Good that you have decided to buy an online term insurance plan finally – it’s a great decision. But don’t make the mistake many buyers are making these days – i.e. just choosing the cheapest term insurance plan.
Read how you should ideally go about doing this.
Don’t start thinking about a company, its product and some advertisement that you may have seen. For a moment keep all that aside and start thinking about your family and their needs.
Start with listing down the following, even if it is broadly. This is important. If you skip this step, your family will end up getting under-protected, or even not protected at all when you need them to be.
- What is the amount of money your family should have if you were to die today?
- And what if you were to die after a few years – will it be higher or lower?
- How long does your family need to be protected?
- Do you have any debts or liabilities? e.g. a home loan. Add that to the life insurance cover calculation.
- What is the kind of life insurance you need? Constant cover through the term of the policy, increasing cover or decreasing cover?
- How many policies do you need? One, two, or more?
Now let us get to the companies and the way to buy the policy from.
In order of priority, following are the things to consider when buying an online term insurance plan.
1. What has been the Claims Settlement Ratio of the insurance company in the last year?
If I were you, I would look at a claims ratio in the range of 85-92% when I choose the company for my term insurance plan. Why? Because to me a high (>90%) claims settlement ratio indicates 2 things.
- the company has a good process for choosing which customer to take the risk of and which not to, and
- the company has a good claim settlement policy which ensures that all clear cases are definitely paid out.
This is exactly the kind of company I would choose when buying an online term insurance plan. In the case of some ‘younger private companies’, 85% claims settlement ratio should be fine. This ratio generally keeps going up with the company’s age, as they gain higher and higher experience on the 2 points I mentioned above.
To know how companies fare on this parameter check out the Claims Settlement Ratio of India’s Life Insurance Companies.
2. How good is the Insurance Company and its services?
Thanks to the insurance regulator (and they are really good on ensuring good governance, I think), you can rest assured that all insurance companies are safe to buy from. So don’t have any doubt in your mind about solvency.
Then comes your ‘feel’ about the company – whatever you have acquired so far. Through some real experience, through the advertisements you have seen, through newspaper articles you have read, through anecdotal insights from your friends, colleagues at office, relatives, etc. Whether good or bad, don’t ignore it. While not all of it may be true, most of it will always be.
Next is the company’s servicing. Branches they have, their website, payment ease through multiple collection points, query handling ability etc. I know it is difficult to know all this for all companies. So use your judgment – you will be almost 100% right. When you compare LIC with Private Life Insurance Companies, they are both equally good I feel, although if you look at things like the services offered through the website, I think the private companies are much better at least as of today. But LIC is a large company and that has its advantages as well.
Based on the above, select 4-5 companies you will want to consider. I will not attempt to influence that choice by naming any. To me they are all the same, unless proven otherwise.
3. What is the Annual Premium?
Yes, you know about this already. Cheaper the premium, better it is, obviously. Just make sure that is not the only thing that you check before you buy your online term insurance plan. Use a good price comparison website to find this out. Nothing more on this.
4. Are Medical Tests required?
Whether you are asked to take a medical test and what kind, depends on (a) the Life Insurance Cover you apply for and (b) the Company. Different companies have different rules around this, and larger companies are more liberal because they have more experience and can take higher risk. Personally I would prefer to get one done especially if I am taking a large life insurance cover (more than Rs. 1 crore, say) so that the responsibility of the risk cover does not lie with me and the claim does not get rejected on that ground at least. But it finally depends on which company it is that we are referring to – in the case of good companies, the kind of process should not matter – you can trust them to honor your claim since (besides your family) they have a reputation to protect.
Remember one thing – when you buy an online term insurance plan, don’t discard a company just because you have to go through a medical test. Or just because you don’t have to do one. The 3 points before this are definitely more important than this one.
5. How easy is it to Buy the Term Insurance Plan?
The best way to buy a Term Insurance plan is to buy it online. The agents are not likely to anyway sell term insurance to you anyway (Read : Why your Agent may never suggest Term Insurance).
The Online Term Insurance Plan gives you 3 big and distinct advantages.
(1) You get to compare all insurance company products in one shot and see which are the best ones price-wise.
(2) You can buy it yourself (and that is very important) by filling the application yourself, eliminating all risks of misrepresentation by the Agent. Since claim is the only benefit in an online term insurance plan, this is a very important point.
(3) The Online Term Insurance Plan is cheaper than offline. Simply because the quality of buyers is better and hence risk is lower thereby reducing the premium. Also there are no agents that need to be paid commissions, making the premiums lower than when buying through an agent, bank, broker, etc.
Besides these, also check whether you can pay your renewal premium online, whether the website has all information that you may need, whether it allows automatic premium deduction from your bank account etc. These are important to consider as well.