How to Compare Benefits of Term Insurance

How to Compare Benefits of Term Insurance
Whom do you consider a great friend? Maybe it is someone who stood by you in your most difficult
times and shared some of your responsibilities. On similar lines term insurance plans work. They assume
many of your responsibilities after your unfortunate and untimely demise. As the death of the earning
head of the family exposes it to financial difficulties, a term plan replaces the income loss from the claim
proceeds, called death benefit in insurance language.
It not possible for us to delay or avoid our preordained death but we can reduce the resultant pain it
causes to our family to some extent. Obviously it is impossible to recover the emotional loss from any
insurance product but we can take measures that they don't suffer financially after such tragic event.
By evaluating your liabilities and your current household expenditure you can come to a ball park figure
stating how much life cover you need so that your family can maintain their current lifestyle and status
after paying off your debts. Now match that figure with your eligibility. Eligibility of term insurance can
be calculated by multiplying your provable annual income at the time of taking the policy with a relevant
factor. The relevant factor can be maximum 20 and keeps decreasing with subsequent age brackets in
which you by the plan. For example, it is 20 if you buy the plan between ages 18-30, it can go to 17 if you
buy between the ages 30-35, 15 if you buy in the age group of 35-40 and so on. Insurance companies
can set their own age brackets but in any case the relevant factor does not exceed 20.

You can buy more than one term plans also in cases you have not bought plans to your full eligibility. For
example if according to your income and age bracket you are eligible to a life cover of INR 1 crore and
you have taken a policy of INR 40 lacs you can take further plans till you are fully covered for INR 1 crore.
The sum assured on an existing plan cannot be increased. When your income rises your eligibility also
rises, in such event you can buy another plan to get a higher cover and have multiple term plans or
surrender the existing plan and buy a new plan with a higher cover.
One important tip is that you buy term plans after comparing the options available in the market. Term
plans are compared primarily on four bases. These are discussed below.
Premium
One of the obvious parameter to compare any insurance plan is premium. Especially in case of term
plans the premium paid is of high importance as it is generally a very long term plan and you wouldn't
want to pay higher premium for such long period than you could avail had you done effective
comparison. Another reason why premium comparison is important in your term plan is that in these
plans the premium does not get accumulated and paid at maturity. Absence of maturity benefit makes
premium comparison very important.
Plan Term
It is the duration of the life cover. The insurance company is liable to pay only when death of the insured
occurs during this period. It is favorable for you to have a longer life cover to remain protected in the
senior years of your life in which fatality ratio is high. Go for companies offering a higher plan term.
Claim Settlement Ratio
While comparing the term plans of various companies it is very important to compare the claim
settlement ratios of the insurers. Claim settlement ratio is the ratio of number of claims sanctioned out
of the total number of claims received by the insurance company in a year. Higher claim settlement ratio
of the company is indicative of increased probability of your claim getting passed. Companies with
better claim settlement ratio often enjoy good reputation and popularity among the customers.
Extra Benefits or Riders
Few Insurance companies offer a range of added benefits by charging a little extra on a regular term
plan. These benefits are called riders.
Popular riders available in India are:
Critical Illness Rider: Under this rider the insurance company pays a lump sum amount to the
policyholder if and when he is diagnosed with serious disease listed as critical disease. The money
received from the insurance company can be very useful to take required treatment.

Accidental Rider: Under this rider the insurance company pays up to twice the sum assured to the
nominees in cases where the insured dies because of an accident. An accident can be any violent
incident of physical nature caused by an impact from an external and visible object.
Disability Rider: Under this rider the insurance company pays a portion of the sum assured to the
policyholder in case he encounters a disability in his body to enable him to sustain his needs as in case of
disability earning capacity can be compromised.
There are many other such riders available in the market. You can sit with your agent or on the internet
to explore what all riders you need and which companies are offering those. Based on such analysis you
can short list those companies and compare.
Study and scrutinize a large number of plans to make a smart purchase. Missing out on a lucrative plan
and settle for a mediocre one is not what you want. It is recommended to use services of various online
insurance comparison portals to get an unbiased plan comparison and that too free of cost.
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