Over the years, individuals have become more financially aware. For example, we can bet you know all about, or have at least heard about, mutual funds, SIPs, life insurance plans, ULIPs, Endowment policies, and stock market trade. Haven't you?
Much of this awareness can be attributed to the shooting inflation and the sudden consciousness about human mortality (after COVID-19 descended). While this is a great edge for a nation, here's the problem—this increased demand for value-worthy financial products has led to the surfacing of multiple channels. This is getting a tad bit confusing for policyholders, who are now in two minds: “Should I save money or should I invest in diverse channels?”
We say do both, but keep the two separate! So, if you are looking for an investment, your options can be mutual funds, the stock market, etc. On the other hand, if you are looking for a pure savings tool that is affordable, fetches 0 risks, has options for customisation to suit your tailored financial goals and bandwidth, and has convenient access to a substantial amount, term insurance policies are what you need!
However, since this is finances we are talking about. Since this amount should act as your financial substitute (in the event of your unfortunate absence), you need a complete and thorough guide to term insurance plans that will leave you with no doubts about whether and why you should avail yourself of these policies.
Happy reading!
Heads Up: It takes an average person up to 5 hours to read & analyze a policy, and 10 hours or more to compare different plans and make a decision.
This is why we propose a better alternative - taking a 30-minute FREE consultation with Ditto’s certified advisors. We have a spam-free guarantee, and we’ll never push you to buy a plan. Don’t delay this - we have limited slots every day, so book a quick call here before they run out.
Best Term Insurance Plans in India for 2024
| Best-term plans | Features | Drawbacks |
|---|---|---|
| Max Life Smart Secure Plus |
|
None that we could find |
| HDFC Super Click2Protect |
|
Expensive plan |
| ICICI Prudential iProtect Smart |
|
Lengthy and complicated application process |
| TATA AIA Sampoorna Raksha Supreme |
|
None |
| Bajaj Allianz Smart Protect Goal |
|
There is no zero-cost option, Premium waiver, Inflation Shield, Accidental Death Benefit, Terminal Illness Benefit, or the option to boost the cover amount. |
What is Term Insurance?
Term insurance plans are financial safety nets that kick in in the case of your unfortunate passing away. Such funds are crafted to shield your family’s financial security and ensure they achieve their life stage goals without any hiccups.
What are the Advantages and Disadvantages of Term Insurance Plans?
Now, we are sure that, like any other financial tool, term insurance plans must seem “too good to be true.” raising doubts about whether you should avail of a term insurance policy. So, we will settle it once and for all by discussing the advantages and disadvantages of term insurance policies.
| Pros of Term Insurance Policies | Cons of Term Insurance Policies |
|---|---|
|
|
Once you tally the advantages and disadvantages of term insurance policies, you will know why this has become one of the most popular financial products ever. Hence, there’s no question about whether you should apply for it; rather, it’s a question of how fast - because and here’s one more pro -
Term insurance policy premiums get locked in as per one’s purchase age. So, say you are a male looking for ₹1 crore coverage till you turn 65 years old and do not smoke; here’s how your premiums change -
| Age of the policyholder | Range of Premiums (since it varies from one insurer to another) |
|---|---|
| 25 | ₹10k - ₹12k |
| 25 | ₹10.6k - ₹14k |
| 27 | ₹10.6k - ₹14k |
| 28 | ₹11k - ₹14.7k |
| 29 | ₹11.6k - ₹15.2k |
| 30 | ₹12.3k - ₹15.5k |
While you can see how the premiums vary, remember that your tenure is also lowered from 40 years to 35 years. Hence, we always recommend getting a term insurance plan in your 20s.
What are the Eligibility Criteria for Term Insurance Plans?
As established before, since a substantial cover amount is involved against a nominal premium, all term insurers are incredibly stringent about the eligibility criteria required to avail of a term insurance plan. So, if you are planning to opt for a term insurance policy, here’s all that you need to know about the eligibility criteria:
- Income: Generally, reputable term insurance providers offer plans to individuals aged 18 to 65. (P.S. Whole-life plans can extend coverage until age 99.) This age range is significant because:
- Individuals are typically professionally active during this period.
- Applicants can consistently pay premiums due to ongoing employment.
Term insurance companies' underwriting teams consider the applicant's age, apply a preset multiplier to their income, and determine the maximum eligible coverage amount.
| Age | Multiplier |
|---|---|
| 18 - 35 years | 25 |
| 36 - 40 years | 20 |
| 41 - 45 years | 15 |
| 46 - 50 years | 12 |
| 51 - 55 years | 10 |
| 56 - 65 years | 5 |
So, let’s say Ansh is a 30-year-old with an annual income of ₹10 lakhs. In that case, he is eligible for a maximum sum assured of ₹10 lakhs * 25 = ₹2.5 crores.
2. Education: Term insurance providers consider a potential policyholder's education as an indicator of premium payment potential and life expectancy. Based on this, the underwriting team may reject the application or offer a term plan with or without a cap on the maximum sum assured.
3. Occupation: When you apply for a term insurance plan, the insurer sends you a questionnaire about your occupation. The underwriting team uses this to assess the risk associated with your job. If your occupation is deemed riskier than average, you will receive a more detailed questionnaire focused on occupational hazards. Based on this assessment, the underwriting team may:
- Reject your application
- Offer a different plan
- Increase the premium on the same policy
- Lower the coverage on the same plan
These decisions are made due to the higher risk associated with your occupation.
If you combine the above 3 criteria, here’s how underwriters determine the term insurance eligibility of a policyholder -
| EDUCATION | INCOME | SALARIED/NON-SALARIED | TERM INSURANCE ELIGIBILITY |
|---|---|---|---|
| Below Class 10 | Not eligible | ||
| Class 10 passed | ₹10 lakh or above | Salaried | Max Life |
| Class 10 passed | ₹10 lakh or above | Non-Salaried | HDFC Life and Max Life |
| Class 12 pass | ₹5 lakh or above | Salaried and Non-Salaried | HDFC Life and Max Life |
| Diploma | ₹5 lakh or above | Salaried and Non-Salaried | HDFC Life and Max Life |
| Graduate | All insurers offer | ||
| Post - Graduate | All insurers offer |
4. Pre-existing medical conditions: Term insurance relies heavily on life expectancy, so the underwriting team will review your medical history. Be prepared with documents if you have a history of hospitalisations or surgeries. If you have pre-existing conditions, the insurer may require additional medical tests. Based on the results, they may:
- Deny your application
- Accept it with a reduced cover
- Increase the premium
- Offer a different plan
- Exclude certain riders
What is the Ideal Term Insurance Cover and Term Insurance Tenure?
Now, let’s say that you are found eligible for a term insurance policy, and the insurer, based on your age and income slab, offers you a maximum term insurance cover amount. The question now is, what should be the ideal tenure of your term insurance plan, and how much term insurance coverage should you opt for? Here’s how you calculate it -
- Ideal Term Insurance Tenure: To calculate the appropriate term insurance tenure, remember that these plans are designed to support your dependents financially in your absence. Consider these factors:
- Years until your retirement
- Number and age of dependents
This will help determine how long you need coverage. Some term insurance policies offer coverage until age 99, but these come with high premiums due to higher payout risks.
Coverage until age 65 to 70 is usually sufficient, as this aligns with retirement, and your dependents will likely be financially independent by then. Afterwards, you can redirect the premiums towards savings or investments in real estate or the stock market.
2. Ideal Term Insurance Cover: After deciding on the term insurance tenure, consider a few other factors to calculate the perfect coverage. Term insurance coverage varies for each policyholder, as it must meet your family's specific financial goals and needs based on your income and dependents' financial milestones.
Use a free calculator to determine the ideal coverage by factoring in the policyholder's age, policy tenure, number and age of dependents, household expenses, inflation rate, and existing financial liabilities.
What are the Features of the Best Term Insurance Policy?
- Critical illness rider: This rider is common in top-term insurance policies. Each provider offers a list of critical illnesses with varying numbers. If diagnosed with such an illness, the insurer provides a lump sum. There are two types:
- Accelerated Critical Illness Rider: The sum is deducted from the base sum assured upon diagnosis.
- Standard Critical Illness Rider: The lump sum offered is in addition to the base coverage.
The maximum payout for a critical ailment is capped, varying between insurers and plans.
2. Waiver of premium: In case of a critical ailment or permanent total disability, your income is likely severely affected. Keeping your plan active by paying premiums becomes burdensome. With this rider, all future premiums are waived, ensuring your policy remains active without any payments.
3. Accidental Death Benefit: This rider is valuable for frequent-traveling entrepreneurs. If your death results from an accident, your beneficiary receives an additional amount on top of the base sum assured. Given the suddenness of such events, leaving little time to prepare your family financially, this extra amount can be beneficial.
4. Increasing/decreasing cover option: The vanilla term insurance policy doesn’t allow adjustments to the chosen cover amount. However, life changes like increasing or decreasing dependents, taking out or repaying a loan, or considering inflation rates may impact your family's future financial goals. Riders like Increasing Cover Option or Decreasing Cover Option are helpful in such cases. The Increasing Cover Rider boosts the cover amount annually by a fixed percentage.
While opting for an Increasing Cover Rider is wise, avoiding the Decreasing Smart Cover is best. Even when dependents are financially independent, inflation persists, making the cover amount valuable for your spouse in your absence. Hence, increasing or maintaining the cover amount is advisable.
5. Terminal illness benefit: This is primarily an in-built feature in top-term insurance policies, but it's also available as a rider in some plans. If diagnosed with a terminal illness and certified by your doctor and another doctor from the insurance team, you receive a lump sum payout. This amount may be part of the base sum assured or in addition to the cover amount.
6. Life stage benefit: This rider provides significant assistance if you experience major life changes necessitating an increase in your cover amount. Events covered include marriage, birth/adoption of the first and second child, and home loans. The insurer increases your cover amount to a capped limit once within a preset time limit from the life stage event.
What are the Best Term Insurance Providers for 2024?
To determine the best term insurers for 2024, you need to consider the following metrics -
- Claim Settlement Ratio (CSR): This helps you assess the number of claims an insurer settles yearly against the claims received. While this is a crucial metric for determining credibility, don't rely solely on it when choosing a life insurance provider.
A credible insurer should have a Claim Settlement Ratio (CSR) of 97 or above. Avoid insurers with a CSR of 80 or lower, or 100, as these indicate delayed settlements or a higher chance of rejected claims.
| Best Term Insurance Providers | Claim Settlement Ratio CSR (2020 - 2023) |
|---|---|
| Max Life Insurance Co. Ltd. | 99.40% |
| Aditya Birla Sun Life Insurance Co. Ltd. | 98.08% |
| Tata AIA Life Insurance Co. Ltd. | 98.53% |
| ICICI Prudential Life Insurance Co. Ltd. | 97.09% |
| Bajaj Allianz Life Insurance Co. Ltd. | 98.85% |
| HDFC Life Insurance Co. Ltd. | 98.69% |
| INDUSTRY AVERAGE (2020 - 2023) | 97.74% |
2. Amount Settlement Ratio (ASR): This helps you analyse the number of claims an insurer has settled. The ASR reveals whether the insurer settles all claims regardless of the amount or manipulates its CSR by settling more minor claims. An ASR of 90 or above indicates that the insurer reliably settles claims of any size, ensuring a hassle-free process for your nominee.
| Best Term Insurance Providers | Amount Settlement Ratio ASR (2019 - 2022) |
|---|---|
| Max Life Insurance Co. Ltd. | 95.5 |
| Aditya Birla Sun Life Insurance Co. Ltd. | 93.9 |
| Tata AIA Life Insurance Co. Ltd. | 92.7 |
| ICICI Prudential Life Insurance Co. Ltd. | 92.1 |
| Bajaj Allianz Life Insurance Co. Ltd. | 93.0 |
| HDFC Life Insurance Co. Ltd. | 87.3 |
| INDUSTRY AVERAGE (2019 - 2022) | 90.9 |
3. Complaint Volume: This metric establishes whether an insurer offers hassle-free claim settlement. Lower complaint volumes indicate better efficiency in settling claims, reducing potential hassles for your family during the emotional and financial vulnerability following the loss of a family member.
| Best Term Insurance Providers | Complaint Volume (2020 - 2023) |
|---|---|
| Max Life Insurance Co. Ltd. | 7.0 |
| Aditya Birla Sun Life Insurance Co. Ltd. | 7.1 |
| Tata AIA Life Insurance Co. Ltd. | 2.3 |
| ICICI Prudential Life Insurance Co. Ltd. | 14.3 |
| Bajaj Allianz Life Insurance Co. Ltd. | 5.0 |
| HDFC Life Insurance Co. Ltd. | 2.7 |
| INDUSTRY AVERAGE (2020 - 2023) | 72.8 |
4. Total Annual Business Volume: While not a precise metric for determining insurer credibility, acknowledging the insurer's annual average business size ensures awareness of its scale and potential client base. It's preferable to entrust substantial coverage to a medium—or large-size brand with a solid client base that reflects credibility and an extensive insurance track record.
| Best Term Insurance Providers | Annual Business Volume in crores (2020 - 2023) |
|---|---|
| Max Life Insurance Co. Ltd. | ₹7,897 |
| Aditya Birla Sun Life Insurance Co. Ltd. | ₹5,967 |
| Tata AIA Life Insurance Co. Ltd. | ₹6,014 |
| ICICI Prudential Life Insurance Co. Ltd. | ₹15,380 |
| Bajaj Allianz Life Insurance Co. Ltd. | ₹8,729 |
| HDFC Life Insurance Co. Ltd. | ₹24,315 |
| INDUSTRY AVERAGE (2020 - 2023) | ₹14,204 |
What are the Best Term Insurance Plans for 2024?
- Max Life Smart Secure Plus: This term insurance plan from Max Life is one of the best in the industry. It's comprehensive and affordable, with a diverse range of in-built features and riders, including terminal illness perk, critical rider (3 variants), voluntary top-up sum assured, Joint life cover option, Premium Break option, Waiver of Premium Plus, and Disability Rider.
Drawbacks: None
2. HDFC Life Click 2 Protect Super: The Click2Protect Super plan offers an in-built terminal illness benefit and a smart exit perk, making it comprehensive but slightly pricier than the Click2Protect Life policy. It comes in three variants: Life, Life Plus, and Life Goal, with a range of riders including Waiver of Premium on Critical Illness, Return of Premium, Waiver of Premium on Total and Permanent Disability, Spouse Cover Option, Option to alter premium frequency, Option to change Premium Payment Term from regular pay to limited pay, Renewability Option at Maturity, Life Stage Option, and Death benefit as an instalment option.
Drawbacks: Expensive as compared to other plans in its category.
3. ICICI iProtect Smart: This is the only term insurance option offered by ICICI Prudential Life. The policy has four variants for death benefit payout options: Lump sum, Income, Lump sum plus income, and Increasing Income. Additionally, there are four plan options based on combinations of riders: Life, Life Plus, Life and Health, and All In One, which include Waiver of Premium + Terminal Illness Benefit, Waiver of Premium due to Disability, Accidental Death Benefit, and Critical Illness Benefit.
Drawbacks: The insurer needs to do a better job at improving its overall operational efficiency.
4. Bajaj Allianz Life Smart Protect Goal: This offering from Bajaj Allianz Life comes with four variants: Life Coverage, Child Education Extra Cover, Life Cover With Joint Life, and Increasing Cover, addressing your changing financial needs and goals. The list of riders includes Critical Illness Benefits, Accidental Death Benefits, Waiver of Premium Benefits on CI, and Accidental Total Permanent Disability Benefits.
Drawbacks: No Waiver of Premium, Inflation Shield, Accidental Death Benefit, Terminal Illness Benefit, or option to boost cover amount.
5. TATA AIA Sampoorna Raksha Supreme: Based on death benefit payouts, the plan offers three variants: Life Option, Life Plus Option, and Life Income Option. It includes built-in features like terminal illness perks, life stage benefits, top-up sum assured, and premium payment flexibility. The policy is comprehensive and affordable, offering riders such as Accidental Death Benefits and accidental Total and Permanent Disability Benefits, among others.
Drawbacks: None
Why Talk to Ditto for Your Health Insurance?
At Ditto, we’ve assisted over 3,00,000 customers with choosing the right insurance policy. Why customers like Srinivas below love us:
✅No-Spam & No Salesmen
✅Rated 4.9/5 on Google Reviews by 5,000+ happy customers
✅Backed by Zerodha
✅100% Free Consultation
You can book a FREE consultation. Slots are running out, so make sure you book a call now!
Conclusion
If you are looking for an affordable option to secure your family’s financial future, it can’t get any better than a term insurance plan. However, before you purchase a term insurance policy, you must use a free tool to compare the top term insurance policies, ensure that you have the ideal term insurance coverage and the perfect term insurance tenure and that you have opted for the most value-worthy term insurance riders. These will ensure that you have tapped into the maximum potential of your term insurance plan, that this policy caters to your family's tailored financial goals/requirements and that it falls within your existing financial bandwidth.
