What is Term Plan in Insurance & How to Choose Best Term Plan

What is a Term Plan in Insurance?

Term insurance plan is nothing but an insurance policy that could commit a very high life cover in return of very low premiums. However, the flip side is that the plan does not give you anything in the end of the term if you complete the time period.

Term plan is very effective in case of a death because you get a very huge returns as compared to your investment but you don’t lose a big amount in case nothing happens to you.

Why should you buy a term insurance plan?

Well! There are many advantages of it but the best part is that it is available with low premiums because there is no maturity plans included.
Moreover, Most of the insurance agents running around you sell the costliest insurance plan.

Therefore you end up buying a plan that you need desperately but the premium cost is too high for you.
OR you take a plan that you do not need at all
OR you do not take any plan and postponing it.
Hence, in this scenario the term insurance plan is best to buy because it is designed for special purpose.
I hope this gives you a brief idea about the term insurance plan and why it is important for you.
Keep on reading to know more…

Who all Can and Cannot Apply for Term Insurance Plan?

Although term plan is very easy to get but you should know who all can apply for term insurance plan. I mean to say there are certain eligibility criteria for this.
It differs from company to company which gives the insurance plan but I will tell you general things that is normally remains same while applying for a term insurance plan irrespective of a company you choose.
1. Minimum Age: Every insurer is going to ask for minimum age of 18 years. The maximum age for applying is 65 years. If you are older than that they you might not be eligible for a plan.
2. Policy Terms and Condition: The minimum time period for an insurance plan is 5 years. Maximum it can go up to 30 to 55 years. Hence, your time period must be between 5 years to 55 years.
3. Maturity Age: The maximum maturity age is 75 years and it can be for whole life also. It depends upon the kind of insurer you are choosing for your insurance plan.
4. Annual Premium: This is very important for you because people are mainly interested in knowing how much they have to pay every year.
Normally, minimum amount you need to pay is Rs 2000/-. However you could pay more if you want more money if something happens to you. It would depend upon the sum you have assured and your age.
Premium Payment Mode: You have complete flexibility for paying your premium money. You can pay outright the entire amount or you could pay regularly, yearly, half-yearly, quarterly, and monthly.
It depends upon you what is convenient for you.

Smokers

As smokers are at higher risk of early loss of life hence there is a separate plan for them. You have to pay a higher premium (around 15% to 25%) if you are a smoker.

Riders

Riders like dangerous diseases rider, or accidental death riders. They are valid for certain period of time with special benefits.

Terrorism Cover

Many company offers cover for death because of terrorism. You need to check this with your insurer whether they have this plan or not.
So these were some variables that you need to consider before choosing a term insurance plan.

Advantages of Term Insurance Plan

Before you choose a term insurance plan you need to know some of its advantages. Here are some of them.
1. Plan Choice – You can choose a plan on single life basis or joint life basis. Insurer would give you that flexibility.
2. Death Benefits – The nominee would receive the amount the he or she has chosen.
3. Maturity Benefits – As you in term insurance plans there is no maturity benefits when you survive you get money only if you are dead.
4. Policy Terms – Minimum is 5 years (it can be different for different insurer) and maximum is 30 years.
5. Entry Age – Your entry age should be at least 18 years it maximum could be up to 75 years.
6. Other Benefits – There are other benefits like critical illness benefits. Then accidental benefits and it covers for terrorism deaths also.
So what do you get when you choose a term plan.

• You get maximum cover at very low price. Your life is insured and you have to pay small amount of money monthly or yearly as per your plan.
• Flexibility – You have complete flexibility to choose the sum that is assured at the end of the term.
• There is additional benefit that could be availed at a small cost. It means if there are some additional benefits in a plan and you want to use it then there is flexibility to make use of it at a low cost.
• Premium amount remains same over the entire term of the policy
• As I said earlier it is your choice how you want to pay your premiums, you can pay it regularly in months or one full time.
• Above that you would like to listen is the tax benefits. Under section 80C and 80D you get relaxation in paying your tax. Hence, you could save a lot of money.

I would like to add here that customer support of various banks that give term insurance plan to you is great.
It is because of competition as there are dozens of companies in the market and you can choose anyone which is best for you.
There is an agent dedicated to you that is going to explain you everything whenever you want.

How to Choose a Best Term Plan for You

Investing money is a serious business. Therefore before you invest your hard earned money you have to think twice and make a right decision.
So if you are sure that you are going to buy a term plan from a particular company then you should look out for following things before you make a choice.

1. Decide on the Insurance Cover Amount

You have to make a decision on the insurance cover amount. Ideally, your amount should be 6 to 8 times of your annual income.
It is advised to consult your financial planner before you choose your cover amount.

2. Scrutinize Claim Settlement Ratio of Your Insurer

This is also very important factor. You need to know the number of successful claims that has been settled or disbursed by the particular company.
The ratio must be high, only then you should go for that company.

3. Do Not go for Low Premium Rates

Going for Low premium rates always is not a wise decision. It is an important factor but not always.
Low premium rates have several conditions attached to them. Hence, you should be clear about it.

4. Check for Rider Benefits

Almost every term policy offers rider benefits like for critical illness, permanent disability or death from terrorism etc.
Choose a policy that has low additional cost among different insurance provider.

5. Do Not Hide Anything, Disclose all your Information

Disclose all your information to your insurance provider. Your smoking habits, any illness and your lifestyle.
You should be honest otherwise later your insurance provider could deny the insurance amount on the basis of suppression of facts.

6. Avail Free Look Period

You have complete choice to return your policy within 15 days of date of issue if you have some problem with the term plan.
Insurance providers are mandated by IRDA to offer free look period where the customer has choice to return the policy. Hence make best use of it.

7. Read Policy Documents of Insurer at least 10 Times

Ready the policy documents of your provider at least 10 times. Take your time and do not be in a hurry, read it comprehensively, especially things that are between the lines and then make a decision.
Always fill the form on your own, never let agent to fill the form on your behalf.
Therefore, you need to consider these things before you choose your term insurance plan.

Comparison Table of Various Term Plans

To make things easier for you I created a table of 15 companies with their policy names and premium you have to pay, riders and mode of applying them.
Although premium amount is subjected to change and you have to check the website of the company before applying but the table down under show a tentative amount.
Below comparison table is for a 30 year old person for 1 crore sum assured & who is a not a tobacco user:

Sr. No.	Company	Policy Name	Premium	Riders	Mode
1	LIC	Amulya Jeevan	Rs. 33,600	NIL	Offline
2	ICICI Prudential	I – Care	Rs. 14,607	Yes	Online
3	HDFC Life	Click 2 Protect	Rs. 11,461	No	Online
4	Metlife	Met-Protect	Rs. 12,134	No	Online
5	Aegon Religare	iTerm	Rs. 25,618	Yes	Online
6	Kotak	e-Prefered	Rs. 10,825	No	Online
7	ING Vyasa	My Term Insurance	Rs. 11,891	No	Offline
8	Bajaj Allianz	iSecure	Rs. 25,838	Yes	Online
9	SBI Life	Smart Shield	16798	Yes	Offline
10	Reliance	Term Insurance	Rs. 35,954	NA	Offline
11	Tata AIA	Maha Raksha	Rs. 7,978	NA	NA
12	Birla Sun Life	Protector Plus	NA	Yes	Offline
13	Canara HSBC	Life Pure	NA	NA	NA
14	Sahara Life Insurance	Kavach	NA	NA	NA
15	Max New York	Platinum Protect	Rs. 23,500	Yes	Offline

This is the list of top 10 companies with highest claim settlement ratio. You get an idea which company has paid the amount after the death.
Surely LIC comes first.

Sr. No.	Company	Claim Settlement Ratio
1	LIC	97.4%
2	ICICI Prudential	96.5%
3	HDFC Life	96.2%
4	SBI Life	95.5%
5	Kotak	92.1%
6	Birla Sun Life	90.9%
7	Bajaj Allianz	90.6%
8	Max New York	89.8%
9	Aviva	89.6%
10	ING Vyasa	88.8%