Applying for a term insurance plan is a great way to provide financial protection to your family members after your demise. While making a term policy comparison, the first thing people consider to prioritize is the insurance premium. Having a low insurance premium is great, but cheap is not always the best solution as you can potentially compromise your family’s financial security.
So, if you are applying for a term insurance policy for the first, here are the best tips to follow while making a term policy comparison and find an insurance plan that offers low premium and maximum coverage:
Choose a high claim settlement ratio
Claim settlement ratio (CSR) refers to the percentage of insurance claims cleared by the insurance company compared to the insurance claims filed in a financial year. A higher claim settlement ratio indicates that your insurer will pay the claim amount on time, due to which your dependents will be able to access funds in your absence
The primary objective of acquiring a term insurance plan is to secure a future for your dependents. So, the higher the claim settlement ratio, the greater are your chances of ensuring a secure future for your family. Furthermore, it would be wise to check the total number of claims settled in previous years by the insurer. Opt for an insurer only if they have settled a significant number of insurance claims.
Check the solvency ratio
A solvency ratio represents the insurance company’s capacity to settle the claims when the need arises. For instance, during a natural disaster, the insurance company will receive a significant number of claims in a short period. The insurer will have to settle all the claims, and that is when the solvency ratio becomes crucial.
When you compare insurance plans, keep in mind that your family’s financial security is dependent on the solvency ratio. Although it is pretty unlikely for a natural disaster to happen, you must not ignore this factor while making a term policy comparison. As per the Insurance Regulatory and Development Authority of India (IRDAI), an insurance company should maintain a minimum solvency ratio of 1.5.
Ensure that your plan also covers critical illness
Your unfortunate demise is not the only time when the financial security of your family is under threat. You or your family members may require financial assistance to treat critical illness. For instance, you may need funds to pay for cancer or brain surgery. The cost of such medical expenses can affect a lot of your family’s finances.
When you compare insurance plans, it would be prudent to choose a plan that covers critical illnesses. The critical illness cover amount in your insurance plan can take care of the cost of treatments. Doing that spares your family peace of mind. It is worth noting that the premiums paid towards the critical illness cover are eligible for deductions under 80C of the income tax act 1961.
Opt for an insurance plan with comprehensive coverage and benefits
While making a term policy comparison, you must ensure that your preferred insurance policy covers almost every aspect of financial security for your family members. For instance, it must include a waiver of premium in the case of permanent disability. Furthermore, most insurers offer to increase the sum assured to be paid to the dependents after the policy holder’s death due to an accident.
Also, you can decide to receive a regular income from your insurance plan rather than a lump sum after your demise. If your family is dependent on your income, a term insurance plan is the best option to protect them financially. So, when you compare insurance plans, make sure to avail of features like terminal illness benefits, increased sum assured, and increased monthly income benefit.
Decide your premium cost
After comparing insurance plans and evaluating them based on factors like claim settlement ratio, solvency ratio, critical illness benefits, etc., you need to consider the cost of your insurance premium. It is imperative to avoid compromising on the above-said points due to the cost. Also, you are eligible to get tax deductions under 80C of the Income Tax Act for the premium on term insurance plans.
However, if cost is your biggest, you can assuage yourself of your worries by selecting a monthly payment option. It enables you to manage your finances better.
If you are applying for a term insurance plan at mahindra insurance brokers for the first time, pay heed to the above-said term policy comparison tips and avail of an insurance plan with comprehensive coverage and benefits.