Best Term Life Insurance Plans-Policy for common people

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I often get asked “what is the one decision which affects or improves a person’s financial life”. My reply “Term Life Insurance” .This will be the best investment or financial decision one can make in your life.

Best Term Life Insurance Plans-Policy for common people


Have you have just started earning or have a family? You should spend your first salary on the best term life insurance policy you can find. Agreed you can’t enjoy the benefits of your term plan. But it secures the financial requirements of your family when you’re gone.

I don’t want my daughter’s education or my mother’s medical treatment to be unavailable because of lack of money. I also don’t want to burden/thrust my wife with these responsibilities.

Considering how important family is to me (and I assume same for you), a term plan becomes inevitable. To have peace of mind that the claim will be paid, you need to choose the best. So which is the best term life insurance plan in India ?. Let us try to brainstorm that.

Best Term Life Insurance Plans in India

There are different life insurers operating in India after the insurance industry was opened up. We have stalwarts like LIC, ICICI, HDFC and newbies like ING, Future Generali, Exide Life all operating in the same space.

Since we want to be covered by a good policy we have had some filtering criteria. We’re not

Get peace of mind with term plans as interested in variety , we’re interested only in the best. So what are the filtering mechanism or criteria used? Following in order of preference
Good claim settlement ratio. (minimum 80%)
Reputable management.
Good financial background (solvency ratio) or trust factor ( minimum net worth of Rs.200 crore)
Policy features, add-on and riders.
Premium rates.
Customer service or satisfaction.
Average time to settle a claim
Sl.NoCompanyNumber Claims ReceivedClaim Settlement Ratio (%)
1LIC75057697.7
2ICICI Prudential Life1494896.3
3HDFC Standard Life625395.8
4SBI Life1342694.4
5Max Life905194.3
6Kotak2 Life308992.1
7Bajaj Allianz2728288.7
8Reliance Life2141286.4
9Birla Sunlife987182.6

When we applied these filters, most of the new insurers got filtered out. As a consumer I’m interested in how quick and often our claim will be honored. We’re not looking to test any waters. Rather I’m interested to go with the sound & tested insurers and their policies.


Claim settlement ratio of insurers

Claim settlement ratio is nothing but how many claims were paid by the insurer against claims submitted. IRDA releases claim settlement ratio every year on its website. A company with high claim settlement ratio means a consumer friendly insurer.

Claims Settlement Ratio = (Total Claims Approved / Total Claims Received)

Solvency Ratio=(Net Profit+Depreciation/Total Liabilities)
Company NameSolvency Ratio(as of March 2013)
LIC1.54
ICICI Prudential3.96
HDFC Life2.17
SBI life2.15
Kotak5.21
Birla Sun Life2.672
Bajaj Allianz6.34
Max NewYork2.07
Aviva4.23
Reliance Life4.29

.This is one of the important criteria for selecting the best term insurance plan. So when you choose a term plan you need to look for a high settlement ratio. Below is the tabulation of latest year claim settlement ratio from IRDA website(download PDF and refer page 173) of big insurers.


A point to note is that there are also other insurers who have high settlement ratio.For eg Star Union Daichi – 89.8 %, Bharti Axa – 89.5%. But they have low number of policies (in range of 700 – 1200). 


Good Financial Background (Solvency ratio, Trust factor) Solvency Ratio is a financial ratio that denotes the ability of a company to meet its financial obligations and debts. The solvency ratio of an insurance company is defined as the ratio of the size of capital divided by cumulative risk taken based on its premium. For more details check Wikipedia.

It should be a minimum of 1.5 as per IRDA . Higher the ratio the better. A good solvency ratio ensures that a company can meet all its obligations in of case large claims in a short period like earthquake, tsunami etc.,

However a high ratio is not just enough. You need to check for good financial background, reputation, longevity and trust factor. Every company in Insurance industry takes 7-10 years before turning profitable. So better to be associated with insurers who have deep pockets, trust, making profits consistently and been around a while.

For eg., LIC, HDFC, ICICI, Kotak are well-known brands with deep financial muscle. LIC is the most trusted brand in India not just in insurance. LIC is the most trusted company in India for 5 years in a row across all industries.

Premium Rates- Price of policy

Sl.No Company Policy Name Online Option Premium(Rs)
1 Reliance Life Online Term Plan Yes 5,720
2 Max Life Online Term Plan Yes 6,395
3 HDFC Life Click 2 Protect Yes 8,250
4 Kotak Life ePreferred Plan Yes 8,827
5 Bajaj Allianz Life iSecure Yes 9,395
6 SBI Life eShield Yes 9,699
7 Birla Sunlife BSLI Protector Plan Yes 10,291
8 ICICI Prudential Life iCare II Yes 10,845
9 LIC e-Term Yes 11,280

The premium and cost of the policy are among the major influences when buying life insurance India. But the best term insurance plan cannot be decided just based on the cost factor. Agreed, it’s important but must not be the sole criteria.

I have tried to compile the premium rates for standard life insurance policies.The values are close and may vary slightly based on your input criteria. The values are provided based on Rs.75 lakh Sum Assured for a 30 year non-smoking male.The term is 30 years.

We hope the above premium rates will give you a fair idea. Remember, the cheapest option is not always the best. Shop around, compare features, settlement ratios and then decide.

Tip: Don’t try to be smart and hide facts. Provide all truthful information. If you smoke or drink then mention them in your application form. Hiding facts is one of primary reasons for insurance claims to get rejected.

Average Claim Settlement Time

SL.NoCompanySettlement time(<30days)Settlement time(31-90days)Settlement time(>90days)
1LIC6208816004052624
2ICICI Prudential Life13736362295
3HDFC Life533860248
4SBI Life11217137980
5Max Life71191252160
6Kotak Life2326398119
7Star Union Dai-Ichi246231185
8Bharati Axa65421369
9Bajaj Allianz1763551751382
10Canara HSBC217187124
11Aviva182528326
12Reliance Life132214731559

A good settlement period is also good factor and criteria to measure customer service.


Policy Features and Riders

Policy Features and additional Riders are usually added to term life insurance plans. There are multitude of options among riders to accommodate with term life plans. However, pure life coverage is the only criteria you must focus on. Also note that, there is additional premium payable when you opt for riders.

Why? Because the other riders and add-ons like accidental death cover, critical illness and partial disability claims can all be purchased separately. These are decided based on the requirements of every individual. We present some common types of riders below
1) Accidental Death Benefit

– This is an addition to the sum assured. Normally, it is used by people who are frequent travelers. For eg., if your sum assured is 40 lakhs and you have an accidental death benefit riders for Rs. 10 lakh. The total amount paid to your nominee in case you die by accident will be Rs.50 lakh.
2) Critical Illness Rider

– You are paid when you are diagnosed with one of the diseases listed under the rider clause. Each insurer has their own list of Critical Illness diseases . The common ones include Heart attack, major types of Cancer, kidney/renal failure.

The difference between a critical illness and mediclaim is that as follows:

Critical Illness – You get the fixed Sum assured you’ve opted under Critical Illness rider upon diagnosis. This is irrespective of medical costs. For eg., if you have Rs .10 lakh critical illness rider which includes heart attack, then you’ll be paid that amount once diagnosed with heart attack even if you spend only Rs 5 lakh.

Mediclaim – You’re paid the actual medical expenses upon submission of bills. So the benefit is restricted to actual expenses.
3) Partial or full Permanent disability Rider

– In this rider, you will be paid the sum assured under the rider when you get disabled as defined under your policy terms. The settlement is different for full and partial disablement.

Note: In all these riders, the sum assured benefit refers to sum assured of the rider and not the whole sum assured of the policy.

For riders from HDFC check here

For ICICI policy check here

For more information on type of riders check here

Disclaimer: Please note that we are not compensated or paid any commission for above links. They’re provided for reader to get more information and enhance convenience

Best Term Plans in India – my picks

An online term plan is a better option than an offline plan. You can eliminate the commission paid to the agent which makes an online term plan attractive. The following is my opinion of the best term plans in India now in order of preference.

1) LIC Online e-Term – LIC recently launched an online term plan after long demand from customers. The plan has become hugely popular for looking for trust of LIC and economical value of an online plan.

There are no additional riders at the moment but this is not a major drawback. At the moment it costs around Rs.11000 for a 30 year term for 30 year male for Rs75 lakh Sum Assured. There are 2 categories like smoking and non-smoking for sum assured above Rs.50 lakhs.

2) HDFC Click2Protect – HDFC is a financial powerhouse in India. They were among the first to enter the insurance industry when it was opened up. They teamed up Standard Life Insurance initially. They charge around Rs.8300 for 30 year male for a 30 year term for Rs75 lakh Sum Assured.

The user interface is extremely friendly. So far we have received good customer service response based on client interactions. You need to pay extra for additional riders should you choose to add them.

3) Kotak Life ePreferred Term Plan – Kotak’s ePreferred plan is among the comprehensive well made online term plans. There is option to increase life cover in event of marriage (50%) and child birth.

The additional riders have been priced economically. Kotak also seems to have a consistent claim settlement ratio of 90% and above last 3 years.

4) MaxLife Online Term Option I

5) ICICI Prudential iCare

I personally have two term insurance plans – one is HDFC Click2Protect and other is LIC Online e-Term. It is always advisable to split your life cover into policies. I will write a post soon explaining why. So stay tuned for that.

Conclusion:

The above is my personal opinion. You should decide your plan based on your requirements. What suits me may not suit you. I have chosen my term insurance based on my own needs. You should evaluate your options and choose accordingly. The above options seem a right fit for majority of Indians.

Also some may not agree with above order. It is totally fine as long as you know what you need. We hope the best term life insurance plans in India will help you to evaluate your best fit. Compare real-time price quotes on PolicyBazaar here

Was this post useful? Then share it with your friends to benefit them. What is your opinion on my list? Do you think I left some points or disagree with something? Do you have some doubts? Let me know in the comments below.



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4 comments:

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