“Compare term insurance before buying”. This is a phrase a lot of us would have come across from time to time. The most obvious question that pops up in the head is, whether or not it is worth spending some time in comparing term policies. Well, here are a few of the primary benefits of comparing them.
- Better Price
When you compare term insurance you stand to benefit straight off from price point of view. Once you key in the mandatory fields and ask for quotes, you can see the price difference and go for the term insurance policy that fits your budget and requirments.
- Better Features
On comparison, you also get a glimpse into the features and benefits provided by insurers. For a similar price, an insurer could be providing more features which makes it a better deal. If you had not compared, you wouldn’t have found these differences.
- Better Understanding
When you do compare term insurance, you get to understand the policy a bit more thoroughly. Though it is not mandatory to know a policy in and out, but certainly knowing the exclusions of the policy is a must so to avoid any disappointment during claim process.
How to Compare Different Insurance Plans
If you have decided to compare term insurance, there are a few leading parameters or aspects that you must shift your focus to. Here are the parameters that need your attention.
You might have purchased a policy in a hurry and after some time you realise that it doesn’t contain some of the features that you badly wanted. What do you do now? Well, it is simple. You can opt for add-ons and enhance the capabilities of your term plan. A plan with better options as add-ons will give you a better control.
What good would be insurance be if you are unable to claim it at the time of need? Thus, take a quick look at the claim settlement ratio of an insurer. It primarily tells you how many claims the insurer settled against the total number of claims made. A higher number indicates a better probability of your claim being settled.
An insurer needs strong financials to be able to settle claims that come its way. Though the IRDAI mandates a certain solvency ratio for the insurers to remain operational, you must not forget this aspect. A company with better solvency ratio translates into strong financials which again increases the probability of your claims being settled.
The general rule of thumb says that you must have a life cover during the most responsible days of your life. In general, the 40s and the 50s is the most responsible age during a person’s lifetime. Thus, look out for a term plan that covers you through this time period without any issues. A plan that extends beyond this duration is most welcome.
What is the Basis of Calculating Premium?
A lot of mathematical calculations and statistics goes into deciding the premium of a term insurance. When you compare term insurance, you must be aware of the factors that help decide the premium.
Insurance premium for a term plan is directly proportional to the age of the policy holder. If you buy a term plan in your younger days, you will end up paying a lot less as compared to your older days. The rationale is that the risk of health hazards increases with age.
Certain job roles have inherent risks associated with them. Jobs such as pilots, miners, factory workers etc. are more dangerous as compared to desk jobs, teachers, IT consultants etc. Getting a term plan for such occupations can turn out to be a bit more expensive than others.
There is enough data to prove that women live at least 5 years more than men do. Thus, insurers are more comfortable in selling term plans to women than men. And this translates into a slightly lower premium for women as well.
One of the first questions that insurers ask these days is the consumption of alcohol or smoking habits. Such habits can have some consequences later on in the life. Thus, such individuals will end up paying a slightly higher premium. However, one must not hide these things in their forms either, as it will mostly come back to haunt you during claims.
There are a few other parameters as well such as medical history, sports, number of dependents etc. that decide the premium. Irrespective of whether you compare term insurance or not, make sure to disclose all information to your insurer as accurately as possible.