Term insurance plans are type of life insurance which offers risk coverage of life for a certain number of years or a specific period of time.
Demise of the insured during the course of the policy tenure will be marked by payout of the death benefit or the sum assured to the nominee. Payouts are not made if the insured does not die during the policy tenure. The main aim of taking life insurance plan is to offer life coverage to the insured and for his/her family’s financial security.
Anyone between ages 18 years and 65 years is eligible to go for life insurance plans. Premiums for such policies are really low due to the fact that it does not have any investment element and the complete premium is towards coverage of death risk. Term insurance plans are pure life cover and have no maturity or survival benefit after the expiry of the policy. Some policies may have option of reimbursement of the premiums paid by the insured if he/she lives through the policy period.
Some of the main benefits of term insurance are listed below:
- Bigger life cover: Term insurance offers the option of choosing a higher life-coverage for a premium that is similar to a lower life cover offered by a life endowment plan. An endowment policy is a type of life insurance with a built-in savings component. Thus, for example, a 30 year old can opt for a 2-crore term insurance policy with 30 year term limit. For the same premium, an endowment plan of 2 crores may not be affordable or available for 30 year olds.
- Improved life cover: Flexibility is offered by varied insurance providers for enhancement of life coverage during varied important stages in the life of the policy holder. For example, the insured are allowed to improve life coverage by 50 percent during wedding and by 25 percent during birth of a child. Thus, policy holders can select a modest life cover at the beginning and then improve it with higher premiums as and when pay and responsibilities increase.
- Riders: Term insurance plans come with varied riders which improve the policy’s utility. Thus, if a critical disease rider is added to the policy, then the insured will be entitled to get the assured sum after diagnosis of the serious disease as well as the death benefit in case of demise of the policy holder during the plan’s term. Other available riders include job loss cover, premium waiver cover, and disability cover, etc.
- Tax benefits: As per Section 80C of the 1961 Income Tax Act, premiums paid for all types of life insurance plans are eligible for tax deduction up to INR one and half lakhs. Bonus received by the insured and claims received by the nominee are also exempt from tax as per Section 10 (10D).
- Different innovative aspects: All insurance companies engage in continuous innovation to improve their client base. This is particularly true for term insurance policies. For example, many companies have now reduced the premiums and even offered additional discounts to certain groups of people like non-smokers, etc. Those individuals who meet the insurer’s definition of being healthy can also purchase term insurance online without undergoing a medical test.
Choosing the best term insurance plan
There are many factors that people need to look at before selecting a term insurance plan that is best suited to them. You may check out the overall health and market standing of the insurance company, the terms and conditions, the claim settlement ratio, effect of inflation on cover benefits and premiums payment, and the amount of life cover needed.
The most important factor that individuals need to check is the claim settlement ratio. This aspect offers information about the number of policies that the company has settled via payment of claim amounts in case of demise of policy holder during the term of the policy. It is the only factor which is of most use for customers when they choose a plan. A higher claim settlement ratio indicates that the company is reliable and trustworthy, while a low claim settlement ratio is indicative of the fact that the insurer is unable to settle claims and thus less credible or trustworthy.
Presented below are the 5 best term insurance plans for 2017 as per their claim settlement ratio:
- Life Insurance Corporation of India: The claim settlement ratio of LIC is 98.33 percent. This means that more than 98 percent of the claims that LIC receives has been successfully settled by the company.
Five different term insurance plans are offered by LIC; they are LIC e-Term, LIC Amulya Jeevan – II, LIC Anmol Jeevan – II, LIC Bhagya Lakshmi, and LIC New Jeevan Mangal. The last two are micro insurance plans with a term insurance option. Customers can buy a plan of their choice at different LIC branches, while some policies are available for online purchase. All plans have simple terms and conditions and provide tax benefits on claim amounts and premiums paid. Customers can also take loans on the basis of these term insurance plans.
A few benefits of LIC term insurance plans are:
- It is the oldest, most credible, and trustworthy insurance company in the country. It has outperformed all the major private sector insurers in the market.
- LIC offers flexible insurance options with regards to cover amount, term, and payment of premiums
- Certain plans can be changed by customers to other LIC plans
- Online availability of term insurance plans means increased comfort and easy access.
- Max Life: The claim settlement ratio of Max Life Insurance is 96.95 percent. Three different term insurance plans are offered by Max Life; they are Max Life Online Term Plan, Max Life Premium Protection Plan, and Max Life Super Term Plan. All are available offline and online. Online submissions have no paperwork, while offline ones can be easily availed with minimal paperwork after consultation with advisors. Some benefits of Max Life term insurance plans are:
- Tax benefits on premiums paid and death benefit
- Reduced cost of insurance; low premiums for high life cover
- Loans availability in lieu of the insurance policy
- Customized payout options
- Certain plans can be changed to other Max Life plans
- Special rates for females and non-smokers
- All policies are usually issued in just 14 days
- Tata AIA Life: The claim settlement ratio of Tata AIA Term Insurance is 96.80 percent. Three major term insurance plans are offered by Tata AIA Life; they are iRaksha Supreme, Tata AIA include iRaksha TROP, and Maha Raksha Supreme.
- Tata AIA Life features and offers include tax benefits, easy online access, loans in lieu of policy, max application age of 70 years, 40 years max policy tenure, minimum assured sum of INR 5 lakhs, and no limit to the maximum assured sum (it is however subject to underwriting).
- ICICI Prulife: The claim settlement ratio of ICICI Prudential Term Insurance Plan is 96.20 percent. The company is a joint venture between Prudential Plc. of the UK and ICICI Bank. It is one of the biggest life insurers in the country. The term insurance policies offered by ICICI Prulife are ICICI PRU iCare II Term Insurance Plan, PRU iProtect Term Insurance Plan, ICICI Prudential Loan Protect, ICICI Prudential Sarv Jana Suraksha, ICICI Prudential Life Raksha, and ICICI Prudential Loan Protect Plus.
- ICICI Prulife benefits include easy online access, tax benefits, customization of plans, high cover at affordable premiums, micro insurance plan for rural populace, hassle free and highly transparent claims process and progress which can be easily tracked, and accidental death benefit rider and other additional attractive features.
- Aegon Religare: The claim settlement ratio of Aegon Life Term Insurance is 95.31 percent.
- The term insurance policies offered by this insurer are Aegon Life iTerm Plan, Aegon Life Term Plan, Aegon Life iReturn Plan Term, and Aegon Life iSpouse Insurance Plan. Some benefits of the Aegon term insurance plans include life cover to the age of 75 years, tax benefits, and accidental death benefit rider.
Happy Risk Protection!