How to choose the Best Term Insurance Plan for your family.

Introduction

Term insurance is a type of life insurance that provides a lump sum amount to the nominee or beneficiary in case of the death of the policyholder during the policy term. Term insurance is also known as pure protection plan, as it does not have any maturity or survival benefit. Term insurance is one of the most affordable and effective ways to secure the financial future of your family in your absence. Term insurance can help you to:

- Replace your income and support your dependents

- Pay off your debts and liabilities

- Cover your children's education and marriage expenses

- Achieve your long-term goals and dreams

- Leave a legacy for your loved ones

Status

Term insurance is gaining popularity and awareness in India, as more and more people realize the importance of financial protection and planning. According to a report by CRISIL Research, the term insurance segment grew by 17.4% in FY 2020-21, despite the challenges posed by the COVID-19 pandemic. The report also projected that the term insurance segment will grow at a compound annual growth rate (CAGR) of 15-16% over the next five years, driven by factors such as:

- Increasing penetration of digital channels and online platforms

- Rising disposable income and financial literacy

- Growing demand for customized and flexible products

- Enhanced product features and benefits

- Improved customer service and claim settlement process

History

Term insurance has a long and rich history in India, dating back to the 18th century. Here are some of the major milestones in the evolution of term insurance in India:

- 1759: The first term insurance company, Oriental Life Insurance Company, was established in Kolkata by James Dodwell

- 1818: The first Indian-owned term insurance company, Bombay Mutual Life Assurance Society, was founded by Sir Hormusjee Pestonjee

- 1912: The first statutory measure to regulate term insurance, the Indian Life Assurance Companies Act, was enacted by the British government

- 1938: The Insurance Act was passed, which consolidated and amended the previous laws and provided for effective control over the term insurance companies

- 1956: The Life Insurance Corporation (LIC) of India was formed, which nationalized and absorbed 245 term insurance companies

- 1972: The General Insurance Corporation (GIC) of India was established, which nationalized and merged 107 term insurance companies

- 1999: The Insurance Regulatory and Development Authority (IRDA) of India was set up, which liberalized and opened up the term insurance sector to private players

- 2000: The first private term insurance company, HDFC Standard Life Insurance Company, commenced operations

- 2010: The IRDA introduced new guidelines for term insurance products, such as minimum sum assured, surrender value, and free-look period

- 2020: The IRDA mandated the standardization of term insurance products, such as the Saral Jeevan Bima, which offers a uniform cover of Rs. 5 lakh to Rs. 25 lakh

Why

Term insurance is a must-have for anyone who has financial dependents or responsibilities. Term insurance can provide you with the following benefits:

- Peace of mind: Term insurance can give you the assurance that your family will be taken care of financially in case of your untimely demise. You can live a stress-free life knowing that your loved ones will not have to face any hardships or compromises in your absence.

- High coverage at low cost: Term insurance can offer you a high sum assured at a low premium, as compared to other types of life insurance. For example, a 30-year-old non-smoker male can get a term insurance cover of Rs. 1 crore for a policy term of 30 years by paying a premium of around Rs. 700 per month. This means that you can get a large amount of protection for a small fraction of your income.

- Tax benefits: Term insurance can also help you to save tax on your income. The premiums that you pay for your term insurance plan are eligible for deduction under Section 80C of the Income Tax Act, 1961, up to a limit of Rs. 1.5 lakh per annum. The death benefit that your nominee receives from your term insurance plan is also exempt from tax under Section 10(10D) of the Income Tax Act, 1961, subject to certain conditions.

- Riders and add-ons: Term insurance can also be enhanced with various riders and add-ons, which can provide additional coverage and benefits for specific situations. Some of the common riders and add-ons that you can opt for with your term insurance plan are:

- Critical illness rider: This rider can provide you with a lump sum amount if you are diagnosed with any of the specified critical illnesses, such as cancer, heart attack, stroke, etc. This amount can help you to cover your medical expenses and treatment costs.

- Accidental death and disability rider: This rider can provide you with an extra sum assured if you die or become permanently disabled due to an accident. This amount can help you to cope with the loss of income and increased expenses due to the accident.

- Waiver of premium rider: This rider can waive off your future premiums if you become disabled or critically ill and are unable to pay them. This way, you can continue to enjoy the benefits of your term insurance plan without any financial burden.

- Income benefit rider: This rider can provide your nominee with a regular income, in addition to the sum assured, for a fixed period of time after your death. This income can help your family to maintain their standard of living and meet their regular expenses.

Points

Before buying a term insurance plan, you should consider the following points to make an informed and suitable choice:

- Coverage: You should choose a term insurance cover that is adequate to meet your family's financial needs and goals in your absence. A thumb rule is to have a cover that is at least 10 to 15 times your annual income. However, you should also factor in your age, liabilities, expenses, inflation, and future plans while deciding your cover amount.

- Premium: You should choose a term insurance premium that is affordable and within your budget. You should compare different term insurance plans and their premium rates online to find the best deal. You should also look for discounts and offers that can lower your premium cost, such as online purchase, long-term policy, healthy lifestyle, etc.

- Claim settlement ratio: You should choose a term insurance company that has a high claim settlement ratio, which indicates the percentage of claims that the company has settled out of the total claims received. A high claim settlement ratio shows that the company is reliable and trustworthy and that your family will have a hassle-free claim experience in case of your death.

- Policy term: You should choose a term insurance policy term that covers you till the age when you expect to retire or achieve your financial goals. You should also consider the option of renewing or converting your term insurance plan, in case you need to extend your coverage beyond the original policy term.

- Riders and add-ons: You should choose the riders and add-ons that suit your specific needs and requirements. You should also check the cost and benefits of each rider and add-on and how they affect your premium and sum assured. You should not opt for unnecessary or overlapping riders and add-ons that can increase your premium without adding much value to your term insurance plan.

Conclusion

Term insurance is a simple and effective way to secure your family's financial future in your absence. Term insurance can provide you with a high coverage at a low cost, tax benefits, and various riders and add-ons to enhance your protection. Term insurance can also give you peace of mind and confidence to live your life to the fullest. If you are looking for the best term insurance plan in India, you can contact us at 9398991181 and compare various term insurance plans from different insurers. You can also get expert advice and guidance from our team of insurance advisors and buy your term insurance plan online in a few easy steps. So, don't wait any longer and get your term insurance plan today.