Having an insurance policy is important. Equally important is the choice of the term policy.
Never settle for a policy just because a lower premium is on offer. You have to weigh a lot of factors including the insurance company's credentials, the claim settlement ratio, the average claim amount and the features of the policy.
Insurer's track record
A term plan is a long-term product with a life span ranging from 10 to 80 years. It is always better to buy a product from a company that has been around for a while, provided its credentials are good. Even if a company winds up its operations, the Insurance Regulatory and Development Authority (IRDA) ensures that existing customers are assured of continued service.
Claim settlement ratio
This is a vital metric to be checked by all potential customers. This simple ratio – arrived at by dividing the number of claims an insurer received in a given year by the number of approved claims – is an indicator to the company's willingness to pay the customers when a claim arises. The ratio for different insurers is published by the IRDA every year. Go through a company's ratio for at least five years before buying a policy.
High claim amount
The claim settlement ration is not a reliable metric about the company in isolation because it covers all kinds of policies. When you want to narrow your research to a term plan, you have to look at the average amount released to honour a claim. This will give you an idea about how term policies performed.
Premium
You have to look for value for money when selecting a term plan. Of course, premium is important in decision making but it should not be the only criterion.
Policy features
Every company offers different policies. Term plans come in different sizes and types. Some assure coverage up to 100 years, some come with riders and some without any riders. There are polices that pays the sum assured as a lump sum and those which pay in instalments. There are policies that cover diseases and some which waive payment of premium when the policyholder is handicapped.
Every policy might have different options. So you have to shortlist policy candidates in accordance with your needs. Study them well before buying them.
