How to Choose the Right Life Insurance Plan Along with Term Cover
Sometimes it feels like picking up the right life insurance is the same as figuring out a huge puzzle. So many options, big words, and confusing numbers. However, securing your family’s future is definitely one of the most generous things you can do to ensure quality of life with love. In India, where family is the central value, having a solid plan is like providing your loved ones with a safety net that will never break.
If you want to keep things simple and effective, the best way to start is by looking at a life insurance plan that includes term cover. Let’s break this down into easy steps so you can make the best choice for your home.
What Exactly is a Life Insurance Plan?
A life insurance plan is like a contract between you and an insurance company. You pay a small amount of money (called a premium) regularly. In return, if something happens to you, the company will pay your family a large sum of money.
Apart from term insurance, there are a lot of other types of plans as well. Some help you in saving for your future, while others are more focused on providing protection. For most people in India, the first and foremost is going for term insurance.
Why Term Cover is the “Hero” of Insurance
Term insurance is basically the simplest and clearest form of life insurance. It doesn’t offer you any money if you survive the policy period, but it provides the maximum amount of protection for the minimum cost.
In fact, by purchasing term life insurance, you are essentially buying yourself peace of mind. Even in the absence of the breadwinner, the term “cover” can ensure that the children are still able to attend school, the house loan is paid off, the stove remains lit, etc. This kind of insurance is not only simple and honest but very affordable too.
Step 1: Calculate Your Family’s Financial Requirement
Before you browse the offer brochures, simply put a cup of tea and a calculator on the table. Don’t just select a random figure like 50 Lakhs or 1 Crore because it just sounds big. Your “Human Life Value” is based on your lifestyle.
Think about:
- How much does my family spend on groceries and bills every month?
- Do I have a home loan or a car loan?
- How much will college fees be for my children in ten years?
- What about the retirement of my spouse?
Generally speaking, in India a healthy cover should be at least 10 to 15 times your annual income. That means if you make ₹10 Lakh a year, your cover should ideally be at least ₹1 Crore.
Step 2: Decide on the Duration of a Life Insurance Plan
The “term” is the amount of years that the policy is operative. The most logical thing is to have coverage up to the moment you plan to retire.
In India, people often pick a career until the age of 60 or 65. By that time, it’s likely that your children will be independent, your loans fully paid, and you will have accumulated savings. You don’t want a policy that you are going to be paying for longer than necessary; however, you also want to avoid the situation where it ends while you still have significant financial commitments.
Step 3: Check the “Claim Settlement Ratio” (CSR)
The Claim Settlement Ratio (CSR) is a very crucial statistic. It indicates the number of claims a company has paid against 100 claims received. Therefore, a CSR of 98% means that the company has almost paid the claims made by 98 customers out of every 100 and it is an indication of the company’s trustworthiness.
The claim settlement ratio numbers are available yearly and published by the Insurance Regulatory and Development Authority (IRDAI) in India. Always go for a company with a high CSR (generally more than 95%) and a good name.
Step 4: Add Extra “Boosters” (Riders)
When you choose term life insurance, you will be given an option to include additional small “extra” benefits in the form of riders. Like toppings on a pizza, these will enhance the basic plan.
In India, one can commonly find the following riders:
- Accidental Death Benefit: The family of the person who is a victim of an accident receives an additional sum of money.
- Critical Illness Cover: It provides a lump sum to the insured, which can be utilized to meet hospital expenses in case he is diagnosed with severe illnesses such as cancer or heart ailments.
- Waiver of Premium: The Insurer promises to keep the policy active without the insured paying any future premiums if the insured has become disabled and cannot work.
Step 5: Be Honest About Your Habits
When providing information for your life insurance policy, it is essential that you are honest. Are you a smoker? Declare it. Do you have any health issues? Disclose them. If you conceal things so as to get a cheaper price, it is highly likely that the insurer will deny compensating your family later on. It is a much better option to pay a few extra rupees now than to risk your family’s well-being in the future.
Why You Should Start Early
In India, it is quite common for people to wait until they are older to think about insurance. However, the best time to buy term life insurance is when you are young and healthy.
- Lower Cost: A 25-year-old will be paying a significantly lower amount for the same insurance than a 40-year-old.
- Locked Price: Usually, when you take a term plan, the premium does not change for your whole life.
- Easier Approval: When you are young, it is much easier to clear medical examinations.
Comparing Plans Online
The era when you had to wait for an insurance agent to come to your house is long gone. You can check and compare almost all life insurance plans online nowadays. Use websites that compare various life insurance plans to check different prices, benefits, and terms that are often hidden. To know how a company treats its customers, read the reviews from other Indian customers.
Summary: Your Simple Checklist
To ensure that you get to the right side, follow this quick list:
- Calculate: Target to cover 10-15 times your annual income.
- Focus: At the core of your plan must be a strong term cover.
- Check: Only purchase life insurance from companies with a high Claim Settlement Ratio.
- Disclose: Always be truthful about both your health and lifestyle.
- Review: As your family grows, check if your cover is still adequate every few years.
Conclusion
Getting insurance is not about you; it is about safeguarding the ones you love. The life is unpredictable, and while you wish for the best, it is always good to be prepared for the worst. Picking a simple, high-quality life insurance plan with a reliable term cover now is a way of securing that your family’s dreams, their home, their education, and their dignity are protected regardless of anything that might happen tomorrow.
Pranab Bhandari is an Editor of the Financial Blog “Financebuzz”. Apart from writing informative financial articles for his blog, he is a regular contributor to many national and international publications namely Tweak Your Biz, Growth Rocks ETC.
