Indians are known to be discerning buyers, with a keen eye for the best value from the investment they make. Whether shopping for clothes or a new car, Indians lay heavy emphasis on the overall value proposition, basing their purchase decisions on the product’s durability, quality, price points in comparison to comparable products, depreciation, and so on.However, many Indians still continue to entrust the insurance policy buying process to insurance brokers. In the age of the Internet, especially considering the commendable job that insurance companies are doing in educating the Indian consumer about the spectrum of products available, a large number of Indians continue to enlist the help of insurance brokers. The reasons for this are twofold: Firstly, they trust that the broker will complete all the paperwork and follow up on renewals and premium payments, thus saving them the hassle of doing so. Secondly, they believe that in case the company needs to be contacted in times of dispute or filing claims, the broker is the best point contact to do so.

Buying term insurance plans is no longer a confusing exercise in juggling numbers and future projections. Indian insurance companies continue to educate consumers about their best plans, and have simplified the term insurance purchase process on the online platform. However, customers must still be cognizant of a few factors before they select the best term insurance plan. These factors are:

1. Assess your requirement

You must decide which term insurance you require: Online term plan, increasing cover plan, single premium plan, limited payment term plan, staggered payouts plan or return of premium plan. Each has its own merits. You can conduct research online about the best plan that suits your needs.

2. Choose the right insurer

Insurers in India are stringently monitored by the IRDA and there is no margin for fraudulent practices, but some insurance companies are better than others. The factors guiding the selection of the company should hinge on the insurer’s claim settlement ratio and response rate for queries and claims. You can also look up lists published by business newspapers and magazines that rank the best term insurance plans every year.

3. Assess the coverage amount

It is erroneous to merely consider the premium payment; the more important factor is the coverage amount. As a rule of thumb, the coverage amount must be an amount equivalent to 10 times your current annual salary, plus future rate of inflation. Take into account future expense heads such as children’s education, marriage, daily household costs and medical treatment for your spouse and parents, and decide on a coverage amount that encapsulates all these.

4. Look for the best premiums.

An attractive feature of term insurance is that it accords a high sum assured for low premium payments. Use an online calculator to find the best fit between sum assured, policy tenure and the payable premium. Make different calculations based on the add-ons you need before you arrive at the most affordable premium.

5. Select the right riders.

A ‘rider’ offers benefits over and above those already stipulated in the term plan. You can choose such riders as ‘life insurance’, ‘disability cover’, ‘loss of income cover’, ‘critical illness cover’ etc. How it works is, for example, if you developed a critical illness while the policy is active, you will receive the sum assured upon diagnosis, plus the death benefit (of an equivalent amount) upon demise.

6. Look for ‘enhanced coverage’.

It is advisable to choose a term plan that allows you the option of enhancing coverage at certain times in your life. For instance, if you have purchased the plan as a single person, you must be allowed to enhance the coverage amount when you get married and further, when you start a family.

7. Shop for the most convenient policy.

The Internet has revolutionised the workings of such sectors as banking and insurance, with companies able to interact with customers in real time. This has led to scores of Indians opting to purchase insurance plans online. However, there are some term plans that are more conveniently purchased than others. Look for policies that offer the entire purchase process online instead of merely noting your contact details and setting up a personal meeting. The insurer’s website must list all the details and clauses of the plan to enable you to make the right choice.

8. Buy individual term plan for spouse.

It is advisable to opt for a separate term plan for your spouse, unless the term insurance plan you have selected provides coverage to your spouse as well. Also, do not opt for multiple term plans from different companies – in the event of your unfortunate demise, your surviving partner will have to file claims with multiple insurers.

9. Buy the term plan online.

Buying term insurance plans online results in cheaper policies. The insurance companies are pleased to deduct the cost of commission to an insurance broker when customers purchase policies online directly. Secondly, operating costs over the Internet are much lower. Insurers also perceive online customers as lower risk than offline ones.

10. Choose the most suitable pay-out option.

Some excellent term insurance plans offer customers the chance to select the pay-out mode that is most suitable for them. You can choose for a full lump sum pay-out, or lump sum+ regular income/increasing income pay-out.

By Kar

Dr. Kar works in the interface of digital transformation and data science. Professionally a professor in one of the top B-Schools of Asia and an alumni of XLRI, he has extensive experience in teaching, training, consultancy and research in reputed institutes. He is a regular contributor of Business Fundas and a frequent author in research platforms. He is widely cited as a researcher. Note: The articles authored in this blog are his personal views and does not reflect that of his affiliations.

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