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Term insurance plans are a crucial financial tool that ensures the financial security of your loved ones in the event of your untimely demise. These policies provide a lump sum payout to your beneficiaries, covering essential expenses, debts, and future goals, helping them maintain their day-to-day life.
However, with so many options available, selecting the right term plan in India can be overwhelming. To make the process easier, it’s important to focus on the key features that make a term plan the right fit for your needs.
Let’s learn the 7 essential features you should check in term plans in India to ensure you choose the best one for your family’s future.
What are Term Insurance Plans?
Term insurance plans are simple and affordable life insurance policies that provide coverage for a specified term. In the event of the policyholder’s untimely demise within the policy term, the beneficiary receives a lump sum amount, offering financial protection to the family.
Unlike other types of life insurance, term plans do not accumulate any cash value or investment component; they solely provide a death benefit. These plans are highly recommended due to their cost-effectiveness, especially when compared to other insurance policies, offering higher coverage at lower premiums.
Key Features to Check in Term Plans in India
When selecting a term insurance plan in India, it’s essential to focus on the key features that will provide maximum protection and value for your family. Here are the most important factors to consider before making your decision.
1. Claim Settlement Ratio
Understanding how efficiently an insurer settles claims is crucial when selecting a term insurance plan in India. The claim settlement ratio is the percentage of claims settled by an insurer in relation to the total claims received.
A higher ratio means that the insurer has a good history of paying out claims to policyholders’ families. Some of the claim settlement ratios provided by the insurer are:
- HDFC Life: 99.7%
- ICICI Prudential Life: 99.2%
- Tata AIA Life: 99.1%
A high claim settlement ratio gives you the confidence that the insurer is reliable and trustworthy, ensuring your loved ones will receive the payout they deserve.
2. Coverage Amount and Premiums
The coverage amount is the sum assured that your family will receive in the event of your untimely death. It should be sufficient to cover all financial obligations, such as debts, daily living expenses, and future financial goals. Term plans in India typically offer coverage amounts ranging from ₹10 lakh to ₹20 crore or more.
- Choose a coverage amount that is at least 10-15 times your annual income.
- Premiums should be affordable while still providing comprehensive coverage. Many insurers offer premiums starting as low as ₹500 per month.
- Consider your budget and the financial needs of your family when selecting the right coverage amount and premium.
3. Policy Term and Age Limit
The policy term is the duration for which the insurance coverage is valid. Most term insurance policies in India offer flexible terms ranging from 10 to 40 years. The policy should cover you for the duration when your family is most dependent on you, typically until your children are grown or your mortgage is paid off.
- Check the maximum age limit for purchasing a policy; some plans offer coverage up to 99 or even 100 years of age.
- Longer-term policies can be more beneficial for ensuring that your family is protected throughout their financial journey.
4. Add-ons and Riders
Riders are additional benefits that you can add to your term insurance plan to enhance your coverage. Common riders include:
- Critical Illness Rider: Covers the cost of treatment for serious illnesses like cancer, heart disease, etc.
- Accidental Death Benefit Rider: Offers an extra payout if death occurs due to an accident.
- Waiver of Premium Rider: Waives premiums if you become seriously ill or disabled and are unable to pay.
These riders provide extra protection, making your term insurance policy more comprehensive and tailored to your needs.
5. Tax Benefits
One of the advantages of term insurance is the tax benefits it provides. Under Section 80C of the Income Tax Act, premiums paid for term life insurance policies are eligible for tax deductions of up to ₹1.5 lakh per year.
Additionally, the death benefits received by your family are tax-free under Section 10(10D). This makes term insurance a valuable tool for both securing your family’s future and saving on taxes.
6. Premium Payment Flexibility
Term insurance policies often provide flexible premium payment options, such as:
- Annual
- Semi-annual
- Quarterly
- Monthly
7. Policy Customisation and Customer Support
Customisation options allow you to adjust your policy to suit your needs as they change over time. Some insurers provide options to:
- Increase the coverage amount during the policy term.
- Change the policy term if needed.
- Add riders or modify coverage limits as per life events.
Equally important is the quality of customer support offered by the insurer. Ensure that the insurer provides easy access to customer service via phone, online chat, or mobile apps, and is responsive in addressing any queries or issues you may face during the life of the policy.
Make an Informed Choice for Your Family’s Financial Security
Choosing the right term insurance plan is a critical decision to ensure that your family’s future is financially secure. By carefully considering factors such as claim settlement ratio, coverage amount, and riders, you can select a plan that provides maximum protection at an affordable cost.
Term plans in India are designed to be flexible, with affordable premiums and the option to customise coverage, making them an ideal choice for individuals looking to safeguard their loved ones without breaking the bank.
When purchasing a term insurance policy, always ensure that you compare different plans and consider using online insurance brokers like Jio Insurance Broking Ltd. to find the best options available. With the right term insurance plan in place, you can rest assured that your family will be financially protected in your absence.