How to Choose the Best Term Insurance in 2022

Choosing a term insurance plan

While choosing a term insurance plan, the first thing most people do is compare prices. Yes, price is important. But by giving too much importance to the price of a term insurance plan, you may compromise with your family’s financial security. To make sure that your family doesn't suffer in future, we have compiled a list of five important features which should help you choose the right term insurance plan.

1. Claim Settlement Ratio:

This ratio reflects the percentage of claims paid out of the total claims filed in the year. The higher the ratio, the easier it’ll be for your dependents to claim the insurance in your absence and continue to live their lives comfortably.

The purpose of term life insurance is to secure your dependents’ future. The higher the claim settlement ratio, the better are the chances of ensuring that your family’s future is secure.

While the claims settlement ratio is important, what’s equally important is to check the total number of claims that were settled by the insurer. Only when a substantial number of claims are settled, the Claim Settlement Ratio acquires significance. For example,

Fact: ICICI Prudential Life has a Claim Settlement Ratio of 97.8%*. The claim statistics are for FY 2020 and are computed on individual basis claims settled over total individual claims for the financial year. For details, refer to the Annual Report 2021-22 on our website.

2. Solvency Ratio:

The solvency ratio tells you whether the insurer you choose will be financially capable of settling your claim if the need arises. Insurance Regulatory and Development Authority of India (IRDAI) mandates that every life insurer should maintain a solvency ratio of at least 1.5.

Fact: ICICI Prudential Life has a solvency ratio of 2.17^.

In case of a natural disaster, a life insurer will receive a large number of claims in a short period. Since a huge volume of claims will have to be settled quickly, it is in such situations that the solvency ratio becomes vital. The financial security of your family will depend on the financial stability of your life insurer. Even though natural disasters may seem unlikely, ignoring this crucial aspect could compromise your family’s financial security.

3. Critical Illness Cover:

A term insurance plan secures your family’s financial future in case of an unfortunate event. But the death of a significant earning member is not the only time a family’s financial security comes under threat. Critical Illnesses like cancer or brain surgery can cost a lot of money and cripple the family’s finances. Critical illness benefit pays the cover amount immediately on diagnosis of any of the covered critical illnesses. The critical illness cover amount helps cover the high cost of treatment & ensures your family has enough money to sustain their normal day-to-day life. Premiums paid towards the critical illness cover are also eligible for deduction under Section 80D~.

4. Additional Covers available:

All term insurance plans will provide a basic life cover. If the financial security of your family is your goal, then you must make sure that you choose a term insurance plan with comprehensive coverage and benefits. We have listed a few optional add-on benefits that you must look at while comparing term life insurance plans online:Waiver of Premium: Life insurance cover will continue without the need to pay the future premium in case of permanent disability.

Accidental Death: This benefit increases the sum assured to be paid to your family members in case of death due to an accident. Most good term insurance plans will offer you an accidental death cover equal to the base sum assured.

Income Benefit: Some term insurance plans allow your family members to receive a regular income from the plan rather than a lump sum amount. This benefit comes in handy if you want your term insurance plan to provide monthly income to your family in your absence.

Some other benefits you can look at are terminal illness benefit, flexibility to increase the sum assured at major milestones and increasing monthly income benefit.

5. Premium Cost:

Once you have evaluated term insurance plans based on the above parameters and narrowed your choices down to a few, then you can look at the cost to make your final decision. However, make sure you don’t compromise on any of the points mentioned above just because of cost. Remember term insurance premiums are eligible for Tax~ deduction under Section 80C~.

Fact: If cost is a major area of concern, then you can always select a monthly payment option. Set a standing instruction so that the premiums are auto-debited and you don’t have to pay the premiums every month manually.

The ICICI Pru iProtect Smart Plan offers a high life cover` at an affordable premium. The plan also offers additional riders such as critical illness# rider (optional), accidental death benefit^^ rider (optional), waiver of premium in case of permanent disability## and terminal illness$ at nominal costs and a life cover till the age of 99.

1. Is it worth it to get term life insurance?

A term life insurance policy can offer you many benefits. As the sole breadwinner of your family, the money from a term life insurance plan can be a substitute for your income in your absence and help your family lead a comfortable and dignified life. The premiums for term life insurance plans are also quite affordable. In fact, term insurance is the most inexpensive form of life insurance. In return, you get a high life cover and many other advantages, such as a critical illness cover, a permanent disability cover, an accidental death cover, and other benefits.

The critical illness cover takes care of health insurance by covering you against expensive and life-threatening ailments. The accidental death cover offers your family a sum of money in the unfortunate case of death in an accident. The disability cover waives off all future premiums if you suffer from a permanent disability and are unable to work.

2. What happens if I outlive my term life insurance?

Generally, pure term insurance plans offer a life cover` that is payable to the nominee only in the case of an unforeseen event during the policy term. So, if you survive the term and the plan matures, your cover will automatically end. If you wish to keep it running, you can pick a policy with a longer tenure that keeps you covered for life.

Alternatively, there are term plans with a return of premium also available in the market where the premiums are slightly higher but there is a money-back at the end if you survive the policy tenure.

3. What should be the duration of your term plan?

In order to ensure the protection of your family, you must pick an optimal policy duration for your term plan.

There are several aspects that need to be looked at while selecting the policy term. You can start with your age. The younger you are, the longer the period you need protection for and vice versa. Your gender too plays a crucial role here, as women generally live longer than men1. Similarly, your lifestyle habits, the ages of your dependents, and other factors. Also, decide the length of your policy term.

4. Do term insurance premiums increase every year?

The premiums for an existing term insurance plan do not increase every year. The plan you purchase today will have the same premiums a few years from now as long as your policy is active and unchanged. The premiums will only alter if you purchase a new plan altogether.

Your premium may also rise if you increase your life cover or enhance the coverage of your policy with additional add-on benefits.

5. What are the types of death covered in term insurance?

When it comes to claiming settlement for the sum assured in a term life insurance plan, the following deaths are considered valid under ICICI Pru iProtect Smart term plan:

• Natural death caused by factors, such as age or a medical condition
• Death due to a critical illness such as cancer, stroke, and others
• Death due to an accident is also covered. Some plans also offer additional payouts to the nominee in the event of an accidental death
• Death due to a natural calamity like an earthquake, flood, hurricane, tsunami, etc. is also covered under the plan

The following deaths are not included in a term life insurance plan:Self-inflicted harm or death caused by suicide is not covered under term insurance, for a certain duration from the policy inception/revival

Death in a homicide that involves the nominee is not covered under a term insurance plan. In such cases, a proper investigation will be conducted

It is important to know these aspects before purchasing a plan. You can also read the policy document to be sure of which kinds of deaths are not included in your term insurance.

6. How much money should I have as a sum assured for my term policy?

The sum assured is the amount of money your family would get from your insurance plan in your absence. The sum assured you would need would depend on various factors, such as the number of members in your family, their lifestyles, future goals, and other factors. Many experts suggest that your sum assured should be calculated by taking your annual income and multiplying it by 10. You would also need to add inflation to this. The final result that you get can be sufficient to meet your family’s future needs.

Keep in mind that the sum assured should reflect your family’s requirements. On an average, most people pick a sum assured equivalent to 10 – 20 times their annual gross income2.

7. When is the right time to buy term insurance?

The best term insurance plans are the ones that are bought at a young age. The premiums are a lot more affordable when you are young since the chances of suffering from health ailments are low. As a result, you can get a term plan at a lower premium and save a lot of money.