The best way to ensure the financial stability of your loved ones in your absence is through life insurance cover. When you buy a life policy, you trust the insurer to pay the benefits to your beneficiaries in case of an unfortunate event.
Therefore, you need to choose a reputed insurance company. One of the commonest benchmarks to finalize on an insurer is the claim settlement ratio. Let us understand this in a little more detail.
Claim settlement ratio
It is the ratio between the numbers of claims settled compared to the total claims received during a year. The ratio shows how many cases the insurance company resolved over a particular period.
Generally, it is advisable to avail of a life insurance term plan from an insurer with a high claim settlement ratio. Although a higher ratio provides credibility to the insurance company, it must not be the only deciding factor.
Here are four additional things that you must check before opting for an offline or online term insurance policy:
This amount is based on the sum assured (SA), age, lifestyle, and employment. You need to pay a higher premium for a greater SA. However, you must not choose a lower cover only to reduce the premium. You need to determine an appropriate SA as per your family’s financial requirements, outstanding liabilities, lifestyle, and other goals. This ensures your family does not face financial distress in your absence. One way to avail of a higher coverage at an affordable premium is by buying the term plan at an early age.
- Included benefits
Every insurance company offers different types of offline and online term insurance policies with varying terms and conditions. Therefore, it is important that you compare different plans to make the right decision. You must read the terms and conditions to clearly understand what is included and excluded, different payout options, and other policy benefits before you buy the insurance policy. You may also use an online insurance calculator to estimate the premium for different SA and analyze the policy benefits to make an informed decision.
- Additional riders
Insurers offer extra riders (add-ons) for a wider coverage along with your base term insurance plan. Some of these add-ons include accidental death benefit, critical illness cover, waiver of premium, and many more. Before adding riders to your base plan, evaluate your family’s needs because every add-on increases the premium.
- Appropriate payout options
The benefits of a term plan may either be paid as a single lump sum or as a regular pre-determined payout. You must find out if the insurer offers different payout alternatives to ensure that your family members receive the benefits to meet their monetary needs effectively.
In addition to providing financial stability in your absence, the premium on the term plan is eligible for tax benefits under the Income Tax Act, 1961 as follows:
- For policies issued before March 31, 2012, an amount of up to INR 1.5 lakh is exempt from tax (Section 80C)
- If the policy is issued after April 1, 2012, a maximum of 10% of the total SA is eligible for the term insurance tax benefit under Section 80C.
- Under Section 10(10D), the death benefit received by your nominees is tax-free
There is no denying the importance of a term insurance plan. It is a pocket-friendly way to ensure the financial stability of your family members in case of your sudden absence due to any untoward incident.
If you still have not secured your family’s financial protection, buy a suitable term plan at the earliest.