How To Buy The Best Term Plan



A term insurance plan is a pure life cover with no investment benefit. A 30-year-old salaried male with no tobacco habit, and earning ₹5 lakh a year, can get a term cover for ₹1 crore for 15 years with annual premiums starting from ₹5,900. This is more cost-effective, and it frees up your savings to be invested in other avenues that can earn you higher long-term returns. Despite the attractive pricing for a substantial sum assured, you must pick the right product carefully.

Sum assured

It’s critical to be insured for the right amount. You need to make a long-term assessment of your family’s money needs in your absence. Think about EMIs, rent, daily needs, healthcare, children’s education costs, post-retirement income needs, etc. You must also calculate the inflation-adjusted value of some of these requirements and ascertain when your family will need this money.

A simpler way to calculate your insurance need is to multiply your current annual income by the number of years left till retirement. Usually, a life cover of 10-20 times your current income is enough to protect your family.

You should cover yourself till your retirement age, or till the time you have financial dependants. The typical term plan is open to persons between the ages 18 and 65, with a maturity age of 70. A higher tenure attracts a higher premium.

Other points to note

There are several riders that enhance the protection offered by a term cover. These include the payout of the sum assured as monthly income. For example, a well-known insurance company has a monthly income rider that pays 0.4 per cent of the sum assured every month for 10 years. The income rider also has an increment option, where the income rises by a fixed per cent every year.

Riders which payout additional benefit due to death or disability from an accident and riders that provide premium wavier /payout based on diagnosis of critical/terminal illness are also available. Some insurers provide discounted premiums to non-smokers and women. A husband and wife can get a joint term plan.

One of the best ways to find a product that fulfils all your needs is to go online, shortlist products, compare them, and then make an informed choice. While choosing the product, make sure the ideal claim settlement ratio is in the 90-99 range.

The writer is CEO, BankBazaar.com

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get





Previous Story Alerts

MORE FROM BUSINESSLINE


 Getting recommendations just for you...
This article is closed for comments.
Please Email the Editor