimated insurance coverage and premium will be displayed on the screen in seconds. 

It is recommended to spend adequate time to compare term insurance policies from different insurers to ensure that you buy a plan that best meets your family’s needs in your absence. Also, while checking personal information, the companies strictly scrutinise your documents to see whether you have provided the correct age details. Hence, for seamless claims, add all relevant information correctly and proceed to buy an all-around term insurance that comes within your annual financial budget.