Tips for Choosing the Best Term Insurance Policy
A term insurance policy is the least expensive way of purchasing protection against the risk of death and the consequent financial loss for the policyholder’s family. Term insurance is a policy with a fixed term, annual or monthly premiums, and a sum assured as chosen by the insured. There is no limit on how high the death benefit can be; the insured also chooses the term of the policy. Term plans usually require the policy holder to be medically checked, and premiums differ depending on the age of entry into the policy, whether the insured is a smoker or non-smoker, and the overall health of the insured.
Criteria for Choosing a Term Policy
There are a variety of term plans on offer. So, how do you choose the best term insurance? Here are some criteria you should apply when making your choice.
1. Check the claim settlement ratio. This is the ratio of total claims settled to total claims received by the company. The claim settlement ratio should not be lower than 80%. The Insurance Regulatory and Development Authority of India (IRDA) publishes these numbers in its annual report.
2. Look into the financial background of the insurance company. One key parameter is the solvency ratio, which denotes the ability of the company to meet its financial obligations and debts. It is the size of its capital relative to the risks it has taken, and is calculated as the ratio of net assets to net premiums written. The IRDA recommends a minimum ratio of 1.5. A good solvency ratio means that the insurer will be able to settle any large claims in the event of a catastrophe. Cash in hand, annual profits, the leverage ratio, etc, are also important. In addition, look at the reputation and longevity of the company. These indicate its standing in the industry and its experience.
3. Premium rates are another criterion for selecting a term insurance policy. However, cheapest is not always best, nor is the most expensive. Look at this criterion along with all the others.
4. Average claim settlement time is a key input in your decision. Taking a policy with a company known to delay claims may cause trouble for the beneficiaries, so look at the IRDA report for these numbers.
5. Compare the policy statements and riders, and choose the one with the clearest statements and conditions. Choose additional policy benefits carefully. A pure term insurance policy is generally your best bet.
A term insurance policy is the least expensive way of purchasing protection against the risk of death and the consequent financial loss for the policyholder’s family. Term insurance is a policy with a fixed term, annual or monthly premiums, and a sum assured as chosen by the insured. There is no limit on how high the death benefit can be; the insured also chooses the term of the policy. Term plans usually require the policy holder to be medically checked, and premiums differ depending on the age of entry into the policy, whether the insured is a smoker or non-smoker, and the overall health of the insured.
Criteria for Choosing a Term Policy
There are a variety of term plans on offer. So, how do you choose the best term insurance? Here are some criteria you should apply when making your choice.
1. Check the claim settlement ratio. This is the ratio of total claims settled to total claims received by the company. The claim settlement ratio should not be lower than 80%. The Insurance Regulatory and Development Authority of India (IRDA) publishes these numbers in its annual report.
2. Look into the financial background of the insurance company. One key parameter is the solvency ratio, which denotes the ability of the company to meet its financial obligations and debts. It is the size of its capital relative to the risks it has taken, and is calculated as the ratio of net assets to net premiums written. The IRDA recommends a minimum ratio of 1.5. A good solvency ratio means that the insurer will be able to settle any large claims in the event of a catastrophe. Cash in hand, annual profits, the leverage ratio, etc, are also important. In addition, look at the reputation and longevity of the company. These indicate its standing in the industry and its experience.
3. Premium rates are another criterion for selecting a term insurance policy. However, cheapest is not always best, nor is the most expensive. Look at this criterion along with all the others.
4. Average claim settlement time is a key input in your decision. Taking a policy with a company known to delay claims may cause trouble for the beneficiaries, so look at the IRDA report for these numbers.
5. Compare the policy statements and riders, and choose the one with the clearest statements and conditions. Choose additional policy benefits carefully. A pure term insurance policy is generally your best bet.
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