When it comes to Term Insurance, all of us try to save money by opting for a cheap insurance. After all, term insurance doesn’t offer any maturity benefits, so why get a costly plan? However, cheaper rates should not be the sole criteria for deciding which term policy to buy. Have you wondered what your ‘cheap’ term insurance will do when you pass away? What if your insurer rejects the claim or imposes any other restriction?
There are four more factors to be considered than JUST premium to ensure term insurance works well when its need would actually arise:
1. Higher Policy Tenure - Insurers are now term policy, with tenure of 35-50 years. With an increase in the life expectancy ratio, it is better to opt for a higher term and save yourself from the hassles of buying a new plan in case the first term insurance expires.
2. Maturity Age - Most of the term insurance plans have a maximum maturity age between 65 and 80 years. As your age increases, you become more susceptible to ailments and therefore, higher the maturity age, the better it is. For instance, ICICI Prudential and HDFC term insurance plan have a maturity age of 65 years and 75 years, respectively.
3. Claim Rejection- This is one of the most important factors to be considered. An insurer might be offering the cheapest term plan but what if its claim rejection ratio is over 50%? In that case, the money paid over the years may go down the drain.
Table: Death claim ratio of insurance companies:
4. Low Claim Pending Ratio- High claim pending ratio points towards a company’s inefficiency in settling claims. While considering claim spending ratio, check the age of pending claims. As per IRDAI guidelines, all claims should be settled within six months.
Table 2: Number of pending claims with respect to leading insurers for the year 2013-14:
Term insurance is meant to financially secure your family after your death. To ensure that they are not left in the lurch, choose the right term insurance policy that not only costs less but also guarantees fast claim settlement at the time of need.
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