Claim settlement ratios are available
in the latest Insurance Regulatory and Development Authority of India (Irdai)
I am 50 years old and want to buy a
term plan. Kindly suggest a suitable one.
You need to consider a few variables before
finalising a plan. These include: sum assured, policy term and optional
riders. Typically, a minimum sum assured of 10 times your annual income is
recommended. You should adjust this upward for any major liabilities such as
mortgages. About policy term, at 50 years of age you can get policy term
options between 5 and 30 years.
Premium rates increase with length of coverage.
Buy a cover till the age of 65, at least. At 65, you could be financially
secure and may not need a term insurance. Finally, on riders, I suggest you
evaluate the critical-illness rider available with term plans. This rider
will pay you a lump sum in case you are diagnosed with any of the specified
critical illnesses. Other riders such as accidental death and disability are
best bought as stand-alone general insurance plans.
Once you have decided on these factors, choose
an insurer based on the offered premium and its claim settlement ratio. Claim
settlement ratios are available in the latest Insurance Regulatory and
Development Authority of India (Irdai) annual report. You should consider
insurers with claim settlement of 85% or more. Premium for Rs.1 crore of
coverage for a 15 year term would be Rs.25,000. This assumes non-smoking
status and good health history.
Can I buy more than one term plan for
the same sum assured? I plan to buy two plans of Rs.1 crore
Yes, you can buy multiple term plans with same
or different sums assured. You can have the same or different plan durations
as well. But you will need to disclose to the second insurer that you have an
existing life insurance plan, with details of the coverage. Insurers
typically ask this in the proposal form itself. The objective is to ascertain
if the overall sum assured taken by the insured is commensurate with the
person’s annual income. Insurers will restrict the cover to about 25 times
your annual income.
Why should one buy an accident rider
with a term plan? Doesn’t it pay the sum assured if the death happens in an
A standard term life insurance will pay the
complete sum assured as a lump sum to the nominee in case of any kind of
death. This is irrespective of the cause of death, i.e., natural or
accidental. In fact, the only exclusion in a term plan is suicide in the
first year of policy.
Accidental death rider pays additional sum
assured over and above the policy sum assured in case the death is due to
accident. The cost of this rider is lower than that of the full risk
coverage. So, this rider is promoted as a cost-effective way of enhancing
life insurance cover. Some accident riders also include a benefit if you
suffer from partial or total permanent disability.