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TERM INSURANCE

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  • WHAT IS TERM INSURANCE?

    Term insurance is the basic form of insurance providing for your family’s finances in your absence. It is a pre-protective plan offering a pre-agreed sum assured based on the premium and tenure you opt for.

    How Term Insurance works

    Vivek, 30, non-smoker and non-drinker, opted for a term insurance plan with an insurance company. He had chosen a tenure of 30 years. He has to pay a monthly premium of Rs.1000, which translates into an annual premium of Rs.12,000.

    The sum assured offered by the company for an annual premium payment of Rs.12,000 is Rs. 1crore. This means, in case of an unfortunate event happening to him like death, critical illness, or partial / full disability at any time during these 30 years, his family (that is, his beneficiary) will get Rs.1 crore. The company will pay the agreed sum assured even if the unfortunate event occurs after 1 year of the policy inception.

    No amount is refundable if he survives until the end of the term or something happens to him after the term. The policy will be live as long as the premium is paid, and the company is not liable to provide death benefits if the policy tenure is expired or if the buyer discontinues the policy.

    A term plan works with the basic and age old concept of insurance, that the insurance company uses the money collected to create a pool with which they pay claims.

    Why should we have term insurance?

    A term insurance policy provides highest coverage at the lowest premium rates. The premium here is many times lower than the other types of life insurance policies. So, a term insurance doesn’t create any unnecessary financial pressure on the insured person, and through it, the insurance company promises a lump sum to be paid to the nominee.

    Tenure in a term insurance plan

    Tenure in a term insurance refers to the length of time you need to pay the premium to keep the policy in force. Normally, a term insurance plan can be purchased for 5, 10, 15, 20, 25, or 30 years, although some companies may not offer 5 years’ term insurance policy. You need to select the tenure depending on your current financial status and what your family targets in the near future like higher education of your child or marriage of your daughter, etc.

    Objective of a term insurance plan

    There are two primary objectives of term insurance that you desire for the family in your absence:
    • Meet day-to-day expenses and maintain the existing socio-economic status as much as possible
    • Meet basic future goals that are most necessary or inevitable

    Term insurance policies are available with several attractive riders that you can opt to make the policy more attractive and comprehensive. Such riders like accidental death benefit, disablement benefit, and monthly income benefit help to achieve the above mentioned objectives more efficiently. Term insurance is the most basic type of life insurance and very affordable too.

    why do you need to buy term insurance?

    If you are the sole breadwinner for your family, you would be worried about your family’s welfare in case of any unfortunate incidents. Your family will be deprived of the monthly income that you earned.

    Hence, in those situations, a term insurance plan can come to your rescue, as the insurer will provide the beneficiary or the nominee a sum assured in the event of the insured’s premature death during the tenure of the policy.

    However, if no claim is made and the insured survives the term of the policy, then no survival or maturity benefit is given. But still term insurance plan comes with a lot of benefits.

    Here are some of the reasons why you should buy a term insurance plan.

    Insurance gives you financial security:
    If you have any dependent or loved ones and you wish them to lead the same lifestyle post your untimely death, a term insurance provides that financial security to overcome the hardships. There are different versions on the amount of sum assured you should take the term insurance cover for. It should be 10 times your annual income, taking the rising inflation into account. The term of the policy should be chosen the number of years you are left with after subtracting your current age from the retirement age. For example, if you are 35, you should take a term plan for 25 years, considering the retirement age is 60.

    Term insurance comes with low premium and tax benefit:
    Compared to other insurance plans, the premium on term insurance plans is quite low. Some insurance companies also provide a term plan that gives back a certain percentage of the total premium paid in case the insured survives the tenure of the policy. The premium paid on this plan is also eligible for tax benefit under Section 80 C, up to Rs 1 lakh.

    Low claim rejection as compared to others:
    Generally, you should make complete disclosures about your health, habits and financials before taking a term plan to ensure it is not rejected. However, once the policy has been active for 10 years or more, claim rejections are lower. Besides, recently IRDA has mandated that a claim cannot be rejected two years after the policy came into force for non-disclosures of facts.

    Riders provide additional benefit:
    There is no one way that you can pass away or die untimely. Hence, in situations such as accidental death, permanent or partial disability, critical illnesses, a rider can be taken with the term insurance plan that can cover these risks at additional costs. It will help the insured as he will covered against other risks that can lead to untimely death.

    Who all can benefit from a term plan?
    This plan is not just applicable for the sole breadwinner who would like to cover his family financially in case of his untimely death. Someone who has taken huge loans can benefit from this plan. They can take term insurance plan to cover risk of death before they had paid all their loans. The sum assured can be used by the beneficiary or the nominee to clear all the dues. It also an inexpensive way to secure financially your domestic helps. Employers too can buy life cover for their employees and can claim the premium paid on such policies as business expenses.

    Hence, a term-insurance plan is a must for people who want to insure their loved ones financially when they will not be present with them due to untimely death. It is one of the best ways to keep your loved ones secure and happy.
    How does Term Insurance work?
    Abhishek, 30, is the sole breadwinner of his three-member family. He is worried about what will happen to his family and dependents if he meets with an untimely death. The family will be robbed of the monthly income that takes cares of all the house expenses. As he has taken a huge home loan, his family would be burdened to repay it in case of his untimely death as they will be deprived of the financial security of his monthly income after his death.

    In such a case, a term insurance plan will be of a great help to Abhishek’s family. Let’s see how.

    How a term insurance plan works security:
    Insurer promises a sum assured: In this plan, the insurer promises to pay the nominee a sum assured on the death of the insured during the tenure of the policy.

    Abhishek has to choose the sum assured wisely to cover his family’s financial requirements in his absence. A higher sum assured will attract higher premiums. And if he opts for lower sum assured, it may not cover his financial requirements adequately.

    Generally, the sum assured should be 10 times your income, taking into consideration the rising inflation. Premiums are low and remain the same throughout the duration of the policy: Term insurance plans generally cost less and attract low premiums. The premiums are calculated on the basis of the age and health of the insured, the sum assured, and the tenure of the policy. This is best suited for salaried-class people who want to secure their family financially in case of their untimely death. Employers also buy these plans for their employees and claim tax benefits as business expense.

    No maturity benefit on survival: If Abhishek survives the tenure of the policy, then no maturity benefit is given to him or his beneficiary. However, some insurance companies are now giving back a percentage of the premiums paid on survival of the policy.

    Beneficiary or nominee can use the sum assured as per their wish:The sum assured is given to the beneficiary or the nominee on the death of the insured. Abhishek’s beneficiary can choose to spend the money the way she wants. It can be used to repay the home loan or cover the education of the children. However, Abhishek can set up a will to allocate the funds of the sum assured among his various beneficiaries.

    Higher premium if you buy another policy if the first plan is not adequate or you outlive the policy term: Abhishek may survive the duration of the policy. In that case, the policy lapses and no maturity benefit is given. However, if Abhishek wishes to buy another term insurance plan, then he will have to pay higher premium as he turns older and his health conditions will also be taken into account. Hence, it makes sense to buy a term plan for a longer duration. Generally, the term of the plan is calculated as the difference between the retirement age and your current age. So, as Abhishek is 30 now, he can take a term plan for 30 years, considering retirement age is 60 years.

    No cash value: Term insurance does not build any cash value for you as the death benefit remains the same throughout the duration of the policy. It is not an investment or wealth-creation plan, but provides a security cover to your dependents in case of your untimely death.

    Hence, like in the case of Abhishek, term insurance is the best cover for those who have dependents surviving on their monthly income. The plan will cover them financially post the death of the breadwinner. This is a much preferred plan for its low cost premium and death benefit to the beneficiaries.
    Comparison of best online term plans in India
    When it comes to life insurance, term insurance plans are by far the most cost effective option. Offering financial protection against life, term insurance plans payout benefits to the nominee of the insurance policy. Some insurers also offer an additional sum insured for accidental deaths while offering protection against partial or permanent disability to make for an optimum protective instrument. Some of the popular term insurance plans available today are as listed below.

    1: Aegon Life iTerm Plus Insurance Plan: Aegon Life iTerm Plus Insurance Plan is a comprehensive protective term insurance plan offering coverage till the age of 80 years. Aegon Life iTerm Plus Insurance Plan offers a choice of 4 different plan options as per the policyholder’s protective needs.

    https://www.aegonlife.com/content/aegon-life-iterm-plus-insurance-plan

    2: Bajaj Allianz iSecure Term Plan: Bajaj Allianz iSecure Term Plan is a term insurance plan catering for the financial needs of a policyholder’s family in the event of any eventuality. The plan comes with two options of an annual renewable term and a level premium plan allowing term insurance protection for fixed number of years. The policyholders have the option of selecting the policy term of 10, 15, 20, 25 or 30 years depending on their requirement. Premiums paid are eligible for tax deductions under Section 80C while death benefits are eligible for deductions under Section 10 (10D) of the Income Tax Act.

    https://www.bajajallianzlife.com/term-insurance/isecure-insurance-plan.jsp

    3: ICICI Pru iProtect Smart special term plan: ICICI Pru iProtect Smart special is a term insurance plan offering comprehensive protection against death, accidental death as well as any terminal illness, disability, critical illness. The plan offers life cover up to 75 years of age (under Life Option) with premiums starting as low as Rs. 2400.What's more the policyholders can pay premiums either yearly, half-yearly or monthly.

    https://www.iciciprulife.com/term-insurance-plans/iprotect-smart-term-plan.html

    4: LIC eTerm Plan: LIC eTerm Plan is an online term assurance policy offering financial protection in any eventuality of unfortunate demise of policyholder. The plan will is exclusively available through online application process only and no intermediaries are involved. LIC eTerm Plan offers differential premium rates for Smoker/Non-Smoker lives. Policyholder must have own earned income. One cannot propose for anyone other than self.

    https://eterm.licindia.in/onlinePlansIndex/ login.do; jsessionid= 0C7E52BC520BF085829C2D23478F8D19

    5: Kotak Preferred e-Term Plan: Kotak Preferred e-Term Plan is an online term insurance plan offering life insurance protection at minimal costs. The plan comes with customized payout options like recurring payouts at fixed intervals or lump sum as per the nominee preference. Kotak Preferred e-Term Plan offers waiver of basic premium in the event of total and permanent disability of the policyholder.

    https://insurance.kotak.com/online-plans/online-protection-plans/kotak-preferred-e-term-plan

    6: Max life Super Term Plan: Max life Super Term Plan is a popular term insurance plan offering flexibility to choose the benefit payouts while offeringcomprehensive insurance cover at affordable prices. The policyholder can choose policy terms from a minimum of 10 years to maximum of 35 years making it ideal for vast range of individuals with different needs. The minimum premium for the product is Rs. 5,000 p.a. excluding extra premium. The policyholders have the option to choose a term between 10 years to 35 years, with intervals of 1 year. The policy offers riders like Max Life Accidental Death & Dismemberment Rider, Max Life Waiver of Premium plus Rider.

    https://www.maxlifeinsurance.com/Plans/ insurance-plans/protection/ super-term-plan.aspx

    7: PNB MetLife Mera Term Plan: PNB MetLife Mera Term Plan is a term insurance plan safeguarding your family's financial needs in the event of any eventuality. The plan offers a Joint life benefit to cover the policyholder's spouse in the same policy. PNB MetLife Mera Term Plan is a fully customizable protection plan which gives you the flexibility to choose from four payout options.

    https://www.pnbmetlife.com/insurance-plans/protection/mera-term.html#parentHorizontalTab

    8: SBI Life eShield term plan: SBI Life eShield is a term insurance plan offering comprehensive and affordable life insurance to safeguard your family's future financial needs. The online pure term plan offers the option of choosing amongst four plan options with a discount on premiums for non-smokers and female lives.

    "https://www.sbilife.co.in/en/online-insurance-plans/eshield

    9: Canara HSBC OBC eSMart term plan: Canara HSBC OBC eSMart term plan is a non linked, non participating term insurance plan offering life insurance cover at a low cost. With an easy claims process, the policy offers a dedicated manager to assist your family in claim settlement in the event of a claim. The case manager will be a one-point contact for your family making it easy for claim related assistance.

    http://www.canarahsbclife.com/ lifeinsurance/portal/canh/home/ for-individual/esmart-term-plan

    10: IDBI Federabl iSurance online term plan: IDBI Federal iSurance online term plan offers comprehensive life insurance for policyholders at lucrative premium rates. The plan is available for Indian residents, Non Resident Indians (NRI), Person of Indian Origin (PIO) or Overseas Citizenship of India (OCI) and Indian with dual citizenship. iSurance Online Term Insurance can be purchased online making it easy and affordable.

    https://www.idbifederal.com/Download/ Brochures/Documents/ IDBI%20Federal%20iSurance% 20Online%20Term%20Insurance% 20Plan.pdf

    Term Insurance plan Min-Max entry Age Min-Max Maturity Age Policy Term Premium Paying Term (PPT) Plan options
    Aegon Life iTerm Plus Insurance Plan 18-65 years Up to 80 years 18-80 years Equal to policy term
    • Life
    • Life plus
    • Life and health
    • Life and health plus
    Bajaj Allianz iSecure Term Plan 18-60 years 28-70 years 10-30 years Same as policy term
    • Annual Renewable Term Insurance Plan
    • Level Premium Term Insurance Plan
    ICICI Pru iProtect Smart special term plan 18-60 years 23- 75 years 5-40 years for regular pay You can choose to pay the premium once, for a limited period or throughout the policy term.
    • Life
    • Life plus
    • Life and health
    • All in one
    LIC eTerm Plan 18-60 years 75 years 10-35 years Same as policy term NA
    Kotak Preferred e-Term Plan 18-65 years 28-75 years 10 to 40 years (in multiples of 1 year)
    • Regular Pay: Equal to Policy Term
    • Limited Pay: 5 pay for policy term 10 to 40 years 10 pay for policy term 15 to 40 years
    • single pay: Single payment
    NA
    Max life Super Term Plan 18-65 years 75 years 10-35 years Same as policy term
    • Level Sum Assured Option
    • Increasing Sum Assured Option
    PNB MetLife Mera Term Plan 18-65 years 75 years 10-40 years Same as coverage period opted Full Lump Sum Payout, Payout as Lump Sum+ Regular Monthly Income, Payout as Lump Sum+ Increasing Monthly Income and Payout as Lump Sum+ Regular Monthly Income till child turns 21.
    SBI Life eShield term plan 18- 60 years 70 years 5 years (for Level Cover, Level Cover with Accidental Death Benefit), 10 years (for increasing Cover and Increasing Cover with Accidental Death Benefit)- max 30 years Same as policy term Level Cover, Level Cover with Accidental Death Benefit, Increasing Cover and Increasing Cover with Accidental Death Benefit.
    Canara HSBC OBC eSMart term plan 18-70 years NA 5- 40 years (Policy Term should be in multiple of 5 years (5/10/15/20/25/30/35/40) same as policy term NA
    IDBI Federabl iSurance online term plan 18-50 years NA 10-25 years Same as policy term NA

    How much Term Insurance do I need?
    Buying a term insurance plan without sufficient cover is like going on a long drive without spare wheels. Things can go wrong anytime leaving the passengers—your family— in the lurch.

    Turns out, it is not as much about whether you have bought insurance as it is about whether you have bought enough insurance to give your family sufficient financial cushion in case of your early demise—a probability statistically greater than you would like to believe.

    But how much cover is enough?

    There is no cut and dried approach to estimate this—individual situations being unique to each buyer. Experts in the insurance domain differ in their opinion on the matter. Here are a few popular methods to reach at a realistic sum that can help you get an optimal cover.

    The Income Method
    Multiply your annual income by 10. The product is the minimum cover you should look for in your term insurance plan.

    For example, if Anil earns a monthly salary of 60,000 rupees, his optimal cover would be 60000 X 12 X 10 which is equal to 72 lakh.

    Experts differ in this method on the multiplier though. While some agree on 8 to 10 times others recommend multiplying the annual income by at least 15 to 20 times.

    The major drawback of this method is it does not take into account liabilities and one-time needs like children’s education, marriage etc.

    The Expenses Method
    Also popular is the expense method. Many advise multiplying your monthly expenditure by 50 to get a sufficient cover. Again this sounds like an arbitrary estimate but the proponents of this method swear by its effectiveness.

    The Premium Method
    A sum assured which is equal to 30-40 times the lump sum premium is also believed to suffice the insurance needs of a person.

    The Assets-Liabilities Method
    To explain this method let’s take the case of Anil in the earlier example.

    Let us say his is a family of four, the other three members being his wife, a son and a daughter. Further assume he has a car loan, a home loan and a personal loan to pay off with outstanding (at the time of buying insurance) of 5 lakhs, 25 lakhs and 2 lakhs respectively.

    Now let us work out the replacement income Anil’s family will need after him. To simplify things, assume Anita, Anil’s wife, is a homemaker i.e. Anil is the sole breadwinner of his family. As mentioned earlier Anil’s annual salary is 7, 20,000 (all figures in rupees henceforth unless specified) so his annual replace income should be three-fourth of this income in his absence (remember he is a family of four) i.e. 6, 00,000. Anil is 45 years of age now and he has chosen term of 15 years, the time up to his retirement. So the final replacement income for his family becomes 15 times 6, 00,000 which is equal to 90 lakh.

    Moving on to other liabilities, Anil will need funds for the remaining education of his children, say 20 lakhs. At some point of time he will also have to bear marriage expenses for her daughter, ignoring for simplification that his son’s marriage will also incur expenses. Let us assume this figure to be 25 lakhs. Adding this total of 45 lakhs to his loan liabilities which amount to 32 lakhs in all, we get a total liability of 77 lakhs. If he dies right away he will need 90 + 77=1.67 crore.

    Taking stock of Anil’s assets now, let us see what he possesses. He has a home, a car, liquid asset in form of savings and cash-in- hand, and an investment in mutual funds with corresponding figures of 30, 4, 3 and 40 in lakhs and at present market value. The total financial value of his assets is therefore 77 lakhs.

    As a final step, we now calculate his total insurance requirement as the difference between the financial equivalent of his liabilities and assets which is 1.67 crore – 77 lakhs=90 lakhs.

    These methods can prove to be a handy tool for calculating your insurance need but each of these has some limitations. Like mentioned before, since insurance needs are unique to each buyer, a good amount of personal judgment and self-assessment is necessary in addition to applying one of these methods, to reach a realistic sum necessary to cover your family adequately.

    A Word of Caution
    Several other factors must be taken into consideration before calculating your insurance need. You should not forget that the premium goes out from your disposable income and can be quite a strain on your expenses. Furthermore, you should take into account your lifestyle, spending habits and status of living before making a decision. If you have considerable assets you may not need a big cover and can do well with a basic plan. On the other hand if liabilities exceed your assets considerably it may not be wise to settle for an inadequate cover to save on premiums as you do not want to be under-insured. Finally, you must also be mindful of the type of term insurance plan you choose.
    Eligibility criteria for Term Insurance
    Term insurance plan is a type of the life insurance plan that offers individual life coverage for a limited period. If the policy owner expires during the time of the plan, the beneficiary or nominee as per the document will get the full sum assured.

    But can everyone avail a term plan? Or, are there any eligibility criteria for availing a term plan? Let us see.

    A term plan is open for all. However, based on the age and health conditions of the insured, there are certain conditions put forward by insurance companies for availing a term plan. Insurance companies have added these criteria for lessening their risks and safeguarding misuse of insurance plans when they offer high cover at very reasonable pricing. The eligibility criteria of term plans are based on different aspects that include the policy term, plan choice, entry age, death benefits, maturity benefits, and other optional benefits.

    Policy Term: A term insurance is offered from 5 to 25 years. For policies with single premium payment, the term varies between the 5 years to 15 years.

    Entry Age: The minimum entry age for taking the insurance is 18 years and the maximum age for getting insurance is 65 years. Certain terms and conditions are applicable for insurance seekers with entry age greater than 60 years.

    Maturity Age: Term plansgenerally come with the maximum maturity age of 65 years and it is 75 years to the whole life plans. Some whole life plans offer coverage for the whole life, or as long as the premiums are paid.

    Health conditions:Most companies ask for medical tests for policy buyers above 35+ years to be eligible for a term plan. For some companies, it is for buyers of 40+ years. It depends on the sum assured one opts for. Higher the sum assured, higher the chances of medical tests being required.

    Lifestyle:Usually, insurance companies are interested to offer plans for individuals with healthy lifestyle habits. They ask questions regarding the insurance seeker’s drinking and smoking habits to analyse the risk involved, and may reject the policy or charge a higher premium if the insurance buyer is a frequent smoker or drinker.

    Occupational Risks: nsurance companies also consider the various risks involved while issuing a policy. Adventure hobbyists, occupational risks, etc are considered before approving an insurance application.

    Pre-Existing Diseases:If the insurance seeker suffers from any diseases, it should be declared at the time of application. The company can reject the policy application or charge a higher premium after analysing the risks.
    Types of Term Insurance
    Individual insurance needs differ and this is the basic premise on which insurance companies diversify their products. There are people who may not care for a life insurance plan. They might already have one and be looking for additional cover. They might even feel that do not need a lifelong cover and would rather like to be covered for a specific set of risks and for a specific term only.

    To cater to such peopleinsurance companies offer term insurance plans . The trade-off here is – the insured is willing to limit the extent and duration of risks covered and the insurer is ready to decrease the premium accordingly.

    However, one must have a basic understanding ofthe types of term insurance plans to choose a plan that provides adequate cover in addition to being cost effective.

    Classifying Term insurance Products
    Term insurance planscan be classified into various types based on consistency of sum assuredthroughout the term, flexibility of cover and repayment functionality. However, the various categories overlap meaning the same plan can fall into different categories. Effectively, there are only a few distinct types and a perusal of the following synopsis will dispel any myth or confusion regarding the various types of term insurance plans.

    Regular Term Insurance Plans
    Regular Term Insurance plans – also called as Pure Term Insurance Plans or Standard Term Insurance Plans— belong to the most basic type of term insurance. These are also one of the cheapest policies in term insurance and for a reason. These plans provide a basic predetermined cover/sum assured for a fixed term. You pay a lump sum to buy these plans or opt to pay premium periodically. There are no riders or add-ons available with such plans and the liability of the insurer ends with the expiry of a successful term, i.e. no financial reward for buyer surviving the agreed term. The sum assured depends primarily upon age, length of the term and the premium.

    Convertible Term Insurance Plans
    These plans are different to regular plans in as much as these can be morphed into a permanent or life plans subject to fulfillment of certain terms and conditions. This category also includes those term plans that double up as a savings and/or investment plans. This functionality can be offered by the insurer as a rider benefit or sometimes as a standalone policy. Naturally they come at a higher premium.

    Term Return of Premium Plans
    Term Return of Premium plans or TROP’s are, as the name implies, premium refund policies where the premium paid is returned to the insured at the end of the policy term – of course on the condition that the insured survive the term without a claim. Since these policies carry a reward for survival they attract a higher premium. Important to note here— the amount returned at term end is total premium paid minus taxes.

    Level Term Insurance Plans
    Term insurance plans can also be classified on the basis of consistency of sum assured through the agreed term. Level Term insurance plans are those where the sum assured remains constant throughout the term. Suppose, Anita buys insurance for a 20-year term and her policy assures a fixed sum in the eventuality of death mid-term irrespective of whether she dies in the very first year or in the 20th. In this case Anita has bought a level term insurance plan.

    Decreasing Term Insurance Plans
    Let us further suppose that Anita has taken a loan and her bank has offered her an option to buy insurance for this loan either in-house or from a different insurance company. This kind of insurance can cover loan or the collateral for the loan as the case may be. In such arrangements the sum assured decreases with every passing year of the term very much in proportion to the loan liability. This is an example of Decreasing Term Insurance Plan. The premiums for these plans are generally low and charged as lump sum. As a rule, premium are borne out and paid by the loanee or the mortgagee (Anita, in this case) but in many cases the banks or the lending institutions pay the premium on behalf of the insured and, naturally, deducting the same from the loan forwarded. It can be pointed out here that Decreasing Plans are generally associated with loans and mortgage.

    Increasing Term Insurance Plans
    As a corollary to the Decreasing Plans there are Increasing Term Insurance Plans, which work quite the opposite – the sum assured goes on increasing with time. This type of insurance caters to risk-wary individuals or those who have reasons to feel that they are under insured and every passing year adds more risk to their life. These plans charge higher amount as premium obviously. Also worthwhile to mention that there is generally a cap on how much the sum assured could be increased to—a prevalent practice is to keep on increasing the sum assured every year by a certain percentage until it doubles itself.
    How to choose a Term Insurance Plan
    Well begun is half done is an understatement in the context of choosing a suitable term insurance plan. In fact choosing a perfect plan in the beginning gets the whole job done

    But there’s the catch – it is not a walk in the park. You have to factor in several things before signing the dotted lines.
    Does it cover me adequately? Do I need a flexible plan instead? How much insurance I need exactly? Is it the most optimal choice in terms of sum assured, risks covered and the premium I pay? In short, is this the best possible bargain? These could be some of the questions you would like answered before writing your check.

    Very often you are the best judge to determine what clicks for you. Nevertheless, something in the nature of a guideline or checklist always helps. Here are a few pointers that will set you on the right path to choose your best term insurance plan:

    Nature of Insurance: Plain Vanilla or Strawberry?
    Term insurance plans come in all flavors. You have to do a self- assessment and ask yourself what sort of insurance will work for you. Will a bland, bought- it-forget- it, plain vanilla cover do for you or you would rather have a multi-ingredient cover with one or several of rider benefits like accidental cover, return of premium capability or critical illness?

    A simple life term insurance will obviously cost you less than one with added features. But costs come second to concern for family which is the main reason for buying insurance.

    Extent of Insurance: Bigger the better?
    One very important consideration before buying a term insurance policy is how much of a cover is enough cover for you. You may be a Yuppie (young urban professional person in employment) and a single now and you would like to believe you do not need to invest big in insurance and instead focus on building an investment portfolio. However, such thinking is flawed. What if you marry and decide to have children? Naturally, the right cover for you will drastically increase.

    So how much cover does one actually need? While there cannot be a unique answer to that and depends on individual situations, there seems to be a wide consensus on the theory that insurance cover should at least be ten times your annual income. This is something to go by while deciding an adequate cover for your family.

    Adjustment to Inflation
    As an appendix to the last pointer, it is also advised to calculate your adequate cover after factoring in the nuisance of inflation. We live in highly inflated times—a double figure inflation is ever looming large on us. Thankfully, there are term plans of increasing nature, which increases the sum assured by 5-10% annually to counter inflation.

    If your term plan of choice is level type, you will need to increase your cover proportionately. That said, you cannot go wrong with the ‘ten times the annual income’ rule.

    Right Age to Buy: An Early Bird Catches the Worm
    Being an early bird gets you cheaper bargain when it comes to buying term insurance. For example, a 30 year old can get a cover of one crore for as little as 20 rupees a day, but a 60 year old may be charged an astronomical amount as premium for the same cover. Or they could be denied any cover at all.

    Cost Benefit AnalysisA
    Term plans are popular as they are considerably cheaper than insurance for entire life. You can save even further by decreasing the amount of cover you need, the number of years you want insured for and by opting for a no-frills basic plan. However, that may not be the best ploy.

    Decreasing the quality and extent of insurance for a few bucks is as nonsensical as opting out of insurance altogether. If addition of an insignificant amount provides considerable enhancement to your cover you should definitely go for it.

    Buy Insurance Online or Offline?
    It does not mean however, that you do not have other ways to reduce the cost of insurance without compromising the quality of cover. Buying insurance online is generally cheaper than buying through an agent as you can compare plans offered by different companies. The process is more transparent and you get a better idea of what you are buying.

    The Choice of Term
    However, nothing is more important in a term insurance plan than the term itself. And plans are offered for terms ranging from 5-50 years. In fact, a big state-owned insurance company is offering a term insurance for up to 100 years of age! General practice is to get insurance till retirement. However, it is a subjective matter and differs from person to person. Early or late marriage, one or more children, early or late retirement – all these things must go into consideration for deciding on the tenure of insurance.

    The Choice of Insurer
    Last and certainly not the least, one must be very mindful of the authenticity of their insurer. Always go for a reputable insurance company—an established name in the industry. And between two good insurers, choose the one with a better claim settlement ratio. You can also compare their Assets under Management (AUM) and solvency ratio.

    These pointers are more in the nature of broad guidelines. Use it with your own discretion and careful self-assessment to find your perfect term insurance plan.
    Documents required for applying for a Term Insurance
    A term insurance is the most simple and pure form of insurance. Every insurance product is designed for a different purpose and the main purpose of term insurance is to provide for the loss of income that a family may suffer if the income to the family is not available due to any unfortunate event like death or disability of the bread earner.

    Though the main purpose is to provide for death now a days critical illness and disability is also covered under a term plan. Purchasing a term insurancerequire the applicant to provide the company with a different set of documents. Each document is required to verify the KYC details that one has provided.

    The set of documents required to buy a term plan fall into these broad categories:

    • Id proof
    • Address proof
    • Age proof
    • Income proof
    • Health proof in form of medical tests

    Id proof
    One needs to provide the proof of identity as it is a mandatory requirement by law. The following documents are accepted as valid id proofs.

    • PAN Card
    • Passport
    • Aadhar Card
    • Voter Id card

    Make sure that the full name that you have provided in the application form matches with the name in the documents. In case of mismatch, your application would not be approved. This becomes a problem on for many applicants, as sometimes only the first name is there in the documents. In such cases, additional documents, which validate the identity, may be asked.

    Address proof
    The address proof would be validated by document which carries your full address just like Id proof make sure that the address you provide in the application form matches with the address proof you are providing

    The following documents are taken as valid address proofs:

    • Leave & License agreement
    • Bank Statement or Passbook with entries for 6 last months
    • Credit Card statement, not more than 3 months old
    • Driving License with address
    • Electricity / Telephone / Water / Gas bill
    • Passport
    • Ration Card
    • Voter ID card
    • Aadhar Card

    Age proof
    Applicant’s age is important, as the risk premium increases with age. Also the duration of the cover one can get depends on the age. The following documents are valid age proofs

    • PAN Card
    • Passport
    • Aadhar Card
    • Voter Id card
    • Marriage certificate
    • Ration card
    • Birth certificate
    • Driving License
    • School/College mark sheet etc

    Some documents can serve the purpose of age, address, and id and one do not need to provide multiple documents.

    Income proof
    The amount of sum assured that a company can offer is directly dependent on one- income. Usually a maximum of 20 times of one’s income is provided. So income proof is another important document. The following are valid income proofs.

    • Salary slips of last three months
    • Last three years Income Tax Returns
    • Bank statement with entry for salary for three
    • Latest Form 16

    Health proof
    The applicant is required to answer a detailed questionnaire on his health status. It is imperative that one answers the question truthfully. If one is seeking a high cover or has any pre-existing ailments or habits like smoking, then the company would want to undergo a medical test at company prescribed centers. Once the health status is verified, the company may give you revised premium offer or as in most of the cases may not change the existing premiums and in some cases may decline to cover you.
    The aim of asking for these documents is twofold: one they are required by law and second to provide the applicant with best possible alternative. So one should be honest about their health condition and should cooperate by providing the right documents.
    Claims Process for a Term plan
    The claim process for term insurance plans essentially deals with the verification of the claim made by the claimant in case of death, critical illness, or disability of insured.
    A vanilla term insurance only covers death, but if one has taken any riders for critical illness or accidental death, then documents pertaining to the same are required. The entire process is designed to settle the claim with minimum hassle to the customer. The process of claims is easier if all the details have been truthfully given at the time of application. In some cases, the insurance company may ask the claimant to provide further details or the claim may be declined, but this happens only when there is some discrepancy in the facts provided.

    Insurance claim process is simple and consists of the following steps:

    • Claim intimation
    • Submission of document
    • Verification
    • Claim payout

    Claim intimation
    The claim could be initiated by using various means:

    • One can contact the agent from whom the policy has been purchased.
    • One can intimate the company by sending an e mail to their customer care.
    • One can call the helpline and follow the instructions.
    • One can contact the nearest branch.

    In the case of death of the insured, the company is to be notified immediately, but in the case of critical illness, the company is to be intimidated after a mandatory survival period, which is generally 28/30 days.
    Once the claim is registered, the company would ask for documents to be submitted. Different sets of documents are required for various types of claims.

    Documents required for death benefits:
    • Original policy documents
    • Original / Attested copy of death certificate issued by local municipal authority
    • Death Claim Application Form (Form A)
    • NEFT mandate form attested by bank authorities along with canceled cheque or bank account passbook.
    • Nominee's photo identity proof like acopy of passport, PAN card, Voter identity card, Aadhar (UID) card, etc

    In case there is no nominee or the nominee has also expired, then in such cases a Registered Will or Succession Certificate that has been issued by a court is required. In the case of Succession Certificate, specific orders as to how to distribute the claim amount should be there. In the case of a Will, a Probate is needed along with a copy of the original Registered Will.

    Additional documents required for death from illness:
    • Attending Physician's Statement.
    • Medical records (Admission notes, Discharge/ Death Summary, Test reports etc.)
    • For critical illness, all the medical records and reports by the hospital or doctor are required

    Additional documents required in case of accidental death or unnatural death:
    • A copy of the First Information Report (FIR) or Panchanama/Police Complaint
    • Copy of Post Mortem Report (PMR) / Autopsy and Viscera report
    • Copy of the Final Police Investigation Report (FPIR)/Charge sheet

    Claim Verification Process by Insurance Companies
    Once the insurer has been informed and all the documents submitted, the process of verification would start. The company would verify the facts provided in the documents, and if everything is found all right, the claim would be passed. In the case of some discrepancy, they may ask for additional documents.

    Claim settlement
    As per law, a claim should be settled within 30 days, but in case of any further verification needed by the company, the time frame is 180 days. The claimant is to be notified at all times.
    Once the claim is approved, the money would be paid in the claimant’s bank account or by cheque to the claimant.
    The entire process is now transparent, online, and designed to settle the claim with minimum paperwork, and the claimant is kept in the loop all the time. So obviates the common myth that insurance companies always do not want to settle the claim.
    Exclusions for Term Insurance Plans
    A term insurance plan is the simplest form of insurance, which is intended to cover the loss of income if the earning member of the family meets with an unfortunate event. But this cover may be denied by the insurer under some conditions.The conditions in which the insurer may refuse to pay the death cover or sum assured are known Exclusions.

    Exclusions come into force when the insured dies an unnatural death. If the death has occurred in the normal course, there are usually no problems. But in the case of unnatural death like suicide, accident or death due to any critical illness or lifestyle related demise, the insurer reserves the right to reject the claim.

    Let us look at some of the common exclusions under a term insurance

    Death due to suicide
    Suicide, if it happens within the first year of purchase of the policy is strictly not covered. Even if the suicide is after one year, in that also sum assured is not payable, but the company may refund the premium paid.

    The reason for this is that Term insurance is purchased with the intent that in the case of some unforeseen event, the family is assured of an income. But suicide is an intentional act of death. If a person has committed suicide, that means he has done the same with full knowledge of its effects on his family. If insurance companies start entertaining suicide cases then, it may be misused by anybody to provide money to their family. Also it may increase crime as a person may be forced to commit suicide for the sum assured. So suicide is strictly not covered.

    Death due an accident or critical illness
    Accidental death iscovered under Term insurance plans but under some circumstances, the claim may be denied these are

    • When the accident takes place under the influence of alcohol or drugs the claim is strictly not payable
    • If death takes place in an act of war
    • If death occurs while taking part in some risky activity like scuba diving or racing
    • When death takes place due to any activity that is criminal in nature
    • For females, a death due to pregnancy or any complication during child birth is not covered
    • In case the death is due to pre-existing illness

    At the time of application, the application form clearly asks a person to state whether he/she is engaged in any type of activity, which could put his /her lives in danger. Insurance companies would assess the risks once the form has been submitted and may choose to deny giving cover or increase the premium. Same is the case with any pre-existing disease. The same should always be disclosed. It is better not to take a Term insurance plan than taking one by giving false information.

    Death due to lifestyle related diseases
    A lifestyle related disease like any complication due to excessive smoking or drinking are not covered. You are asked to disclose the same at the time of application. If a person admits that he is a smoker or drinker, it does not mean that the cover would be denied but the company may choose to increase the premium. But if a person has stated that he does not smoke but the death is due to any illness caused by such lifestyle habits, the insurer would surely deny the claim. So it’s better to disclose than to hide the same. Also in such cases, the time elapsed after taking the policy is also important. If a reasonable time has elapsed and then some complication occurs, the insurer is likely to look at the case differently.
    No insurance company wants to deny a rightful claim. The whole idea is to not allow for any misuse of the insurance policy.
    Useful Tips to Buy Life Insurance
    Most of us end up buying a life insurance just to get a tax rebate under 80C of Income Tax Act. Then life insurance as a product is much beyond that, it’s a serious tool for securing the future and a rock solid financial backing for your dependents in your sudden demise. So often, we don’t get into depth of it but park our money for the sake of it and claim tax rebates. But not so long, you realise having a wrong policy and keep regretting for the same.
    It is hence advisable to make an informed decision and choose the right policy for a better future. Not everyone is well versed with the necessary information needed to buy a policy as per their need, hence following some basic tips would help them to select the best fit for their financial need.

    1. Understand your need
    There should be a purpose for buying a policy. If there isn’t then better to stay away than ending up buying the wrong product and repent later. If there isn’t any dependent then no need to buy a life insurance. You will be better off with a good mediclaim or health insurance. But if there’s dependents and they cannot sustain their current standard of living in your absence, then you should definitely buy life insuranc

    2. Have clarity on coverage and sum Assured
    While availing a life insurance policy, calculating the sum assured is the most critical step once you have analysed your need and chosen the policy that suits you. Make sure that you don’t end up under-insuring yourself. Have a clarity on the coverage part too. As a general thumb rule - sum assured should be at least 12-15 times your annual expenses or 8-10 times your annual income. If you have a debt, such as a home loan, factor it in that too while calculating your cover.

    3. Avoid riders or add-ons unnecessarily
    Do not add riders to your basic plan just for the sake of it. broker and agents will make it look fancy for you, but have a thorough understanding of the same before availing it. Opt for them only if you know what purpose it will serve. Remember, riders are not free. The cost of riders will be added to your insurance premium. You should be prepared to shell out that extra money for adding riders.

    4. Give away correct information
    This is vital. Always be true to yourself while filling up the proposal form. Furnish correct information and reveal medical history. Often at a later stage, because of this ignorance or fallacy, the claims get rejected resulting into frustration. Fill up the form all by yourself and avoid getting it done by agents or broker.

    5. Buy at a younger age
    The cost of an insurance policy is directly proportional to your age, which means cost increases as you grow older. Hence, it is advisable to buy a suitable policy at a younger age. An insurer sees you as a business prospect, when you are young there is less chances of your death and hence low risk. As you grow old, your value depreciates and you are likely to have more problems. So the cost of premiums is low when you are young. Few insurers even refuse to sell their policy once you reach 60 years.

    6. Keep investment and insurance separate
    Insurance companies are in the market with various offers to lure you. You must be concerned about your financial health and not give into their trap of giving them profits. Policies such as whole-life, endowment, money back plan etc pay very high commissions, as high as 20-40%. If not needed, it’s always recommended to get a term policy and invest the balance elsewhere.

    7. Plan long term
    Insurance plans aren’t short term instruments that will give quick returns. You need to have at least a 10 year’s horizon, so ensure that you will be able to pay the same premium ever year consistently. Never stretch yourself just to meet the 80C investment limit. Surrendering a policy midway can devastate your investment plans overall.

    8. Utilise free look-up option
    As per IRDA, here is a mandatory 15 day period during which one can return a policy. Within these 15 days, the buyer gets to scrutinize all the policy document and in case of any mismatch between what was promised and what the customer receives, the latter can opt out.

    9. Consult a qualified financial advisor
    Insurance broker run after commissions. So often they will force you a product that offers his best commission. Free advices are not the best ones, they often are not clear about the nitty gritty of the product and generally deliver details that are told to them in Sales meetings. It would be best to get a paid advice from a qualified financial consultant, who can help you create your portfolio too.

    10. Buy online
    Internet has made life simpler. Even term policies available online are cheaper and easy to buy. Comparing various brands are now easier through the broker sites, one can also read the reviews before narrowing on to a particular company. Also cross check details in company’s own website.
    What are the different types of riders under term policy?
    Term insurance is the most common form of policy availed by Indians. The insurance plans are typically designed to protect family members financially in case of any unfortunate and unforeseen circumstances. Term insurance comes with multiple benefits besides the core offering of death benefit and helps in leading a stress free life, while protecting the future of the dependants.
    A term insurance with riders act as a supplement to your basic cover and gives you extra benefits that can strengthen a term policy by shelling out a few extra bucks. However the best way to opt these riders is to first realize the future financial needs and then narrow down on the rider that suits your financial requirement the best.
    The various riders that enhance the basic term policy come with a slight higher premium but offers extra coverage and additional protection. Listed below are some of the important riders offered by insurance companies.

    Waiver of Premium:
    This rider ensures that your policy remains active even if you fail to pay insurance premium. This safeguards policyholders against policy lapse in case of non-payment of premiums. Non-payments could be due to various reasons that may arise out of complex financial conditions like joblessness etc. This rider Waiver of premium ensures that your policy remains in force even if you are unable to pay your premiums.

    Critical Illness:
    A very important rider in the world of uncertainty. Medical expenses including hospitalization made towards critical expenses can cause a financial havoc to any individual, if proper provision is not taken timely. Hence, a critical illness rider goes a long way in protecting policyholders from any major medical expense and also makes sure that medical attention is not delayed or ignored due to lack of funds. This rider generally extends medical coverage for illnesses like heart attack, stroke, kidney failure, cancer, paralysis and certain other illnesses and helps policyholders avail a certain pre-decided lump-sum amount as soon as either of the illness is detected. Depending on the insurer’s T&C the basic term policy might continue to cover or seize to exist.

    Income Benefit Rider:
    This rider can be oxygen for your family in your absence helping them with regular financial support. It offers benefit to the policy holder’s family in case of his/her sudden death and can act as a source of income for the dependents. Payment is generally made as some percentage of the total sum assured and this acts as supplementary income for dependents for next 5 – 10 years along with regular sum assured.

    Accidental Death:
    Accidents are unpredictable and it can leave your family devastated both emotionally and financially on occurrence of accidental death. Accidental death rider is best suited to those who wish to leave their families a substantial sum of money in case of sudden death caused due to accident. Since, accidental death may involve higher medical expenses and unfulfilled financial liabilities, this rider offer extra payment to your family in case of accidental death. The basic sum assured applicable on term insurance will still be paid even if this rider is not availed.

    Partial and Permanent Disability:
    This rider comes as a saviour if you face permanent or temporary disability caused due to accident. The partial and permanent disability rider offers staggered payments that are basically a percentage of the total sum assured of your insurance policy. Generally, policies offer 10% or more of the sum assured every year to the individual or his/her family. This compensates for the loss of regular income that may arise due to partial or permanent disability of the policyholder caused due to accident.
    Can policy premium be paid in lump sum or in instalments?
    The first thing one has to keep in his mind when deciding to avail any insurance product is about the premium payment amount and its frequency. Since insurance is a long term product, one should have financial capabilities to the premiums in future. However, policy buyers are always in dilemma as to whether or not to pay the entire premium at one go (single premium) or would go for instalment payments at regular intervals such as monthly, quarterly, semi-annually or annually.
    There are certain factors, which needs to be analysed before deciding on the frequency of the premium payment of your policy. IRDA has given provisions to the insurance companies and accordingly they are fine with either of the mode.

    i) Cost Factor
    Cost factor is something that is vital and should be considered while you opt to choose a policy. While at the outset, a lump sum amount paid as premium might look as beneficial and cheaper, but that may not be true always. Factoring inflation and time value of money, it might turn out to be an expensive option. Hence, calculate your premiums upfront before deciding on it.

    ii) Affordability Factor
    Paying the premium all at once for a salaried class could be a financial overload. Unless one has money lying idle to pay such lump sum amount, it is advisable to go for instalment payments at regular intervals – that would be affordable and less strenuous.

    iii) Convenience Factor
    In case you are a person who remains busy with your schedule and tends to forget premium payment dates. Then a lump sum payment makes sense, else there’s a possibility of skipping the premium which would lead to policy lapse.

    iv) Risk Factor
    Insurance products are long terms with a tenure of anything over 10 years. By investing at one go you might expose yourself to market volatility thereby mitigating risk. Whereas a regular premium protects you from market fluctuations and your investment cost is averaged out over a period in time.

    v) Tax benefits
    One must know the fact that, tax benefits can be availed on payments made in a particular financial cycle. Hence, if lump sum is paid that is accounted for tax benefits of only a year, whereas the same can be availed year on year basis frequency of premiums paid. However, depending on an individual’s capability and flexibility to pay premium, the frequency has to be decided. Insurance companies have both the options open for its customers under the ambit of IRDA’s rules and regulations.
    What are the medicals that I have to undergo while buying a term policy?
    The sole purpose of undertaking medical tests before availing a term insurance is to determine the health quotient of the applicant. Based on the test results the insurance company provides you a customized plan with better cover. An insurer mostly decides the premium based on risk perception. Taking a medical test before buying a term policy can significantly lower your premiums.These medical tests are determined based on applicant’s age, sum assured, term and other details provided in the proposal form. This is based on company’s underwriting guidelines and internal requirements. The required tests are however borne by the insurance companies

    Basis the underwriting requirements of the proposal for insurance, you might be required to undergo routine medical tests which could include a review of your medical history, along with details of doctors consulted so far. Basic physical exam of height, weight, blood pressure, pulse rate may be conducted and a urine sample and blood work may also be taken. If need be, EKGs or treadmill EKGs are conducted too. A licensed paramedical examiner associated with insurer’s Third Party Administrator generally conducts these examinations.

    The examiner could probe into any pre-existing or previous medical conditions, surgeries, medications, or other treatments you may have had. As a normal practice report of these tests are not shared with policy buyers, however on request it can be availed.

    Basis your age and risk cover, following are the tests, which one has to undergo before buying a term policy. Full Medical Test, which is common across age groups, consists of fasting blood sugar, blood count and blood pressure tests along with ECG. Certain kidney and liver test can also be added from case to case basis.

    Age Groups
    Risk Cover 18-30 years 31-40 years 41-50 years
    Upto Rs 2 Lakh No Test No Test Full Medical Test
    Rs 2-5 Lakh No Test Full Medical Test Full Medical Test
    Rs 5-10 Lakh Full Medical test Full Medical test + HIV test Full Medical test + HIV test
    Rs 10-20 Lakh Full Medical test + HIV test Full Medical test + HIV test Full Medical test + HIV test + Blood serum test
    Rs 20-30 Lakh Full Medical test + HIV test Full Medical test + HIV test + Blood serum test + Routine Urine Analysis Full Medical test + HIV test + Blood serum test + Routine Urine Analysis
    Rs 30-40 Lakh Full Medical test + HIV test Full Medical test + HIV test + Blood serum test + Routine Urine Analysis Full Medical test + HIV test + Blood serum test + Routine Urine Analysis
    Above Rs 40 Lakh Full Medical test + HIV test + Blood serum test Full Medical test + HIV test + Blood serum test + Routine Urine Analysis Full Medical test + HIV test + Blood serum test + Routine Urine Analysis + Comprehensive Trail-making Test

    >What are the documents that my nominee must furnish in case I die during the policy term?
    You are the sole breadwinner in your family. You know the importance of your monthly income that keeps the kitchen fire burning. But what if you meet with an untimely death?

    Then the monthly income will no longer be there to take care of your beneficiaries’ financial needs. Hence, a term plan will come to your family rescue if you have taken one when you were alive and running the household.

    A term plan gives a sum assured to your beneficiary or nominee in case if you die within the tenure of the policy. The financial help will take care of your family needs, your children’s education, and even take care of loan instalment, if any.

    But your nominee needs to know what documents need to be submitted to claim the sum assured on death of the insured. You will not be present to help out your nominee. Hence, it is important to educate your nominee about the documents that need to be submitted to make claim on the term plan once you pass away during the duration of the policy.

    Documents required for claim filing
    The documents required differ on the cause of death. However, there are a few common mandatory documents required to be submitted irrespective of the cause of the death.

    Here are the mandatory documents required to make a claim on a term plan:
    • Policy documents in original
    • Attested death certificate
    • Death claim application form or Form A
    • NEFT mandate form along with cancelled cheque for online transfer of claim amount
    • Nominee must submit proof of identity such as a copy of passport, PAN card, Voter ID card, or Aadhar card.

    However, there are few extra documents required depending on the nature or cause of death. If death is due to natural causes or medical reasons, the following additional documents must be submitted as well:

    • Attending physician’s statement or From C
    • Medical records such as admission notes, death summary, test reports, among others

    But if the death of the insured is due to accidental or unnatural causes, then the following additional documents must be submitted as well:

    • Copy of FIR (First Information Report)
    • Copy of PMR (Post Mortem Report) or copy of autopsy and viscera report
    • Copy of FPIR (Final Police Investigation Report) or Charge Sheet

    However, different insurance companies may demand a few extra documents to satisfy themselves that the claim is genuine before passing on the amount to the beneficiary.

    As the sum assured will be passed on to the beneficiary after the death of the insured, it is the duty of the policyholder to educate his nominee beforehand on the paperwork to be done so that the claim can be settled peacefully. Hence, the nominee must be told of the various formalities to be completed to claim the sum assured on the death of the insured to have a financially secured future.
    Which Insurer process death claim fastest
    It has been five months since Nilesh met with an ill-fated accident and succumbed to death. He was 41 years and left his family with an irreparable emotional void. Fortunately, he had a life insurance policy worth Rs 60 lakhs but the claim amount is still pending as his wife is still trying to figure out the process of filing a claim and the required documentations.

    Death is inevitable. When the life assured dies during the term of the policy, the proceeds under the policy can be claimed by the beneficiary. This is known as a death claim. A very vital aspect one needs to check before buying a policy from a company is their Claim Settlement Ratio. IRDA releases company wise report of the ratio by end of every financial year. It uses the following simple formula to calculate the ratio.

    Claim Settlement Ratio=Total Claims Approved (paid to nominees) divided by Total Claims Received by the Company

    Listed below are the top life insurers with an impressive claim settlement ratio in 2016-17.

    Insurer Claim settlement ratio
    HDFC Life 99.16%
    SBI Life 97.98%
    Max Life 97.59%
    ICICI Prudential 97.20%
    Reliance Life 94.91%
    Birla Sunlife 94.21%
    Edelweiss Tokio Life 93.29%
    Kotak Life 92.59%

    Here is a step by step guide to ensure a faster claim processing from your insurer.

    Step 1: Inform the insurance company about the unfortunate incident, either by visiting the nearest branch or through call centre. Even the agent from where the policy was bought can be informed.

    Step 2:The nominee needs to submit a claimant’s statement along with some vital documents like – original policy papers, FIR from police, death certificate, post-mortem report (in case of accidental death).

    Step 3:nsurer initiates evaluation process. If need be, they can conduct further investigation through external agencies to check the authenticity of the claim made.

    Step 4: After receiving all documents, the requisite claim is settled. A life insurance company is required to settle a death claim without investigation within 30 days. While those requiring investigation will have to be settled within 6 months. As per section 45 of the Insurance Laws (Amendment) Act 2015, no claim can be rejected after three years of a policy being in force.

    IRDA is ensuring claim settlement guarantees becoming a part of insurance policies. Insurers can promote these guarantees, if they are filed along with the product at IRDA. Claims guarantees make sure that families receive some benefits if claims are delayed.

    To ease the process of claim settlement, many insurers have introduced a claims tracker in their website and send regular SMS alerts to keep claimants updated. Having a bank partner makes settling claims easier and faster, because processing can initiate from branches itself. Factors leading to delay in claim processing

    There are certain factors that lead to delay in death claim processing. While a few can be avoided, some are unavoidable due to circumstances.

    • Late reporting of death or death in foreign countries
    • Deceased policyholder has not nominated or assigned a benefactor
    • Insurance company has the right to contest the policy, if there’s material misrepresentation in the policy
    • Lapsed policy due to non-payment of premiums
    • Change in beneficiary post-divorce

    It is always advisable to make no delay for the claim process as the company would need some finite time at their end for due diligence before disbursing the claim amount. In case of a person missing, the settlement is governed by sections 107 or 108 of the Indian Evidence Act, which could be a little complex and time consuming.
    What if I survived till the policy tenure of my term policy?
    If you are worried what will happen to your family if you meet with an untimely death, then you should buy a term insurance plan. This plan will give your family the financial support in your absence. In this policy, the insurer promises to pay the beneficiary or nomine a sum assured if the insured dies during the tenure of the policy. The premium in this policy is low and hence, it is affordable.

    This policy is a must if you are the sole breadwinner of your family. In case of an untimely death, the insured will pay your family the sum assured and then your family can choose to spend the money the way they wish.

    Besides, if you have a house loan, then the death benefit can be used to pay off the instalment. Or, it can also be used to finance your children’s education.

    What if you survive the tenure of your policy?
    However, you may ask what if I survive the tenure of the policy.

    Will I get the sum assured? Will I at least get back the premiums I paid over the tenure of the policy? Or, will I get nothing at all?

    These are some basic queries that you may be keen to know the answers in a term insurance plan.

    So, when you survive the tenure of the term policy, the following things happen:

    A) No maturity benefit is given: A term insurance plan gives you financial security to your beneficiaries or nominees post your death during the tenure of the policy. It is not entitled to give you any maturity benefit if you survive the tenure of the plan. The policy lapses once you complete the tenure of the policy. You are not entitled to any refund of the premium as well.

    B) However, there are exceptions: Some insurance companies do give back a certain percentage of the premiums paid if you survive the tenure of the policy. But the policy lapses anyways. This is to lure more consumers into buying term insurance plan.

    C) You can buy another term plan: Once the tenure of the policy ends, the plan lapses. However, you can go ahead and buy another term plan. In that case, the premium will be on the higher side as you would have aged and your health will not be same when you had bought the first policy. Hence, it is wiser to buy a term plan for a longer duration to cover till the retirement age and provide your family the security cover when you are not physically present.

    Although there is no maturity benefit on a term plan once you survive the tenure of the policy, it is still prudent to buy such a policy as it covers your family financially if in case you meet with an unforeseen death. Your family will be able to live the same way financially with the claim amount even when you are not physically present.
    Myths on Term Insurance
    Term insurance plans have been around for a while but they remain shrouded in misconceptions.

    The promise of a huge cover for absolute trifles and the certainty of getting nothing on survival—there’s something in the very structuring of a Term Insurance proposal that makes it somewhat of a mystery and hard to digest.

    Here’s an attempt to dispel the most common myths surrounding term insurance.

    1.Sounds too good to be true, insurance companies never pay the claims.
    Yes, the amount of cover you can buy for unbelievably low premiums raises suspicion. But consider this, every insurer offers term insurance plans on basically the same terms. Can it possibly be a con? If doubts still persist, one can check the credentials of the insurance underwriter with the insurance regulatory authority IRDA. One can easily mine a wealth of information on an insurance underwriter like their claim settlement ratio, insolvency, AUM, etc. Reputed insurers have very good claim settlement ratio exceeding 90%, whereas 85% is considered good enough. This means that they pay the claims more than 90 out of 100 times, which tells you that these insurers are not bent upon dismissing claims on flimsy grounds.

    2.Term insurance plans do not come cheap.
    Nothing can be farther from the truth. In fact, term plans are the cheapest of the lot. For a few hundred rupees a month, you can get a cover up to Rs 1 crore. No other life insurance product can promise such large cover for so less.

    3.It is a waste of money really; there are no returns in term plans.
    True, pure term insurance plans do not provide maturity benefits. If you outlive the policy term, the money you put in is all but lost. However, the importance of insurance cannot be overstated. While insurance seekers do not mind discretionary monthly expenses like weekend parties or theatres, they rue shelling out half that amount for buying insurance, which can provide a big enough cover for their family in case of the buyer’s untimely death. In fact, investment in a term plan is a very sound financial decision and a great value for money. Also, there are special term plans like Term Return of Premium plans (TROPs) that provide a refund of premiums upon maturity, albeit at an extra cost.

    4.I have group life insurance; why should I care for term insurance?
    Check with your company what is the sum assured in your Group Insurance. Is it a sufficient cover for your family? As a rule, Group Insurancegenerally provides a meager cover and falls quite short of the least financial cover you actually need. Also, importantly, it lasts only as long as your employment with that company, unless you convert it to an individual plan after quitting the company.

    5.I have invested in the market; that should cover me.
    Investment in stocks, mutual funds, and equity market is subject to market risks. Your investment can come a cropper more easily than turn you into a millionaire. But even if your investment is well planned, it will take time to ripen. What if misfortune strikes early? You have to prepare for the worst and that’s where term insurance comes in handy. In fact, ‘First be safe’ is an axiom that applies very well to financial domain. Ideally, you should segregate insurance and investment and prepare for the former before preparing for the latter.

    6.Term Insurance is hard to understand
    Part of the reason why people find it hard to fathom term insurance is they are used to buying insurance from agents. Even today, buyers resist purchasing insurance largely out of habit, but also because of unfounded fears that buying financial products online is fraught with risks. Also, they seldom find their insurance advisors or agents pitching term insurance plans because there is greater commission and incentive for selling endowment plans. The truth is term insurance plans are easier to understand. There’s not much reading of fine print involved as there is in other plans.

    Term insurance is the simplest insurance product to get maximum coverage at minimal cost.
    What are the tax benefits under life insurance term policy?
    One of the most fundamental essentials of good financial planning is to plan avidly for taxation. Yet despite the growing financial awareness, many individuals keep prolonging their tax planning till the very end. As a result every year near the end of the financial year, there is an increase in the number of life insurance buyers.

    The tax saving component of life insurance including term insurance helps individuals avail tax deductions. Although tax saving component is an integral part of life insurance, a life insurance plan remains primarily a protective instrument with taxation benefits as an added advantage. Looking to buy a term life insurance but not sure about the tax benefits on offer? Here is everything you need to know about term life insurance and its taxation benefits.

    An overview of deductions and tax benefits for term insurance
    As per the Income Tax Act of 1961, premium paid for term insurance plans qualifies for tax deductions under Section 80c of the IT Act. The maximum amount that can be availed as tax deduction is limited to Rs. 1, 50,000 as per the current taxation rules. The nominee of a term insurance policyholder also gets the benefit of tax exemption if he or she is the beneficiary or receives any amount as part of death benefits from term insurance policy. Such tax exemptions on offer are made available under Section 10(10) D of the Income Tax Act.

    Deductions and tax benefits under Section 80C
    When it comes to tax deductions, the benefits are made available only for individuals or a Hindu Undivided Family or HUF. To be eligible for tax deduction, the life insurance policy musty be mandatory be bought in the name of either self, spouse or children. While there is no cap on the number of policies one can buy for children, policies bought for any other individual expect the self, and spouse or children do not qualify for tax deductions under Section 80C of the IT act.

    Additionally the tax deduction claims are available from the gross total income of a policyholder for premiums paid in the same financial year.

    If a policyholder has made additional investments which also qualify for tax deductions under Section 80CCC or Section 80CCD, all such investments are added together to calculate the Rs. 1.5 Lakhs limit under Section 80C.

    Many insurance policy holders believe that their entire premium amount paid qualifies for tax deduction. For life insurance policies issued on or before March 31, 2012, only the annual premium up to a maximum of 20% of the Sum Assured is permissible for deductible. For policies issued after April 1, 2012, the maximum limit has been stipulated at 10% of sum assured as maximum permissible tax deductible limit. If the policyholder suffers from any kind of disability or disease as specified under Section 80U and 80DDB, the maximum permissible limit is fixed at 15% of the Sum Assured.

    Taxation and maturity benefits
    Any amount that you as a nominee for a term insurance policy may receive is available for tax exemption as per Section 10 (10D) of the Income Tax Act. The exemption includes payment of Sum Assured along with any bonuses that the insurer may offer as death benefit. Death benefits received by the policyholder’s nominee being tax free makes term insurance an apt financial instrument offering optimum protection with a high Sum Assured and low annual premium.

    Conclusion:
    Life insurance offers tax benefits of deductions on premium paid along with taxation benefits on maturity proceeds. Life insurance with all its taxation advantages should be primarily opted as a protective instrument and not just for its associated taxation benefits.
    What are the post-sales services after buying a life insurance plan?
    “Customer is the King”, and the insurance sector also realise this. After-sales service is very important in the insurance sector. The insurance companies remain responsible to the policyholders for several services. In fact, right from buying an insurance plan, the customer becomes a permanent part of the company and this relationship is one of the longest in the finance sector.

    The insurance company will have to provide up-to-date service to the customers for keeping them extremely satisfied from all aspects. In this age of tough competition, customer satisfaction is on top priority for insurance companies. Insurance companies are vying each other to become the preferred service provider for customers through better customer experience and superior products.

    What is after sale service in insurance?

    After sale service is the adoption of various processes that keep the customers satisfied with the insurance product they have purchased from an insurance company. There are several aspects in after sale service in insurance:

    Policyholders need information on their product or service of the company from time to time. This includes renewal process, due date, change of nominee, claim process, and so on.

    • It is the responsibility of the insurance company to keep their customers informed on the status of the product, i.e. whether it is in force or expired, whether it is renewable, whether poly terms can be changed, where their money is invested ( in case of ULIPs) etc.
    • Timely settlement of claims is another important aspect of customer service
    • Both IRDA and insurers have to educate customers on the various issues in connection to life insurance in to provide clarity and help make their decisions easier. 
    • Transparency in everything post selling insurance is an important part of after sales customer service in the insurance sector

    Important post sales service in insurance

    Here are some important post-sale services in insurance:

    • Claim processing: In every type of insurance, claim processing and claim settlement are two big parts. This service makes an insurance company really trustworthy and popular in the market. So, claim related inquiries, assistance and timely settlement are always the topmost priority for insurers to be a preferred company.
    • Due date and renewal: This is another important part of insurance. Insurance companies should remind the policyholders the due date for renewal for keeping their policies in force and to ensure timely renewal. In life insurance, a policyholder needs to pay the premium to keep the policy in force and enjoy all benefits. The company needs to keep the policyholders informed regarding the due date, fine payable, grace period, etc.
    • Technical services: Change of address, change of nominee, change of bank account details, therevival of a policy, etc. and scores of other technical issues may come up at any point of time. These all need proper servicing from the concerned insurance company 24*7 online.

    The responsibility of the insurance company doesn’t end just by selling the product to a policyholder. In fact, the after-sale service is much more important for the policyholders. Many people today choose insurance company based on their Claim Settlement Ratio (CSR) and user review.
    Is always cheaper premium the best way to choose term Insurance
    Uncertainties can bring huge financial crisis for you and your near and dear ones. But opportunities are there where you can secure the future of your family through proper planning. For this, you have not to invest huge amount. Term insurance is one such opportunity to make a compact planning. Unlike life insurance policies, term insurance policies don’t need huge premium every year. The amount you are investing in a term insurance doesn’t accumulate but they, of course, provide required insurance coverage.

    Common trend in choosing term insurance
    There is a common trend among policyholders to look for a term policy that is cheap and straightforward. Actually, term policies are chosen only when the client cannot pay for common insurance policies. So, term policies are tagged as cheap and straightforward, i.e. they are meant for death benefits only and they don’t cost much. Very few people are aware of various interesting aspects of term policy and their wide many riders. They do this policy because they have no options and because this policy is cheap.

    Know the benefits of a term policy
    Term policies can provide a complete insurance coverage to a policyholder. If you want a policy that can provide death benefit along with disablement benefit, critical illness benefit, and monthly income benefit then term insurance is the best affordable option. You can choose a straightforward term insurance with death benefit only. That would be quite cheap, but you will not be able to reap maximum benefits from that cheaper option of theterm policy. On the other hand, with a little bit of scrutiny, if you add some beneficial riders with the term insurance, you can make it real protection for your near and dear ones.

    Understand the term insurance before buying
    You can add several types of riders with the term insurance to make it more attractive and useful for your family. Let’s have a look at the following riders:

    • Accidental death rider: This rider adds some more insurance cover over the basic insurance coverage and becomes effective when the policyholder dies in anaccident.
    • Disability rider: This rider helps to get some financial support if the policyholder meets an accident and becomes partially or completely disabled.
    • Critical illness rider: With this rider, the policyholder gets a good financial support if he or she is diagnosed with any pre-defined critical illness like cancer, kidney failure, heart attack, etc.
    • Income benefit rider: This rider helps the family of the policyholder to get pre-defined income per month over a long period in case of unfortunate death of the policyholder. This amount will be above the basic insurance amount.

    Besides, several other attractive riders are available with various benefits for the policy holder’s family. Of course, these riders will add some extra amount over the normal premium, still, they make a term insurance really important for the policyholder and his or her family.

    So, don’t go for cheaper term insurance plans but look for comprehensive plans that can make your policy really protective for your entire family. This will help them to lead a decent life in your absence. Cheaper plans cannot be better plans always. Policyholders should look for anappropriate plan for abetter return and better protection.

    You can compare insurance plans online and get the best deal
    What is the Monthly & Lump Sum benefit in Term plan
    The best and cheapest way to avail a life insurance policy is a term plan, which can be bought online too. These plans are pretty straightforward in concept—the nominee gets a sum assured on the unfortunate demise of the policyholder during the policy term and gets nothing if the policyholder survives the term. With changing needs and demands of customers in this highly competitive world, insurers now have started designing term policies to offer periodic income.

    To make a term plan more appealing, insurers have launched staggered plans that offer benefits in parts–a lump sum immediately after the demise of the policyholder in addition to regular monthly payments for a certain period of time. Some of the policies even offer to increase monthly income by a certain percentage in a bid to beat inflation.

    How to choose Monthly & Lump Sum Benefit in Term plan
    • The sum assured amount is chosen by the policy buyer
    • It’s up to the policy holder to opt for various options in the term plan—he may want the death benefit in one lump sum, or as monthly incomes, or partly in lump sum and partly in monthly incomes. To choose this, one has to divide the sum assured in respective proportions when buying the plan.
    • Next is to choose the policy term
    • At this point, additional available riders can also be added as per policyholder’s needs
    • In case of death within the term of the plan, death benefit is paid, which would depend on the option chosen by the policyholder while availing the plan. For lump sum option, the sum assured would be paid entirely in totality. If monthly income option is selected, certain percentage of the sum assured is paid every month for 130 months after death of the insured. If a combination is chosen, the chosen percentage is paid in lump sum and the remaining sum assured is paid in monthly instalments for next 130 months.
    • If the plan matures, no benefit is payable to the policyholder as this is a pure term plan

    Illustration

    Suppose Mr Reddy, who is aged 35 years, opts for a term plan for a coverage amount of Rs 50 lakhs for a tenure of 35 years. The premium he has to pay comes to Rs. 6,837. In case Mr Reddy chooses to receive the entire sum assured as lump sum in case of his demise, the insurer would pay Rs.50 lakhs to the beneficiary if Mr Reddy dies during the term of the plan.

    If Mr Reddy selects the monthly income benefit option, then on his death during the term of the plan, Rs.50000 (considering 1%) would be paid to his nominee every month for next 130 months. Thus, the total death benefit payable would be Rs.65 lakhs

    . Suppose Mr.Reddy chooses to receive 40% of the sum assured in lump sum and the remaining in monthly incomes. On his death within the plan term, his nominee would get Rs.20 lakhs as lump sum benefit, followed by remaining Rs.30 lakhs paid in monthly instalments for next 130 months.

    When the nominee is not equipped to optimally utilise the lump sum, a steady cash flow works better. Alternatively, the beneficiary may not really be equipped to make effective use of big monthly cash flows. In that case, term plans that break the sum assured into part lump sum payment, which caters to immediate liabilities, and part regular payments to provide cash flows.

    How Monthly Benefit Plan helps

    • Monthly benefit plans helps the family of the demised to continue the same lifestyle with monthly income replacement option
    • The lump sum can be used to settle financial liabilities like loans, or keep aside for children’s higher education, or other needs, while monthly income provides for meeting day today expenses
    • There’s no confusion on what to do with a higher amount received as lump sum

    While you are out to buy a suitable term policy, Net Present Value (NPV) is a factor that needs to be considered while comparing such plans. Since inflation eats out the value of cash flow over time, NPV helps to determine the current value of the future inflows.
    What is Income benefit option in Term plan?
    Akhila, a 35-year-old, lost her husband in an unfortunate accident. Nothing could replace the loss the family met with, but some financial help would have been a great help to ease the burden of managing the family in future.

    Of course, Akhila’s husband Prashant had been thoughtful. He had bought a term plan with a sum assured of Rs 1 crore for the security of his family in his absence.

    This may prove helpful for Akhila, but the bereaved is not in a position to plan a proper investment strategy with the lump sum amount she may get. Also, advice from different directions keep pouring in, confusing her even more.

    What would be the ideal plan for many families like Akhila’s? Insurance companies understand this predicament of insurance policy holders and have come up with Income Benefit term plans. These don’t cost much but can keep you stress-free.

    Let’s see how they work.

    Income benefits in term policies
    In an income benefit term plan, the payment of the insured amount to the nominee or beneficiary is made in installments, instead of a one-time payment. A lump sum payment is made at first and then the remaining amount is paid out at regular intervals with some interest for a fixed time period. The installment payment is mostly done on monthly basis like an income from any source. Thus, these type of policies are called term policies with income benefit.

    For example, Reliance Life Insurance has a term insurance that has been paying almost Rs.46 lakhs in a lump sum and then almost Rs.22720 per month for 20 years. HDFC has a term insurance where Rs.10 lakhs are paid in lump sum and then Rs. 50,000 per month for 15 years.

    Almost all insurance companies in India have such policies, which are good for the family of the deceased policyholder.

    How an income benefit plan helps
    It is often found that people often lose most of the sum they get from a term insurance when the total amount is given in lump sum. Many others doesn’t know what to do with it. So, an income benefit plan, which is also known as income replacement plan, keeps them on track and helps them to get relief from immediate financial issues.

    • Income benefit helps the affected family to keep their lifestyle almost same, in the absence of a regular monthly income.
    • The lumpsum payment can be used to complete immediate or future goals like buying a house, invest for education of the children, or marriage of the daughter, etc.
    • This form of insurance comes with a steady flow of income till a predefined goal is met. In this type of insurance policy, a lump sum is paid initially and the remaining amount is equally distributed over the months till that predefined aspect is completed like education of a child, retirement benefits receivable, etc. If not for a future goal, you can choose the tenure for X number of years, considering your financial situations like repayment of a home loan, etc.

    Let’s look at this with an illustration:
    For example, Akhila, a widow with a 10-year-old child needs to maintain the regular income till her child reaches 21, to meet his education expense.

    The sum assured opted by her expired spouse is 1 crore. In absence of her spouse, the insurance company paid her a lump sum first. The company continues to pay the remaining amount as monthly installments for another 11 years’ period, ie, till her child reaches 21.

    This payment is made from the insured amount by dividing the amount in equal installments till that age is attained.

    This was a real help for the family to meet the education expenses without denting Akhila’s single income from her job.

    Thus, income replacement is meant to arrange expenses for a particular purpose and that will happen over a period of time, as in Akhila’s case.

    Income plans in term insurance provide financial stability to the family upon the unfortunate death of the policyholder. Most essential immediate expenses could be met partly or wholly from the initial lump sum payment while the monthly income helps the family to sustain decently.

    There are many income benefit plans online. So, a little bit of research may help to get the best one according to the current and future needs.
    What should be the duration of my term policy?
    Just as finding the right insurance cover for a term plan, many life insurance seekers often wonder on what is the right policy term. With term insurance plans available from 5 year tenure to 30 years tenure, choosing the right tenure can sometimes be a problem.

    Many insurance seekers think that opting for the highest tenure available means a higher level of protection. What they do not take into account is that higher the tenure opted; the larger would be the Sum Assured component with rising inflation. Eventually this means a higher premium to be paid for the term plan.

    An overview of term insurance and policy tenure
    Term insurance is by far the most cost effective form of insurance. The fact that term insurance is made available for a limited tenure usually ranging from 5 to 30 years reduces the risk for the insurer. As a result the insurer is able to pass on the benefits to the policyholder in the form of higher Sum Assured at lower premium rates. The longer you are paying for term insurance; the lower is its efficiency especially if you are still paying a premium for a term plan after retirement.

    Choosing the ideal term insurance tenure
    To choose the optimum tenure, your term life insurance plan should be linked with your overall long term financial goals. As a thumb rule the tenure of a term plan should only be taken for the number of years you may think your family is likely to be fully dependant on you for financial needs. Balancing the time along with the number of active years you may plan to work and your retirement plan should be broad parameters to choose your term insurance plan tenure.

    You may additionally like to consider the duration of any financial liabilities like a home loan etc. For example if your home loan is outstanding for 20 years, your term life insurance plan should be for a minimum of 20 year tenure to ensure smooth repayment of the loan in any unfortunate event of you not being around physically.

    If you have a good financial plan in place, majority of your life's financial responsibilities like higher education of your child, marriage of children, home loan etc are likely to be completed by the time you reach the retirement age of 60. So ideally a term loan that exceeds the age of 60 may not be required for majority of well planned individuals. Of course if you are having different needs and lack of any financial plan, you may have no option but to opt for a higher tenure offering coverage to the age of 80 to 85 years.

    Tips to choose a life insurance term plan tenure
    • The duration of a life insurance term plan should be as per the accomplishment timeline of major financial goals.
    • Having a good financial plan including retirement plan can help you choose ideal term insurance plan tenure.
    • The longer the tenure you will need a higher ‘Sum Assured’ which means a higher premium.
    • Ensure your term plan is active till the time you have any financial liabilities or are active at work.

    Which Insurer process death claim fastest
    It has been five months since Nilesh met with an ill-fated accident and succumbed to death. He was 41 years and left his family with an irreparable emotional void. Fortunately, he had a life insurance policy worth Rs 60 lakhs but the claim amount is still pending as his wife is still trying to figure out the process of filing a claim and the required documentations.

    Death is inevitable. When the life assured dies during the term of the policy, the proceeds under the policy can be claimed by the beneficiary. This is known as a death claim. A very vital aspect one needs to check before buying a policy from a company is their Claim Settlement Ratio. IRDA releases company wise report of the ratio by end of every financial year. It uses the following simple formula to calculate the ratio.

    Claim Settlement Ratio=Total Claims Approved (paid to nominees) divided by Total Claims Received by the Company

    Listed below are the top life insurers with an impressive claim settlement ratio in 2016-17.

    Insurer Claim settlement ratio
    HDFC Life 99.16%
    SBI Life 97.98%
    Max Life 97.59%
    ICICI Prudential 97.20%
    Reliance Life 94.91%
    Birla Sunlife 94.21%
    Edelweiss Tokio Life 93.29%
    Kotak Life 92.59%

    Here is a step by step guide to ensure a faster claim processing from your insurer.
    Step 1: Inform the insurance company about the unfortunate incident, either by visiting the nearest branch or through call centre. Even the agent from where the policy was bought can be informed.

    Step 2: The nominee needs to submit a claimant’s statement along with some vital documents like – original policy papers, FIR from police, death certificate, post-mortem report (in case of accidental death).

    Step 3: Insurer initiates evaluation process. If need be, they can conduct further investigation through external agencies to check the authenticity of the claim made.

    Step 4: After receiving all documents, the requisite claim is settled. A life insurance company is required to settle a death claim without investigation within 30 days. While those requiring investigation will have to be settled within 6 months. As per section 45 of the Insurance Laws (Amendment) Act 2015, no claim can be rejected after three years of a policy being in force.

    IRDA is ensuring claim settlement guarantees becoming a part of insurance policies. Insurers can promote these guarantees, if they are filed along with the product at IRDA. Claims guarantees make sure that families receive some benefits if claims are delayed.

    To ease the process of claim settlement, many insurers have introduced a claims tracker in their website and send regular SMS alerts to keep claimants updated. Having a bank partner makes settling claims easier and faster, because processing can initiate from branches itself.

    Factors leading to delay in claim processing
    There are certain factors that lead to delay in death claim processing. While a few can be avoided, some are unavoidable due to circumstances.

    • Late reporting of death or death in foreign countries
    • Deceased policyholder has not nominated or assigned a benefactor
    • Insurance company has the right to contest the policy, if there’s material misrepresentation in the policy
    • Lapsed policy due to non-payment of premiums
    • Change in beneficiary post-divorce

    It is always advisable to make no delay for the claim process as the company would need some finite time at their end for due diligence before disbursing the claim amount. In case of a person missing, the settlement is governed by sections 107 or 108 of the Indian Evidence Act, which could be a little complex and time consuming.
    Unclaimed policy amount: How to locate and claim it
    Rajesh Sharma is a 50-year-old businessman, married with two children. He has secured his family future by taking a term policy of Rs 50 lakh. His family will receive Rs 50 lakh if he dies during the tenure of the policy. However, he did not inform his family about this policy.

    As providence would have it, he meets with an untimely death, leaving three beneficiaries–his wife Savita and two children–behind. The family is in distress as the two kids’ education is at stake for lack of finances. A year later, Savita comes across the term policy document while cleaning her late husband’s cupboard. She heaves a sigh of relief, knowing that she can claim a death benefit of Rs 50 lakh and secure her children’s future.

    Like Savita, there are various families who are unaware of their unclaimed policy amount. According to IRDA, a whopping sum of Rs 10,527 crore is lying as unclaimed insurance amount in life insurance in public and private institutions as on March 2016. Similarly, in the general insurance sector, an amount of Rs 1198 crore is lying unclaimed.

    What are these unclaimed policy amounts?
    These unclaimed policy are amounts that remain with the insurance companies unclaimed six months after the settlement due date. It can be death claim, maturity claim, survival benefit, premium due for refund, premium deposit not adjusted against premium, or indemnity claims, among others.

    Here’s why unclaimed policy amount remains with the insurance companies:
    • Nominees are not aware that the insured has taken a term plan. The insured dies without informing his nominee of the term policy he has taken to secure his beneficiaries’ future.
    • You shift your residence, lose your investment details, and forget the financial information.
    • You do not maintain a record of the investments you have done in your life and do not realise that its claim is due.

    How you can find this unclaimed policy amount
    You can follow these steps to find the unclaimed policy amount:

    1.Visit the insurance company’s website. You will find an option ‘Unclaimed Amount’. Click on the link.
    2.Keep the following details available:

    • Policy number (optional)
    • Policyholder’s name (required)
    • Date of birth of policy holder (required)
    • PAN card (optional)

    3.Key in policyholder’s name and date of birth

    4.In some insurance sites, you may be asked to key in policy number and PAN card details as well.

    5.Once you enter the information and click on submit, you will find the unclaimed policy amount

    Points to note before you attempt to find unclaimed policy amount:
    • The unclaimed policy amount must be more than Rs 1000.
    • Providing date of birth and name of the policyholder is must.
    • The details on unclaimed insurance policy amount are updated on half-yearly basis. If you don’t find it on the website, try again after six months.
    • The life insurance policy may be taken jointly by your parents or grandparents on your behalf. Or, it could have been taken in your maiden name. So, try putting the correct or old name to retrieve the information.
    • You can try finding the unclaimed policy amount by using your old name before marriage.

    How to claim the unclaimed insurance policy amount
    Once you retrieve the unclaimed policy amount in a term plan by visiting the insurance website, the nominee will be asked to submit bank details and a proof of bank account by submitting a cancelled cheque. If the policyholder has left a will, then it will be easier for the nominee to make the claim. If the policyholder has not left a will and has not mentioned any nominee, then the claim is discharged to the legal heir who can be the son, daughter, spouse, or mother of the policyholder.

    Hence, it is important to maintain a record of investments and inform your beneficiaries of any death benefit to enjoy the benefits of the claims.
    Life Insurance and Married Women Property Act
    The primary objective of life insurance is to safeguard the financial future of your family, children and dependants in the event of any unforeseen circumstances. Now consider a scenario where a self employed individual expires and the creditors approach the bank for being paid their dues out of the individual’s life insurance proceeds. Such an eventuality can lead the family and children with a financial risk and not much legal protection to stop the creditors.

    To bypass any such eventuality and to ensure the wife and children of a life insurance policy seeker remain insulated from any such creditor approach, a legal protection in the form of Married Women’s Property Act is made available.

    Understanding the Married Women’s Property Act
    The Married Women’s Property Act commonly known as the MWP Act ensures that earnings as well as proceeds from life insurance from a husband's insurance policy are treated as effective property of the beneficiary. As a result the proceeds from any life insurance policy cannot be legally used for repayment of any dues, debt or financial liability of the husband after his death.

    Any married individual including divorced and widowers can opt for a life insurance policy with the MPW addendum. There are no limit or minimum stipulations for age, policy tenure or premium. Female policyholders can also seek protection with MWP addendum with the name of the children as beneficiaries. The husband will have no legal right from any policy proceeds from the women if opted for MWP addendum.

    Life insurance policy under MWP at a glance
    Too seek a life insurance policy under the MWP act, the proposer needs to fill up an MWP addendum at the time of filling up of the insurance proposal form. All insurance agents have a copy of the MWP addendum and a soft copy is also available on the official website of every insurer online that can be downloaded or filed online.

    The beneficiaries linked to a life insurance plan must be selected carefully as no changes in beneficiaries are allowed at a later stage. The beneficiaries for life insurance under MWP can be either the wife alone, the children alone including both biological and adopted or both the wife and children collectively.

    The proposer also has the option of appointing one or more people of institutions to act as a trustee to overlook the smooth handling of affairs at the time of death benefit payout. Death proceeds are given to the trustee for effective distribution to all the beneficiaries. The consent of the added people or institutions being added as a trustee is mandatory. The policyholder or proposer has the right to change the trustees at any point during the policy tenure.

    Life insurance policies need to be covered under the MWP act at the time of purchase. Any existing life insurance policies cannot be added to the MWP act.

    Advantages and disadvantages of insurance with MWP
    While insurance plans with MWP offers the advantage of safeguarding the financial future of wife and dependant children, there are some disadvantages as well. Life insurance plans with MWP ensures financial future of a dependant family is secure amid every scenario. Insurance with MWP is open for all women irrespective of their religion. On the other hand, the policyholder is bound to pay for all the premiums but loses control of the policy in the long term. For example no loans can be sought on life insurance plans under MWP. Also the policyholder cannot make any changes to the policy without the written permission of all the adult beneficiaries. Another disadvantage with life insurance plans with MWP is that they have the risk of being misused by fraudsters to specifically defraud people and creditors.

    Conclusion: Life insurance with MWP makes sure the financial future of a dependant wife or children remains secure amid every possible scenario including legal rights of creditors.
    Benefits of buying insurance from Rightpolicy.com
    From an individual life insurance plan to health insurance, car insurance, home loan insurance, pension plans, etc the list of insurance products is quite endless. With an increase in the number of private insurers offering various plans, choosing the right plan can sometimes become exceedingly difficult.

    Many insurance seekers often end up picking a wrong plan only because of lack of knowledge of a better plan offered by another insurer, which would have suited their needs better. Rightpolicy.com makes sure any potential insurance seeker is able to search for and analyze all insurance products available in the market, and access all details of the insurance plans of his choice as per his needs.

    Reasons why you should be buying insurance from Rightpolicy.com
    Extensive listing of multiple products in a single platform: Rightpolicy.com, as a premium online insurance broker, has an extensive listing of all insurance products offered by various public and private insurers. You can choose insurance plans as per your insurance needs by going through the insurance offerings currently available with all public and private insurers.

    Comparison of multiple products at the click of a button: With so many insurers and so many different insurance products, Rightpolicy.com offers a single platform that has an extensive, accurate, and unbiased listing of all insurance products available in India. Rightpolicy.com is an informative and unique single platform that offers extensive details for each active insurance plan. Availability of insurance premium calculators: Since premium is one of the essential criteria in selecting an apt insurance plan, Rightpolicy.com offers an accurate insurance premium amount calculator to help you choose the right policy as per your budget and financial needs.

    Detailed listing to help you understand the policy details: Each insurance plan listed on Rightpolicy.com is added with all details that you may need to make an informed decision. All major and minor details that matters are listed to help you pick the right insurance plan.

    24/7 Helpline for any policy-related queries: Rightpolicy.com offers a dedicated helpline channel should you need any help in choosing the right insurance plan for your needs. Whether it is to buy a new plan, renew a plan, or to get information about some insurance plans, our customer care service is always at your disposal. We understand your needs and then suggest the best plans. We also answer all your insurance related queries.

    Discussion options with fellow policyholders: Rightpolicy.com offers proactive discussions on the portal that can help you to choose the right insurance plan for your need. From current to previous policyholders as well as insurance experts all offer suggestion in various discussion channels.
    Is it Safe to Buy Insurance Online?
    Like any other industry, the insurance sector is also slowly and gradually moving online. Given the convenience, paperless work, and ability to choose from a wide range, customers are moving from the traditional offline mode to online insurance purchases. Right from availing new policies to renewal of existing ones, from life or general insurance purchase to filing claims, preference for online purchase is relatively more pronounced these days.

    Insurers and online insurance broker are able to service their consumers more effectively through their online channels—be it websites or app-based. Tech-savvy customers too prefer buying online rather wasting time on meeting a broker or fixing an appointment with financial advisors.

    Concerns of online insurance buyers
    While everything looks green at the outset, customers may have many concerns while purchasing insurance online. Votaries of online transaction of insurance policies mainly harp on a host of features like less cumbersome, lesser paperwork, no intermediaries, quick and simple, and convenient.

    But insurance buyers online may have some concerns as below:

    • Is it safe to buy insurance online?
    • Is privacy assured and how safe are my documents online?
    • Will I get good service online in the absence of an agent?
    • Will I get policy document on time?
    • Is online insurance costly?

    With increasing cases of online frauds, hacks, and scams, many people are reluctant to buy insurance or financial products online.

    Gaining consumer confidence through protected sites should be the prime objective of the insurance companies and online insurance broker. They should provide various layers of security to the transaction in order to make it hack-proof. Only then availing insurance online will be preferred like net-banking and other online financial transactions.

    However, insurance buyers also should take some basic safety precautions while buying policies online.

    Tips for safe online insurance purchase
    Most of the online purchases that end up as targets of malicious attacks are due to customers’ inability to stick to some basic safety checks such as the below.

    • Purchase from credible sites: While search engines might throw up innumerable options to buy insurance from, the onus is completely on the buyer. Avail you insurance product from a credible site. The best bet is to buy the desired policy from the company’s own webpage or broker sites. The insurance broker gives a comparative picture of all shortlisted policies at one go, thus making it easier to select and take a decision.
    • Use a secure connection: A secured connection is an encrypted (SSL) internet connection that protects your online transactions from unauthorized access. Websites with Secure Sockets Layer (SSL) security certificates ensure that their webpages are legitimate and safe to carry out transactions on. Browsers like Chrome, Firefox, or Opera come with secured extensions, which forces websites to load their secure HTTPS versions instead of HTTP version.
    • Use OTP during transaction: Often during online transaction, sites ask users to enter 3D secure PIN or request for an OTP to the registered mobile number. Using the latter is a safe option as it is uniquely generated for a single transaction and becomes invalid after the time lapses.
    • Avoid public Wi-Fi connections: It is always recommended not to use public Wi-Fi networks while making any financial transactions. These public connections are vulnerable to malicious activities like data thefts, phishing, and cloning, which might be devastating while availing policies online. However, password enabled Wi-Fi networks with proper SSID prompting for OTP can be safe to use.
    • Screenshot of the transaction comes handy: It is advisable to retain a screenshot of the financial transaction made online—this comes in handy and avoids any future ambiguity related to the policy purchase made. Screenshots help to identify the transaction easily and resolves the deadlock, if any, between the insurer and banking partner.

    Purchasing insurance online is extremely convenient and time saving for the consumers. All that is required is to just log into the insurer sites and download the plan brochure. Then, broker sites help them in comparing the features, benefits, and premiums, and aid them in making an informed decision. Since online purchases bring down the distribution cost, policies bought online come at a reduced cost to the policy buyers. One can also check reviews and comments posted by other users and then arrive at a decision. laborum.
    Important Terminologies of Life Insurance
    The life insurance buyers have to go through a lot of jargon which insurance industry has been using for decades. When getting a life insurance,you will definitely hear manytermsthat you are not aware and that makes you highly confused.

    So, whether you are started searching for life insurance or have purchased one, here are some of which you need to know.

    Annuity Plan: This plan offers a lump sum amount, or a pension to the policyholder or his spouse upon his retirement, or after certain years after the policy commencement. Some annuity plans offer pension for a limited years while some offer for lifetime.

    Assignment: Assignment is a legal transfer of interest by the policyholder, from one beneficiary to another. This can be made as an endorsement on the policy document or by a separate deed.

    Beneficiary: The beneficiary is the person who receives the death benefit or the payment upon the death of the insurer. The beneficiary can be anyone such as the spouse, child, relative or a business associate. You can also make a trust or NGO your beneficiary. You can also mention contingent beneficiary in case the original beneficiary dies.

    Death Benefit: It is the total sum paid to the nominee or beneficiary of a policy holder in case of the death of the poly holder or insured. Generally, this is same as sum insured, but in several types of insurance policies it may add some other benefits depending on the riders like accidental benefit, monthly income benefit, etc.

    Exclusions: These are stipulated in a policy as what will not fall under the insurance policy and hence will not provide benefit to the insured or beneficiaries.

    Grace Period: It is a certain period of time over the due date during which the policy holder can pay the due premium without getting his or her policy lapsed. Grace period may vary upto 30 days depending on the nature of policy.

    Insurable Interest: This stands for the financial loss that the insured, or the beneficiary  must be suffering if an unforeseen event occurs. An insurance contract stands valid with an insurable interest.

    Insurability: Whether a person is eligible for an insurance or not is determined through insurability. For this, an insurance company depends of the data provided by the person in the application form and judgement of the underwriter.

    Lapsed policy: A lapsed policy is a policy that is no longer in force due to non-payment of the premium. A policy is generally considered lapsed if the premium is not paid within the due date and grace period.

    Maturity date: This stands for is the date when the amount paid towards the life insurance policy is given to the policy holder once the term of the policy ends.

    Maturity amount: It is the total amount paid to the policy holder after the completion of the policy term. This amount is generally fixed in traditional life insurance policies but may vary in ULIPs.

    Moral hazards: These are the hazards related to the lifestyle and profession of a person applying for an insurance. The insurance company wants to judge the risk level associated with a person, like a person whose profession isdriving has greater life risk than a retailer who spends entire the day in his shop.

    Policy owner: Policy owner is normally the person who buys an insurance policy and who is given the life coverage by the concerned insurance company through the policy. On his death, the beneficiary or nominee gets the sum insured.

    Reinstatement:This is the act of putting a lapsed policy back into force. The company need evidence of insurability and the insured has to pay the total overdue premium amounts.

    Riders: Riders are add-ons over the base policy for enjoying some more benefits associated with the insurance policy. Some riders are waiver of premium, monthly income benefit, accidental death benefit, disability benefit, etc. This is a benefit, which you can add to your policy, usually with a small additional premium payment.

    Surrender value:The surrender value it the amount to be paid to an insured by the company if in case he /she is terminating the policy before its maturity date.

    Term insurance: It is a type of life insurance that provides coverage for a certain period of time, say for 5, 10, 15, or 20 years. The policy holder needs to pay the fixed premium as per the agreement with the insurance company, like half-yearly or annually. As the policy terminates, insurance coverage also cease to exist.

    Underwriting:It is the way of assessing the risk of insurance coverage that an individual asking for. Through underwriting the insurance company assess the life risk of the person from different parameters like health condition, illness, age, profession, family background, etc. and decides the premium accordingly.

    ULIP: It is the abbreviation of Unit Link Insurance Policy. It is a combination of insurance like traditional policy and investment. Knowing all the terms for all the life insurance is highly important and will help surely while you are taking the policy!

    Vesting age: This refers to the age at which the insured starts receiving a pension from the insurer in case of an insurance-cum-pension policy

    Whole life insurance: This is a type of life insurance that provides coverage for lifetime. Unlike other policies that provides coverage for 30 years, this policy covers the insured for lifetime and premium is fixed for a fixed years. The premium here will be comparatively higher.
    Term Insurance, ULIP, or Endowment Plans—Which one to choose?
    Term insurance plans and endowment plans may not exactly be as different as chalk and cheese as both are life insurance plans but the similarities end right there.

    A term insurance is a unicycle offering just pure insurance. Endowment plan is a two-wheeler serving as an investment plus insurance vehicle. Both, however, are essentially traditional life insurance plans and differ from Unit Linked Insurance Plan (ULIP) which is actually an investment plan that offers insurance too.

    However, the sum assured in ULIP is market-linked and hence it can cut both ways depending upon the performance of the market.

    Term Insurance Plans
    These plans are a great buy for the insurance minded as it is the cheapest option providing highest coverage. That is to say, if your main objective is insuring yourself against death and not tax-saving, and if you are not particularly bothered about returns, you should buy a term insurance plan.

    These plans are like a gamble for both the insurer and insured— if the insured dies mid-term, the insurer has to pay a hefty amount as sum assured, and, if not, the insurer pockets the entire premium paid. From the buyer’s perspective too, it is a gamble—if the buyer dies during the term the dependents are well provided for, and, if not, there is nothing but the consolation of being still alive.

    However, there are a range of features available as riders and add-ons that can be used to customize these plans according to one’s need. The key term here, still, is ‘insurance’.

    Endowment Plans

    These plans are a mix of insurance and investment, as mentioned earlier. Part of the premium paid by the buyer is allocated to risk-free instruments like debts and the remainder is invested in high-risk-high-return instruments like stocks and equities. These plans guarantee an assured sum upon maturity. They also give bonuses at intervals during the policy tenure, but this is subject to the performance of the funds invested in the market.

    However, the guaranteed sum or the cover is considerably low in comparison to term plans. These plans are also costlier than term plans as the insurer has to guarantee the payout of sum assured.

    ULIPs

    Unit Linked Insurance Plans are more of investment plans than insurance plans. The basic difference between the traditional life insurance plans—like the two discussed above—and an ULIP is that, in an ULIP, the funds received from the buyers are allocated entirely in the equity market.

    While an ULIP increases the potential of growth and helps in capital formation for the buyer, it also lends a high risk factor to the buyer’s funds by making it vulnerable to market fluctuations. The returns are generally on the higher side as compared to traditional plans, but 4-8% returns compares poorly to returns from pure investments like that in mutual funds and stocks, which can easily be around 15% in normal times. However, there is transparency and participation in ULIP as the buyer is allowed to switch form one fund to another and track his investment throughout the term. These plans also provide better liquidity with options like fund withdrawal, fund switching etc.

    Term Plan Endowment Plan ULIP
    Premium Lowest Higher than term plan Higher than both
    Maturity Benefits No maturity benefit, only death benefit Guaranteed return, but ROI is nominal Subject to market conditions
    Liquidity No Limited Yes, but subject to risks
    Tax Benefits Not flexible Partially flexible, through Top ups Flexible
    Customization Possible Possible Possible

    Premium: Premium for term plans is lower than that for an endowment plan. For example, a cover of 1 crore in a term plan will cost a 30-year-old non-smoker somewhere around Rs. 9000 annually for a 30-year-term. The same cover will cost an annual premium of nearly 1 lakh rupee for an equivalent term in an Endowment plan. Since the premium in the former includes mortality and allocation charges only, it is low. Whereas, in the latter, it includes fund management and other charges additionally, making it high.

    Maturity benefits: Term insurance plans, being the purest form of life insurance, do not have maturity benefits—the insured gets nothing in case of survival of the term. Endowment plans, on the contrary, guarantee a return, dead or alive, which is roughly equal to the total value of accumulated premiums plus bonuses that apply. The return of investment (ROI) here is nominal but assured.

    Liquidity: Endowment plans have liquidity, inasmuch as these generally allow part withdrawal of funds after a specified minimum number of premiums are paid. This feature helps to meet an emergency. Some plans also allow the buyer to take a loan on paid premiums. Term plans do not have this facility. It should be marked here that withdrawal of funds reduces the sum assured upon maturity.

    Tax-benefits: Section 80(C) and 10 (10) D of the Income Tax Act, 1961 applies to both plans, making the sum assured non-taxable. Tax benefits are more with endowment plans as there is a certainty of receiving the sum assured under them.

    Flexibility: Term plans are rigid in the sense that once bought the term, premium and hence sum assured cannot be altered. Endowment plans, on the other hand, have Top Up features, which allows increasing the cover by paying additional premium.

    Which one to choose—Term plan, Endowment plan, or ULIP?
    Answer to this depends upon individual preference and needs. The following list clubs buyer types for these three plans:

    Term Insurance Plans Endowment Plans JULIP
    • For individuals with purely insurance needs
    • For people with a big corpus of financial liabilities and dependents
    • For sole breadwinners of the family
    • For people who cannot afford big investment but require big cove
    • For people with low risk appetite
    • For people looking for goal-based savings along with tax savings
    • For salaried people / people with steady flow of income
    • For professionals looking for ready funds at specified intervals of life
    • For people with high-risk appetite
    • For high net worth individuals who are not particularly insurance-minded
    • For those who look for building a habit of investment and savings in the long term

    Conclusion

    While all these have individual merits and cater to distinct individual requirements, it is easy to see that if insurance is the key nothing beats a term insurance plan, which gives the maximum cover for minimum investment. ULIP, as said, are for people who value investment more than insurance. For all those who fall in between, Endowment plans can be an option. A smart thing to do can be buying a term plan for insurance needs and invest the balance of disposable income in mutual funds or stocks.
  • Q: What is term insurance?
    A: Term insurance plans, also known as a pure life cover is an insurance instrument offering protection against any unfortunate demise of the policyholder. The insurer will pay an amount equal to the Sum Assured to the nominee of the deceased policyholder. Some insurers also offer an additional sum insured for accidental deaths while also offering protection against partial or permanent disability to make for an optimum protective instrument. Term plans however offer No surrender benefits with no paid up value and no benefits on maturity.
    Q: Do term insurance plans qualify for tax deductions?
    A: Yes term insurance plans come with a tax deduction benefit. The premium paid for term insurance plans is eligible for tax deduction under section 80C. In the event of a claim, the death benefits received by the nominee of the policyholder are exempted from tax under Section 10(10d) of Income Tax Act, 1961.
    Q: What are the various types of term plans?
    A: Term plans can be broadly classified as two distinct categories. One is the pure term plans without return of premium or WROP. The second type of term plans offer a return of premium (ROP).Such return of premium plans offer a refund of premium paid at maturity or if the policyholder plans to discontinue the premium payment. The annual premium for return of premium term plans are higher than pure term plans.
    Q: What are the major advantages of buying a term insurance plan?
    A: A Term plan offers the most comprehensive protective quotient against any of lives eventualities and uncertainties. Term plans are by far the most cost effective making life insurance pocket friendly for all sections of society irrespective of their financial conditions and earnings. By opting for a term plan a policyholder is safeguarding the financial future of his or her immediate family and dependants. Add to it the cost effectiveness and tax benefits offered by term plans to make it a truly protective financial instrument.
    Q: Is there a place for term insurance if I already have a group cover from my employer?
    A: Usually having only a group cover is a bad idea as the insurance may not be sufficient as well as you are vulnerable in the event of a job loss or job change periods. A term plans should be a part of your financial plan as an individual irrespective of any group insurance plan offered by your employer.
    Q: What is the maximum term offered by a term plan?
    A: The maximum term offered by a term insurance plan is usually 25 years although recently some insurers have been offering term plans with a maximum term of 30 and even 35 years. There is however a limit on the maximum age at maturity for term insurance plans. Check the terms and conditions of a term plan to be sure of the maximum term conditions.
    Q: How much ‘Sum Assured’ should one opt for?
    A: The amount of life cover you will need depends on multiple factors like your financial earnings, the number of financial dependants, the quality or standard of life your family is used to living etc. Usually financial experts suggest buying a risk cover that is between 10 to 15 times your annual incomes. So if you are earning Rs. 5 Lakhs a year, opting for a term cover of atleats Rs. 50 Lakhs may be a good idea to cater for financial needs of your dependants and family.
    Q: What are the various riders or add-ons available for term insurance?
    A: Different insurers offer different riders for the policyholder to choose from. Some of the common riders available include the likes of critical illness benefit rider, waiver of premium benefit rider, accidental death benefit rider
    Q: What do term plans pay on maturity?
    A: Unless you term plan is a return of premium (ROP) term plan you will not receive any maturity benefit for a term insurance plan. Only the return of premium term plans pay out premiums paid on survival. Large majority of term plans are pure term plans with no payment on maturity.
    Q: Can one seek a loan on a term insurance plan?
    A: Since term insurance plans have no maturity value, a policyholder cannot mortgage a term insurance plan and seek a loan on the same.
    Q: What should be the tenure of a term insurance plan?
    A: The longer the tenure, the more is the protective component of a term plan. As a thumb rule, opt for a term plan that offers you a protective component atleats till 60 or 65 years of age.
    Q: Does the premium amount change in a term plan?
    A: No the premium term is fixed for the entire duration of the policy term and does not change for a term plan.
    Q: Are there any advantages of buying a term plan early?
    A: Yes the sooner you opt for a term plan, the higher is the protective insurance on offer. Also the premiums are low for younger individuals opting for a term plan making insurance more cost effective.
    Q: As a smoker do I need to pay a higher premium for a term plan?
    A: Smokers have a different risk pool as smoking has been proven to have a detrimental effect on your life and health. Smokers may be at a higher risk compared to non smokers and hence the higher premiums for a term insurance plan.
    Q: Is it safe to buy term insurance online?
    A: Yes term insurance plans can be bought online using various insurance aggregators or by opting for a plan of the selected insurer at their official website. Online term plans are safe, convenient and cost effective.
    Q: What happens if my status changes to a NRI post purchasing of a term insurance plan?
    A: Your term insurance plan continues to be in place even if your residential status changes to that of an NRI post purchase. Make sure to intimate the insurer about your change in residential address and updating of KYC norms to avoid any claim related delays.
    Q: How much time does it take for claim settlement?
    A: Depending on my medical intricacies involved in the claim, a term insurance claim can range from a week to 15 day period. Various insurers have varying claim settlement timelines.
    Q: How to know which insurer is better in claim settlement?
    A: IRDA releases a CSR or Claim Settlement Ratio for every life insurance company annually. CSR or claim settlement ratio shows the number of claims settled by the insurer compared to the number of claims it received in that financial year.

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