Different Types of Insurance Plans in India - Expert View

The Covid-19 outbreak has caused a significant shift in the public's attitude of life insurance. Many people have learned the value of having sufficient financial resources in the event of a medical emergency. They've also witnessed first-hand how much a family suffers when the sole breadwinner dies. The rising middle class, the growing insurable population commencing coverage, and the sudden increase in awareness of the need for financial protection have all contributed to the growth of insurance in India.

Term insurance is the most basic and pure form of life insurance, and it will cover all of your fundamental financial needs. Insurers currently offer online term plans that ensures easy and rapid accessibility. It is also incredibly cost-effective. Let's take a deeper look at the many components of the term insurance plans and the different views from our experts.

What is Term Insurance?

Term insurance plan is a contract between insurance company and the person seeking life coverage. According to the contract, if the person dies during the policy period, the insurance company agrees to pay a lump sum amount to the family members/nominee, which is the sum promised. This sum is deducted from the person's monthly premium payments for the length of the insurance. To determine the finest term insurance plan for you in India, you must first understand the many types of term insurance plans available and the essential elements that will best fit your needs. Let's dig in a little deeper.

What Are the Various Types of Term Insurance Policies Available in India?

The term policy is divided into four varieties based on the sum assured and the pattern of premium payments. People can use it depending on their income and requirements.

Level Term Insurance

• This is the most basic and popular type of term insurance.
• The sum assured (death benefit) remains constant throughout the policy term.
• The premium amount also remains fixed during the policy term.
• This plan is ideal for individuals seeking a guaranteed payout to cover long-term financial needs of their dependents (e.g., child's education, spouse's living expenses).

Increasing Term Insurance

• This plan offers a gradually increasing sum assured over the policy term.
• This can be beneficial to counter inflation, ensuring the payout retains its value over time.
• The premium amount typically increases periodically as the sum assured grows.
• This plan is suitable for individuals whose financial needs might increase over time, such as parents with growing children.

Decreasing Term Insurance

• This plan offers a sum assured that decreases over the policy term.
• This can be a good option for individuals with a reducing financial burden, such as those with a mortgage that gets paid off over time.
• The premium amount typically decreases along with the sum assured.
• This plan is not ideal for situations where long-term financial protection is a priority.

Return of Premium Term Insurance

• This plan offers a unique feature - if you survive the policy term, you receive all the premiums you paid back.
• However, the premium amount for this plan is generally higher compared to other term insurance plans.
• This plan might appeal to individuals who prefer a guaranteed return on their investment in case they outlive the policy term.
• It's important to remember that the primary purpose of term insurance is to provide a death benefit, not a return on investment.

Convertible Term Insurance

• This plan offers flexibility by allowing you to convert your term insurance policy into a whole life insurance policy during the policy term.
• Whole life insurance provides both death benefit and a cash value component that grows over time.
• This plan can be beneficial if you are unsure about your future financial needs but want the option to convert to a plan with savings benefits later.
• The premium for a convertible term plan is typically higher than a standard term plan.

Family Term Insurance

• This plan covers multiple individuals (typically a spouse and dependent children) under a single policy.
• This can be a more cost-effective option compared to purchasing separate term insurance plans for each family member.
• Some family term insurance plans offer the flexibility to add or remove dependents as your family situation changes.
• This plan is ideal for families seeking to ensure financial security for their dependents in case of the primary income earner's passing.

Choosing the Best Term Insurance Plan for You

If you're new to investing, you might be wondering how to get the finest term insurance in India to get the most bang for your buck. Making sound financial decisions is essential for you and your loved ones to have a secure future. Therefore, here are a few pointers to assist you in understanding how to choose term insurance :

Take into account your age and the number of people who depend on you

When it comes to knowing how to purchase term insurance plans, the first step is to examine your life. When it comes to life insurance, your age and financial status determine which policy is best for you. It has an impact on the policy's term and, as a result, the amount of life insurance that is most appropriate. Moreover, each person's financial duties throughout life are unique. If you are your family's primary breadwinner, they may rely on you for a long time to achieve their life goals. Unmarried people, on the other hand, are unlikely to have multiple dependents. As a result, you must analyse who requires life insurance and how to select term insurance that is acceptable for them.

Examine your current way of life

Understanding how to buy term insurance based on your lifestyle requirements is critical. Your purchasing habits and general way of living are part of your lifestyle. While projecting the required life coverage from term insurance, it is critical to be realistic when examining your existing lifestyle. You can better protect your loved ones if you have a good understanding of their lifestyle demands. Hence, even in your absence, they will not have to sacrifice their standard of living.

Examine and analyze your earnings

A typical issue among people is determining the quantity of term insurance that will be sufficient for their family. To gain a more practical view of your revenue, it's a good idea to evaluate it. Each of us has a set of financial responsibilities in life that necessitate different amounts of money. You can invest more effectively if you assess the restrictions of your income. It's critical to calculate your loved ones' financial needs so that you don't overestimate your life insurance coverage. If your salary is insufficient to cover the premium, you may find yourself in a financial bind.

Examine the current liabilities

Debts and liabilities are other essential considerations when deciding on term insurance. People frequently have loans that must be repaid over a long period of time. It can be financially disastrous for your dependents if the policy term does not cover the payback period or if the amount is insufficient. It hurts us all to think of our loved ones having to shoulder the load of debt repayment without proper help. As a result, it is critical to comprehend how to select the ideal term insurance plans by carefully analysing one's debts and responsibilities.

Including Riders in the Plan

Few people understand how to buy term insurance and tailor its advantages to their own needs. Riders are additional coverage benefits that can be added to a standard Life Insurance Policy. Insurers provide riders as additional instrument tools to extend the coverage of an insurance policy. By paying an additional premium, they can be added to a base insurance at the time of purchase. Critical sickness rider, accidental death and disability rider, and waiver of premium rider are some of the common riders available with term insurance contracts. Knowing how to choose term insurance riders might help you extend the coverage of your term insurance policy. Please note that riders are not mandatory and are available at an additional cost.

Examine the insurer's claim settlement ratio

The percentage of claims successfully paid by an insurer in comparison to the total number of claims received in a financial year is known as the ratio. It demonstrates an insurance company's willingness and ability to follow through on its pledge to give financial assistance in times of need. From the standpoint of the policyholder, the insurer's claim settlement ratio is critical. By looking at a provider's claim settlement ratio, you can get a better understanding of how to buy term insurance.

Characteristics of the Best Term Insurance

After we've gone over the various types of term insurance plans, we'll go over the basic elements that all term insurance plans should have. The usability and accessibility of these elements, as well as their quality, are critical.

• Flexibility: The premium payment mode and frequency must be flexible, allowing for monthly, quarterly, or half-yearly payments. After you've decided on the payment frequency, you can use a premium calculator to evaluate the cost of different businesses and find an inexpensive one. You can purchase a term plan online and pay your premiums on a regular basis.
• Multiple payout choices: It is good to have multiple payment options such as a lump sum payment or a regular monthly income, or a combination of a lump sum and a regular income for a predetermined period, are desirable.
• Service to customers: It takes a lot of effort to understand your financial obligations and choose the best strategy for you. To comprehend the terminologies for the correct policy, we need expert assistance and the right support. In this case, good customer service can help.

Conclusion

We've gone over the importance of term insurance plans and the qualities that a plan must have. Now is the moment to assess your financial commitments, premium budget, and long-term goals in order to find the best plan for you. Consider the type of insurance you require in light of your requirements. Every person's situation is unique and distinct! The best term insurance for you in India will be the exact term insurance that meets your needs and has all of the necessary characteristics.