6 Ways You Can Choose the Right Term Insurance Cover

Choosing the right term insurance cover involves assessing your financial responsibilities, required life cover, policy features and the insurer’s claim-related record. 

Let's understand how to choose best term insurance plan:

1. Assess your life stage and financial dependants

Your financial responsibilities can change with marriage, parenthood, home loans and other long-term commitments. Consider your current and expected dependants while deciding the cover amount.

• Review the number of people who depend on your income.

• Account for future responsibilities such as children’s education.

• Consider existing loans and other financial obligations.

• Reassess your cover when your financial responsibilities increase.

2. Estimate the cover required by your family

The sum assured should provide adequate financial support to your family in your absence. Consider regular household expenses, outstanding liabilities, future goals and inflation while estimating the required cover.

A common starting point is to consider a cover of around 10–15 times your annual income, while also accounting for your specific financial obligations and resources.

3. Check the insurer’s claim settlement ratio

The claim settlement ratio represents the proportion of claims settled by an insurer during a financial year. Reviewing this metric can help you understand the insurer’s claim settlement record.

• Check the ratio for the relevant financial years.

• Consider the ratio alongside other insurer-related information.

• Review the insurer’s claim process and service features.

• Avoid evaluating an insurer using the claim settlement ratio alone.

4. Review the available riders

Riders can extend the scope of a base term insurance policy for specific circumstances, subject to their terms and conditions.

Depending on the policy, riders may include features related to:

• Critical illness

• Accidental death

• Disability

• Waiver of premium

Select riders based on your circumstances and the additional protection required. Also review their exclusions, eligibility conditions and additional premium before adding them.

5. Compare policy features and premiums

Comparing plans can help you understand how different policies vary in terms of coverage, premium, policy term, riders and other features.

When comparing term insurance, review:

• Sum assured

• Premium and payment frequency

• Policy term

• Available riders

• Exclusions and conditions

• Claim process

• Policy flexibility

The lowest premium alone may not indicate suitability. The cover and features should correspond with your financial requirements.

6. Consider how your cover may change over time

Some term insurance policies may offer provisions to increase life cover at specified life stages or events, subject to policy terms.

For example, additional cover may be available after events such as marriage or becoming a parent. Such features can be considered if you expect your financial responsibilities to increase in the future.

Knowing how to choose term insurance can help you select protection that corresponds with your family’s financial responsibilities. Consider your dependants, income, liabilities and future goals before deciding the sum assured. Also compare premiums, policy features, riders and the insurer’s claim settlement record. Reviewing these factors together can help you choose the right term insurance for your circumstances.