Why Is Term Plans Comparison Important?

A term plan is the most affordable and simplest form of insurance that can provide financial protection to your family in your absence. However, a meagre 17% of those between 25 to 35 years of age in India purchase such a policy. To do so, they need to navigate through a plethora of term insurance plans in the market offering different premium frequencies, death benefits and riders to zero upon a plan that resonates with their financial requirements.

Put simply, consumers are spoilt for choice today. However, with ease of access to the internet, one can seamlessly compare and contrast the various plans available. It is important to compare term insurance policies so that you can make an informed decision. Not only should a term plan be able to ensure financial security of your dependents in the event of your sudden death, it should also be sufficient to take care of higher education, the marriage of a child or your retirement, should you survive the tenure. 

It should also offer a higher sum assured at a pocket-friendly yearly premium. Apart from this, you might also want to look closely at other benefits offered such as inbuilt coverage, loyalty additions, as well as the flexibility to choose the duration of policy and coverage and riders among other things.

How to Choose the Right Term Plan for You?

A Sum Assured That Takes Into Account Your Liabilities

Term insurance comparison helps you determine which plan is the most suitable for you as per your own requirements. The amount payable as death benefit should be able to provide enough coverage to account for debt repayments such as a home loan as well as the education of your kids, including maintenance of a comfortable standard of living for your family in your absence. These are some of the financial liabilities to keep in mind when you opt for a term plan.

Offers a Number of Riders

If you wish to enhance your policy, you might want to compare the various riders available with respective term plans. Riders offer additional benefits apart from the amount payable upon the death of the policyholder. You can add riders for critical illness, accidental death, and permanent disability due to an accident, among others to your term plan for added protection. Ensure the term plan you choose comes with a comprehensive amount of riders.

High Claim Settlement Ratio (CSR)

A claim settlement ratio is the amount of claims settled by the insurer against the total number of claims made by its policyholders. A high CSR implies that a good number of claims have been settled by your insurance provider, which, in turn, gives them more credibility. A low CSR implies that your insurance provider does not have a good track record of settling claims, which should be an instant red flag for you. An ideal CSR is one over 90%.

How to Decide Optimum Flexibility of Term Plans

  1. Flexibility in premiums payments: Look for a term policy that allows you a wide choice of premium payment frequencies, such as monthly, yearly, half yearly or annually frequencies, as per your requirements. Some plans also allow you to pay limited premiums.

  2. Flexibility in sum assured payouts: You can also choose if you want the death benefits to be paid out as a lump sum or want the amount to be doled out in the form of a monthly income.

  3. Flexibility in coverage: Term insurance plans can come with various coverage options, such as increasing, decreasing or level coverage.

  4. Return of premium: Choose a plan that offers the return of premium benefit. Here, the premiums paid over the course of the policy are returned to the policyholder at the end of the policy tenure, should the policyholder outlive the term.
  5. Reliability of the insurance company: Choose a reliable and trustworthy insurance company with a good reputation and a stable performance. It should have financial goodwill in the industry and a trusted service provider to other policyholders like you.

Further, we have discussed term insurance comparison based on the type of term plan and mode of purchase.

Term Insurance Comparison

Term insurance comparison can be based on the type of policy you purchase. We have given a brief overview of a few term insurance comparisons below –

●  Decreasing Term Insurance Plan vs Increasing Term Insurance Plan

Decreasing Term Insurance Plan

Increasing Term Insurance Plan

In this term insurance plan, the sum assured amount decreases every year throughout the policy tenure by a fixed percentage.

In this term insurance plan, the sum assured increases every year by a predefined rate.

Decreasing term insurance is ideal to repay debt or mortgages. So, if the insured dies, the remaining sum assured can be used to repay the debt amount.

Here, the term insurance coverage increases every year until the overall value of the policy is 1.5-2 times the initial coverage.

●  Single Term Insurance Plan vs Joint Term Insurance Plan

Single Term Insurance Plan

Joint Term Insurance Plan

As the name suggests, single term insurance covers only the applicant.

Joint term insurance covers the applicant as well as their spouse. It is ideal for people whose spouses are financially dependent on them.

The policy pays deaths benefits to the dependents of the insured after his/her death.

In case one of the spouses dies, the surviving partner receives the death benefit.

If both partners die, the dependents (most likely children) will receive the death benefit.

●  Individual Term Insurance vs Group Term Insurance

Individual Term Insurance

Group Term Insurance

Individual term plans are for a single person only.

Group term plans are purchased for a community or group of people belonging to the same category.

The premiums paid towards the individual term plan covers the policyholder only.

The premiums paid towards group term insurance cover all the eligible members under it.

The coverage of this term plan can be enhanced as preferred by the individual.

Usually, the coverage in the group term insurance plan is limited and is determined by the primary/master policyholder.

The premiums of the policy are relatively higher than the group term plans.

The premiums of group term plans are comparatively lower than individual term plans.

Another term insurance comparison can be made based on the mode of purchase – whether you are buying the policy online or offline.

● Online Term Insurance Plan vs Offline Term Insurance Plan

Online Term Insurance Plan

Offline Term Insurance Plan

Nowadays, insurers allow you to buy term insurance plans online from their website. The purchase can be made at any time and anywhere.

Offline term insurance plan is a traditional way of buying the policy and requires you to visit the insurer in-person.

Buying term insurance online is hassle-free, secure, and saves a lot of time.

Buying term insurance offline can be time-consuming and a tedious process.

The term insurance plans online are cheap compared to buying the same policy offline.

Buying term insurance offline can be costly, especially when you have an agent to process your application. The premiums charged include the agent’s commission fees as well.

At Finserv MARKETS, you can buy Individual Term Insurance or Group Term Insurance, depending on your necessity. Let us take a look at the difference between the two places before you proceed with your purchase.

Individual Term Plans vs Group Term Plans At Finserv MARKETS

As mentioned earlier, there are two types of term insurance plans available on Finserv MARKETS –

  1. Smart Protect Goal Term Insurance
  2. Group Term Life Insurance

The difference between the two policies is explained in the table below:

Feature

Smart Protect Goal Term Plan

Group Term Life Insurance

Type of plan

Tailored as per individual needs.

Offered to a community.

Policy period

Age at the time of maturity should be 85 years. Those opting for whole life insurance coverage have a maximum age of 99 years upon maturity.

Issued for a period of one year. Can be renewed every year.

Critical illness benefit

Up to 55 major and minor illnesses are covered.

Provides cover for 11 critical illness conditions.

Medical examination

May be required.

Not required.

Premium rates

Rates for individual plans may be higher as compared to group plans.

Rates for group plans may be lower as compared to that of individual plans.

Conclusion

Comparing term insurance is essential as it helps you gain insights on the policy features and benefits. Moreover, it encourages you to make an informed decision so that your dependents are financially protected in your absence.

At Finserv MARKETS, you can browse through a variety of term plans at the tap of a button with our term insurance app. Make your choice keeping your current income and financial responsibilities in mind.

Also, don’t forget to analyse the term insurance benefits and features of each policy carefully to arrive at a plan that fits your needs. After all, a term plan is your ticket to a safe financial future for your family even in your absence. So make a wise decision today and enjoy a worry free life ahead!

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