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How to choose the right term and health insurance covers

Since term insurance is generally limited to Death benefit applicable if the individual dies within the policy period, and does not provide any maturity income, it is comparatively cheaper than the other life insurance plans.

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Here are some of the things to consider before you decide on the right insurance plan;

As the name suggests, a life insurance policy provides coverage for a certain period of time or a specified ‘term’. Term insurance is a pure protection life insurance policy, which in case of an unfortunate event during this time frame provides a guaranteed amount. It compensates the nominee of the insured for the loss of income.

Supriya Rathi, Wholetime Director, Anand Rathi Insurance Brokers, says, “Since term insurance is generally limited to Death benefit applicable if the individual dies within the policy period, and does not provide any maturity income, it is comparatively cheaper than the other life insurance plans.”

Here are some of the things to consider before you decide on the right insurance plan;

The Sooner the better – Since Term Insurance Plans cover Death benefits, premiums are a function of the age of the insured. Hence, it is advisable to go for term insurance at an early age and go for a higher sum insured.

Deciding the Sum Insured – A simple yardstick for deciding on the amount of sum insured is that it should be planned as per the stage of your life cycle and the cover should be sufficient to provide the family with an adequate amount in case of demise of the insured.

Adjusting Inflation – A particular sum insured may look sufficient considering the present needs, however, it may be insufficient for 10 years. Rathi explains, “A simple solution is to take a higher sum insured, alternatively some insurers offer policies where the covering amount hikes by 5-10 per cent every year.” 

Make a Choice post comparison – It is advisable by experts to compare at least 3 plans before deciding on a particular plan. This would necessarily help in terms of  making a prudent by comparing the following factors;

○        Total Payout of each plan

○        Premium amount paid for desired Total Payout

○        Policy term offered

○        High claim settlement ratio

○        Riders offered with the plan

Add Riders to the Plan – Various riders or additional Coverages viz. accidental coverage, Critical illness cover, and Terminal illness benefits are available in combination with the term insurance plans on payment of additional premium.    

Check Claim Settlement Ratio of the Insurer – Information about the Insurer, the claim settlement ratio and the solvency ratio of the insurer, should be checked in advance. 

Solvency ratio, according to Irdai guidelines, all companies are required to maintain a solvency ratio of 150 per cent to minimize bankruptcy risk. Rathi points out, “The solvency ratio helps identify whether the company has enough financial buffer to settle all claims in extreme situations. Hence, it is a good indicator of an insurance company’s financial capacity to meet both its short-term and long-term liabilities.”

Tax benefits – An important fact is that a Life insurance policy helps you save on your tax. This may also prove to be a deciding factor. 

Health Insurance, on the other hand, in the present-day situation is essential. However, Rathi adds, “before selecting any policy, one should take into account the following to make a prudent choice.” 

Coverage – A health plan should be chosen based on the various coverages like pre and post-hospitalization, daycare expenses, transportation, illnesses that one may be at risk of due to your family’s medical history, etc. Rathi “One should also check for benefits in terms of cumulative bonus, recharge of sum insured, riders available for hospital cash or critical illness for concluding on a policy.” 

Plan type: Individual or Family – According to Rathi, go for family floater instead of Individual plans. “This would help provide cover to the family and help make the plan affordable,” he adds.  

Combining base health plan with Top-up – Rathi points out, “One should choose a base plan with the sum insured one may think is essential, the base plan can be effectively complemented with a Top-up plan with a much higher sum insured. This would make the overall plan cost-effective while increasing its affordability.” 

For instance, one may take a base plan of Rs 5 lakhs sum insured and Rs 50 lakhs top up with exclusion of Rs 5 lakhs. This would mean the insured can claim up to Rs 5 lakhs from the base policy, any claim amount in excess of Rs 5 lakhs up to Rs 50 lakhs can be claimed from the Top Up insurance plan. 

Hospital Network coverage – Check with your insurer the coverage of the hospital offered by them, as this would help bring convenience. 

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