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Term Insurance

By   /   February 15, 2014  /   No Comments

 

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www.FinancialKundali.com

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What is Term Insurance:

It is the purest form of Life Insurance. The reason it is called the purest form is that it does not have any investment part in it. The buyer knows the exact amount which his family members will be getting on his demise.

One can compare it with car insurance. You pay premium each other for renewal of the insurance cover. The only difference is that you pay around Rs.15,000 as renewal premium 🙁 for a car worth 5-6 lakhs whereas in case of Term Insurance you can get a cover for Rs.1 crore 🙂 by paying the same premium amount.

The BIG Question that comes in my mind is that why don’t many of us do not buy a Term Insurance. I can bet you that each household must be having an Insurance Policy (child plan/endowment plan / retirement plan etc.). Trust me this is the worst form of investment.

 

Common Misconception:

Their is a common misconception among the masses that insurance cover provided by various insurance plan/child plan/endowment plan/retirement plan etc. is free of cost. The fact is that all these policies deduct charges from the premium paid by you in the name of “Mortality Charges“. The remaining amount is used for investment purpose.

Catch: With the same amount of mortality charge, you can buy a term insurance of much higher amount.

 

How to choose the Best Term Insurance Plan:

Following factors should be kept in mind while selecting a Term Insurance Plan:

 

1. Claim Settlement Ratio: This is one of the most important factor which should be considered while selecting a Term Plan. In simple words it means number of claims approved by the company. Say if a life insurance company gets 100 claims in a year & it approves 90 claims, then it’s claim settlement ratio comes out to be 90%. Higher is the claim settlement ratio, better is the company.

Claim Settlement Ratio of 24 Life Insurance Companies for the past three years:

No

Company Name

2010-11

2011-12

2012-13

1

AEGON Religare Life Insurance Company Ltd.

52

66

67

2

Aviva Life Insurance Co. India Pvt. Ltd

84

90

88

3

Bajaj Allianz Life Insurance Company Limited

89

91

89

4

Bharti AXA Life Insurance Pvt. Ltd.

87

88

89

5

Birla Sun Life Insurance Co. Ltd.

95

91

83

6

Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited

71

81

88

7

DLF Pramerica Life Insurance Company Ltd.

51

24

27

8

Future Generali India Life Insurance Co. Ltd.

51

68

71

9

HDFC Life

95

96

96

10

ICICI Prudential Life Insurance Co. Ltd.

95

97

96

11

IDBI Federal Life Insurance Co. Ltd.

65

67

80

12

IndiaFirst Life Insurance Company Limited.

82

82

71

13

ING Vysya Life Insurance Co. Ltd.

90

89

84

14

Kotak Mahindra Old Mutual Life Insurance Limited

89

92

92

15

Life Insurance Corporation of India

97

97

98

16

Max Life Insurance company Ltd

48

90

94

17

PNB MetLife India Insurance Company Limited

85

81

84

18

Reliance Life Insurance Company Limited

89

85

86

19

Sahara India Life Insurance Co, Ltd.

63

78

85

20

SBI Life Insurance Co. Ltd. 

83

95

94

21

Shriram Life Insurance Co. Ltd.

56

65

67

22

Star Union Dai-ichi Life Insurance Company Limited

81

86

90

23

Tata AIA Life Insurance Company Pvt. Ltd

82

84

84

24

Edelweiss Tokio Life Insurance Co. Ltd.

100

45

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Note:

1. As per data Top 6 companies with a consistent claim settlement ratio of more than 90% are highlighted with red color.

2. Companies with low claim settlement ratio does not signify that the they do not have the intention of paying the claim at the time of settlement. There can be various factors such as non disclosure of diseases, improper form filling etc. which can lead to not settlement of claims.

 

2. Price: As per my opinion if the form is properly filled with all the relevant information disclosed, one should go for the Term Plan with the lowest premium amount.

 

3. Riders: Riders such as death due to accident,  mediclaim rider etc can also be considered while selecting a plan. Some companies offer only death due to accident rider whereas some offer accidental death as well as mediclaim rider.

 

4. Maximum Age / Tenure: This is also an important factor. Some companies offer life cover till 60 years whereas some offer cover till 75 years.

 

Comparison of Premium Rates/Tenure/Riders:

 

To Buy a Term Plan Online or Offline:

1. No doubt online term plans comes at a much cheaper rate & one should prefer buying them online.

2. In case one do not have online payment facility, one can look at offline term plans also.

3. Some companies only offer Term Plan in Offline mode.

 

Important Points:

1. For hassle free claim settlement, fill in the form on your own.

2. Disclose every minute detail asked in the form. May be disclosing that you are a smoker will increase the premium rates,but it will ease the process at the time of claim.

 

www.financialkundali.com

www.financialkundali.com

 

Recommended Articles:

1. Life Insurance Toll Free Numbers

2. Make You own Child Plan

3. Avoid Pension Plan

 

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About the author

Hi My name is Hari Om Tripathi. I am an engineer by chance & a Personal Financial Planner by choice. Currently residing in Kanpur & writing full time for Financial Kundali. In case you have any query about Personal Financial Planning such a buying a MF or ULIP, going for a life insurance plan or a term plan, to surrender your policy or not or any other questions related to your Personal Financial Planning, write to me at financialkundali@gmail.com

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