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6 Factors That Matter in an Ideal Term Plan and Which Plans Have Them Research Team | Posted On Friday, May 03,2019, 01:22 PM

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6 Factors That Matter in an Ideal Term Plan and Which Plans Have Them



Nobody wants their dependants to suffer in a financial crisis. But, hope alone is not enough to protect loved ones against uncertainty. The responsibility of securing the lives of your dependants lies with you. The modern world is full of uncertainty. You don’t know what happens in the next minute. Hence, it is very important to insure against untoward incidents.

This is why availing a Term Insurance Plan is important. A term insurance plan is a pure protection plan which protects your family in your absence. Term insurance is the most economical way of protecting your family’s future. This article covers details of term insurance and factors that matter in an ideal term insurance plan.

In today’s hectic lifestyle, you are not sure, when you would fall sick or meet a premature death. If you are the breadwinner of the family, then your family’s financial future would be in jeopardy on an unexpected demise. This would be a disaster for your dependants. Considering this, you must ensure that your family’s financial state doesn’t go for a toss when you are not around.

You must explore ways of securing the future of loved ones. Term insurance is the best way to secure the lives of your dependants. So, what is term life insurance?

Well, in simple words, term insurance is the most basic form of life insurance which pays out death benefits (sum assured) to the nominee or beneficiary, if the policyholder dies within the term of the policy. Premiums payable towards term policies are nominal and can be paid either on annual or monthly basis, to keep the policy in force. However, when it comes to choosing an ideal term insurance plan, there are certain factors you must consider.

Want to know more on Term Insurance? We at will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

SEE ALSO: Choose Your Term Insurance Plan Based on Claim Settlement Ratio

6 Factors That Matter in an Ideal Term Plan

1) What Benefits are Available?

Each life insurer has different benefits offered to policy holders. These benefits can be low premiums, multiple premium payment options, waiver of premium option, additional riders (critical illness, accidental benefit and the return of premium) and so on. You must opt for a term insurance policy which offers maximum benefits at low cost.

2) What are the Payout Options?

Payout options are one of the most important factors that you must consider when purchasing a term insurance plan. You must check if the insurer pays the sum assured as a lump sum or periodic payouts to the nominee(s), if you die within the term of the policy. With this, you ensure that the nominee or beneficiary would receive benefits as per his/her needs.

3) Coverage of Policy Term

The tenure of the term insurance policy is as important as the sum assured. The policy must cover the insured, across working life. In India, the age of retirement is 60 years. However, in the modern world, people are willing to work beyond the age of 60. Considering this, you may cover yourself till the age of 65 years.

4) Insurance Claim Settlement Ratio

Claim settlement ratio gives the number of claims settled, against the number of claims filed. Higher the claim settlement ratio, better the insurer. Don’t avail term life policies from those insurers with low claim settlement ratio. After all, you are availing insurance so that your loved ones are financially secure, even when you are not around.

Leading insurers like LIC, Max Life Insurance, ICICI Prudential and so on, are popular due to their higher claim settlement ratio. Claim settlement ratio of 92% and above is considered good. The table below shows the claim settlement ratio of various insurers in India:

5) Persistency Ratio

Persistency with respect to the insurance industry is a measure of the business that the insurer can retain over a financial year, without policies lapsing or customers changing the insurer and thereby losing the premiums. This is measured by a ratio known as persistency ratio. Top insurers like Max Life Insurance (81%) and ICICI Prudential (80.5%) are leaders when it comes to persistency ratio.

6) Claim Settlement Process

Claim settlement process is the complete process from filing the claim to the settlement or payout of the sum assured. Faster claim settlement would reduce the cost of processing claims, while multiple stages in the process must be avoided as it increases the overall cost of claim settlement. LIC India, ICICI Prudential Life and Max Life Insurance are the leading insurers when it comes to claim settlement process.

SEE ALSO: What is a Term Life Insurance Policy?

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