Everyone’s priority is to keep their loved ones safe from unexpected occurrences. When you have a consistent source of income, you can establish a solid financial plan that allows you to do so. Understanding how to choose term insurance for your family is one of the first steps. When you make a prudent and informed policy purchasing selection, you can effectively ensure their future.
A term insurance policy can be an excellent choice if you want a basic and straightforward security plan for your loved ones. Term plans operate in a straightforward manner, making them simple to comprehend. This plan would provide financial security to your loved ones in the unusual and terrible event of your untimely death.
In India, various insurance companies offer a variety of term insurance plans targeted to a variety of conditions. Level term plans, increasing/decreasing term plans, return of premium plans, and monthly income plans are the four basic types of term plans. The true problem, though, is selecting the correct insurer and plan.
The solvency ratio informs you whether the insurance you’ve picked is financially capable of settling your claims in times of need. Each insurer in India should have a solvency ratio of at least 1.5, according to the Insurance Regulatory and Development Authority of India (IRDAI).
This ratio is useful when a large number of claims are filed in a short period of time. For example, in the event of a natural disaster, the claims will be numerous and must be resolved as soon as feasible. In this case, the solvency ratio comes in handy.
The financial soundness of the insurer determines your loved ones’ future financial security. Ignoring the solvency ratio would imply putting your family’s future at risk.
Claim Settlement ratio
Every insurer in India has a claim settlement ratio, which may be found on their website. It represents a proportion of claims settled out of the total number of applications received by the insurer throughout the fiscal year. It is best to select an insurer with a high claim settlement ratio so that your loved ones can make a claim request without difficulty after your death.
As previously said, term insurance protects your family’s financial future in your absence. As a result, the insurer with whom you choose to purchase the policy should have a high claim settlement ratio, as the likelihood of your claims being approved increases.
Similarly, the total number of claims settled by the insurer in the given fiscal year must be checked. Only when the insurer pays a large number of claims does the claim settlement ratio become an important issue to consider.
Critical Illness cover
Basic term insurance plans, as we all know, only provide death benefits. In order to supplement the policy’s benefits, insurers offer a critical sickness benefit. It is an optional coverage that broadens the scope of the policy.
So, if you (the policyholder) develop one of the mentioned critical health conditions in the future, the policy will pay out a percentage of the total assured. The funds received can be utilised to cover your treatment and hospitalisation costs.
Furthermore, having a critical illness cover on your term insurance policy provides tax advantages. The premiums paid for this coverage are tax-deductible under Section 80D of the Income Tax Act of 1961.