A large life cover, affordable plans, and fixed premiums are the top reasons that attract one to buy term insurance. But if you need a term insurance policy suited for your specific needs, you must consider a few key things before you select a term policy. In this article, we’ve got just this information for you on how to choose the best term insurance plan in India in 2023.
What is Term Insurance?
A type of life insurance, term insurance covers the policyholder and their family for a specific period only.
In case the insured person suffers a death, the insurer pays a death benefit amount to the person’s family.
This is called the ‘death benefit’ or the ‘sum assured’
Top 5 Tips on How to Choose Term Insurance
1. Check the Claim Settlement Ratio
An insurance company may deny an insured person’s claim due to several reasons.
But what if the agency you choose has a recurring habit of denying claims?
This is why you need to check if the insurance agency has a high claim settlement ratio.
What is a claim settlement ratio?
The claim settlement ratio measures the number of claims an insurance company settles in a year.
Claim Settlement Ratio = Claims accepted / total claims received in 1 year
Consider a case where an agency receives 1000 claims in a year, out of which it settles 997 claims and rejects 3 claims. Its claim settlement ratio will be 99.7%
Look for a claim settlement ratio above 95%
This shows that the insurer is reliable and has been efficient in its settlement of claims.
Further check if this ratio has been consistent across the years.
Note – A CSR is merely an indicator of the reliability of the insurer. You must check other key factors to make a completely informed decision.
2. Calculate The Right Coverage
Often, people choose a random coverage amount while selecting an insurance plan.
But it is really important to select a cover that is ideal for your situation.
6 Tips to Select A Term Insurance Cover
1. You must choose a coverage that is at least 15 to 20 times your current annual income to account for inflation.
2. Assess your financial liabilities and select a higher cover if you have loans to repay. This ensures that your family won’t be burdened in case of your untimely demise.
3. Consider your financial goals as well. Choose a cover where your family can comfortably maintain their standard of living or pay for your kid’s higher education after you.
4. Account for your age too. You could opt for a high cover if you are married with younger kids, while a lower cover is ideal if you are at the stage of retirement.
5. Choose a term insurance plan that allows you to enhance your coverage, in case the need arises.
6. Use online calculators to check the premiums for a specific cover. It will further help you make an informed decision when you opt for a term insurance plan.
How to calculate term insurance cover
| Multiply (x) your monthly income | Your monthly income x 15 |
| Add (+) your liabilities | Loans, credit card bills |
| Deduct (-) liquid assets | Fixed deposits, savings, & mutual funds |
| Add (+) future expenses | Marriage, children’s education, etc. |
| Add (+) retirement corpus | Retirement savings |
3. Consider A Long Policy Term
If you have dependents, you should get term insurance once you start working right till retirement.
Remember that once you get term insurance at a certain age, the premiums are fixed for life.
This is why it is recommended to get term insurance as early as possible to get lower premiums!
To take further advantage of this, you can opt for longer terms as well.
For example – If you get term insurance at the age of 28 for a term of 20 years, it will cover you till you’re 48 years of age.
However, if you still have dependents, you would have to buy another policy.
Renewing to a new one would increase the premiums drastically at the age of 48!
Instead, you could choose a longer term of 30 years when you get the policy at 28 years of age and your premiums would be the same as when you were 28.
4. Choose The Right Type of Plan
There are many plans offered by insurance agencies today, which allow you to choose one as per your specific needs.
Here are 5 types of plans you should consider, depending on the benefits you need.
| Type of Term Plan | Plan Features | Main Benefit |
| Level Term Plan | A basic plan where your family gets the sum assured after your death.
The sum assured is fixed here. |
This is the most common plan available, and provides security for your family after your death. |
| Return of Premium Plan (TROP) | It provides the premiums you paid, if you survive the policy term.
It is only applicable if no claims have been made during your policy term. |
Unlike a level plan, TROP plan offers a maturity benefit. |
| Increasing Term Plan | In this plan, the sum assured keeps increasing throughout the policy term.
The premiums are generally higher for this type of term plan. |
Since the sum assured increases yearly, such a plan combats inflation to provide better funds to your family.
It is also a great plan if you anticipate more financial liabilities in the future.
|
| Decreasing Term Plan | Under this plan, the sum assured keeps decreasing throughout the policy term.
It finally becomes zero at the end of your policy term. The premiums are usually low in these plans and remain the same throughout the term. |
As the sum assured becomes less, it is ideal for you if your dependents decrease as you age.
Such a plan also helps you if you have to repay loans or EMIS. The sum assured decreases as you pay your EMIs, and decreases your loan amount too. It also ensures that your family has funds to pay for the loans, in case you suffer a death. |
| Convertible Term Plan | Such a plan allows you to convert to any type of plan in the future. | It is quite useful if you want to convert your term insurance policy to a life insurance plan. |
5. Select Add-On Plans Wisely
A basic term insurance policy only covers death benefits.
However, there are added risks such as disability, accidental death, & critical illness which can be covered with a rider plan.
Rider plans are offered by insurance agencies at reasonable costs and can provide your family with better protection in unfortunate times.
Note – Get a rider plan only after doing a complete analysis and carefully reading the policy terms set by the insurer.
Here are 5 term insurance rider plans you should know about –
| Rider Plan | What Does It offer? | Who Should Opt for it? |
| Accidental Death Benefit | The rider plan provides an additional sum insured in case you die in an accident.
This is an additional amount over your basic policy sum insured. |
This is a good rider plan for those who travel constantly for business or work on unsafe sites. |
| Accelerated Death Benefit | In case you are diagnosed with a terminal illness, this rider plan provides a part of the sum assured in advance.
This helps in paying the medical bills, providing financial relief to the family. |
You should opt for it, if there is a history of any terminal illness in your family. |
| Accidental Disability Benefit | This add-on plan pays a part of the sum insured in instalments, if you have become permanently disabled in an accident.
The amounts are paid regularly for the next 5 to 10 years to provide a stable income source for you & your family. |
This plan can be taken by people who work in risky conditions. |
| Waiver of Premiums | If you are unable to pay your premiums due to disability or early death, your policy usually expires.
In such a case, no sum assured is provided by the insurance agency. Getting this rider plan prevents this scenario from happening. In such a plan, the insurer will cover all your premiums for you and continue the policy till the end of its term. |
This rider is suited for everyone. |
| Income Benefit | This rider is used mainly to generate income for your family if you suffer a death.
The insurer will provide an additional regular income to your family for 5 to 10 years along with the sum assured. |
This rider plan is suitable for you if you are the only earning member in your family. |
Why Should You Get A Term Insurance Plan?
Unlike other life insurance policies, a term insurance policy does not offer additional sum benefits or a savings component.
This is why it is often dismissed by policyholders.
However, a term plan is not made for such a purpose.
It is a basic insurance used to secure your family financially and instead offers you a larger cover with affordable premiums!
Here are benefits you get in a term insurance policy –
- Life Covers usually start from 5 years and extend to whole life.
- You can buy a policy at 18 years of age
- Premiums for a 1 Crore plan can start from just ₹500!
- Pay Premiums monthly, quarterly, or annually.
- Tax benefits on premiums under Sec 80C
- Tax deductions on sum assured under Sec 10 D
5 Best Term Insurance Plan In India 2023*
We’ve collated the top term insurance plans in 2023 for you.
Most of these also offer discounts for women and the non smoking category.
You also get flexible ways of premium payouts, where you would have the option to pay monthly, quarterly, and annually or in lump sum.
| Term Insurance Plan | Top Features | Claim Settlement Ratio of Insurer
(as per Dec ‘22) |
| Max Life Smart Secure Plus Plan | Get 2 death benefit options – Basic Life Cover & Increasing Cover
Terminal Illness Cover up to 1 Crore. 100% ‘Return of Premium feature’ in case you survive the policy term. |
99.34% |
| HDFC Click 2 Protect Life | Get 3 different plans based on your lifestyle.
Income payouts from age 60 onwards & maturity benefits. Critical Illness Cover |
98.66% |
| LIC New Tech Term | Get 2 death benefit options – Level Plan & Increasing Term Plan
Special benefits if you choose a cover with a higher sum assured amount. |
96.02% |
| SBI Life eShield | Get 3 variants – Level Cover, Increasing Cover, & Future Proofing Plan
Life Cover up to 100 years Terminal Illness benefit for all plans |
97.05% |
| ICICI Pru iProtect Smart Term Plan | Critical & Terminal Illness Covers
Accidental Death Benefit up to 2 Crores Waiver of Premium on permanent disability |
97.9% |
Now that you know how to choose the best term insurance plan in India in 2023, you should keep these things in mind before you select a policy.
With term insurance, remember that the more you save now, the more your family will reap later on!
FAQs
| What age should I buy a term plan?
You should buy a term plan as early as possible, such as your mid-20s if you have dependents and are an earning member of your family. Buying a term plan early gives you the lowest premiums that stay fixed for your policy term. |
| Which term insurance is the best in India 2023?
The top term insurance plans in India are – 1. Max Life Smart Secure Plus Plan 2. HDFC Click 2 Protect Life 3. LIC New Tech Term 4. SBI Life eShield 5. ICICI Pru iProtect Smart Term Plan |
| Which is better – a life insurance policy or a term plan?
This depends on what your needs are. If you are looking for a high death benefit amount, then a term insurance policy is better. But if you want returns on investment, then you should go for a life insurance policy. |
| How much term insurance do I need?
Your term insurance should cover at least 15 times your current annual income. |
| What is not included in a term insurance policy?
A term insurance policy does not cover death due to the wounds inflicted by the insured person such as suicide or intoxication. Deaths due to homicide and natural calamity are not covered as well. It also does not include sexually transmitted diseases such as AIDS & HIV in its critical illness covers. |
| Can I buy a term insurance policy for my spouse?
Yes, you can buy a joint term insurance policy for your spouse. It can be usually taken as a single policy which will cover you both. |
