Be it choosing the best school for your kids so that they get the best education, or buying a car that gives the best mileage, you always want to have only good things in your life. So, why should you settle down for anything other than the ‘best’ when it comes to buying a term insurance policy? After all, it is the matter of your family’s financial future! So, to help you choose the best term insurance policy, here are some of the tips.
- Always go for sufficient coverage: Here the cover means the amount which your dependents require to replace your earnings in case of your premature death. You should always keep in mind that your coverage should be sufficient to cover basic household expenditure and key expenses, like a child’s education, marriage, and other financial liabilities like loans, credit card dues, etc. If you don’t have sufficient coverage to cover present and future expenses, your family will not have complete protection. For instance, ICICI Pru iProtect Smart lets you increase the level of protection of your family at key stages like marriage, birth of a child, etc. It ensures that your life cover remains sufficient as per your current needs.
- Don’t go for the longest policy tenure: The tenure of the policy should be sufficient to meet your needs and ideally, the cover should be valid untill the time you decide to retire. Of course, the implicit assumption is that you would have zero or minimum financial liabilities by the time you retire. Therefore, it is prudent to choose an appropriate cover that offers correct tenure—neither too short nor too long.
- Check for claim settlement ratio: If there is a lot of focus on cost, and you ignore the claims settlement ratio then your family’s financial security comes under threat again. People buy a term plan because they don’t want their families to struggle in the event of their death. Ignoring claims settlement ratio means that you put them at risk. Claims settlement ratio is the measure of the willingness of a company to settle a claim. If an insurer has a high claim settlement ratio, it means, it is settling most of the claims received. In short, higher the claim settlement ratio, better it is. In the case of ICICI Prudential, the claim settlement ratio is 93.80% (2014-15), which means the company is honoring most of the claims received.
- Go for enhanced covers: A family’s financial security is not only under threat when the breadwinner dies, but also when the earning member falls seriously ill, and cannot go to work. In addition to the loss of income, there are added medical bills, hospitalization costs, etc. that put the financial situation of the family at risk. Loss of income coupled with an increase in expenses can be financial death for a family. Therefore, you should go for term plans offering critical illness plans which act as an income replacement option. Under such plans, if the policyholder would suffer a critical illness ailment, the insurer would make a payout to meet rising medical and other expenses. A good term insurance not only gives coverage when you die but also when you are alive, and ICICI Pru iProtect Smart does the same for you. Besides offering life cover, the policy offers 360-degree protection against various unforeseen events like critical ailments, terminal illness, accidental death and permanent disability.
- Check the solvency ratio: Imagine a situation when there is a natural calamity, and it puts a huge financial burden on the insurance company. Though, the insurer is obligated to settle legitimate claims, what if it genuinely cannot do so due to its poor financial state? As a result, solvency ratio is an important factor to consider when deciding which insurer to choose. The solvency ratio is the ability of the company to settle claims. A high solvency ratio means that the company is financially doing well and in a better position to settle claims. All the life insurers in India are supposed to keep 1.50 as solvency ratio. For instance, the solvency ratio of ICICI Prudential was 3.37 as on 31st March 2015, which was quite high. This ratio is high and therefore, it means, the company is financially strong to settle claims of policyholders.
Remember, a term insurance benefit is not a ‘bonus’ to your family in case of your premature death. It is meant to replace your earnings. As a result, be prudent while buying a term insurance policy. It’s important to ensure that you are entrusting your family’s financial future and your peace of mind to someone who is reliable.