Term Insurance: Policy & Insurer Rating Framework

Most people choose a term plan based on the key benefits they offer or the premium expenses. The truth is, neither of these tells you how the insurer will behave 20 or 30 years from now when your family actually needs the money. We’ve seen cases where the premium was low, the CSR looked great, yet the nominee faced delays, document loops, or unclear communication. These problems never show up in ads or brochures.

To remove this guesswork, we built a transparent, data-backed rating framework. Our team analysed multi-year IRDAI filings, product wordings, complaint records, premium charts, and digital servicing availability across insurers. Each plan is scored on three core pillars, insurer strength, features, and premiums, with weights that reflect real-world protection. 

By the end of this guide, you’ll know exactly how we evaluate insurers, why certain features matter more than others, and how each plan earns its final score.

How is the Final Policy Rating Calculated?

Each dimension is scored on a 10-point scale. The final rating is computed as:

Policy Rating = 0.1 × Premium Rating + 0.60 × Insurer Rating + 0.30 × Features Rating

The combined score is on a 10-point scale. For display on customer-facing pages, which follow a 5-point format, the score is simply divided by 2.

Representation in “Best” or “Top” Listings

However, to maintain diversity and keep comparisons meaningful, we apply a one-slot-per-insurer rule for any “Top” or “Best” list.

For example, several Max Life or HDFC plans may score in the top 5 objectively, but only one will appear in our public list.

This ensures customers see a balanced mix of strong insurers rather than one dominant brand.

Note: The framework above explains how each rating dimension contributes to the final score and why the weights are structured the way they are. In the sections that follow, we break down these components in greater detail, starting with the Insurer Rating. 

Since insurer strength carries the highest weight in our model, it is important to explain exactly how we measure it and why each metric matters. The next section outlines this in a transparent, metric-by-metric format, along with the scoring rules and the reasoning behind them.

Insurer Rating - Detailed Methodology 

Insurer strength determines whether a nominee will actually experience a smooth, timely and fair claim process. Unlike product features or premiums that vary widely between plans, insurer reliability reflects long-term governance, risk practices, capital stability and customer service execution.

The insurer rating is generally a weighted score across five metrics, each capturing a different dimension of reliability:

Insurer Rating = (CSR × 0.2) + (Complaints × 0.15) + (GWP × 0.4) + (Online × 0.15) + (ASR × 0.1)

The scoring framework places higher value on insurers with proven scale and reliability, captured through GWP and CSR. This is balanced with customer experience indicators such as complaint volumes, payout quality measured through ASR and the ease of dealing with the insurer through online access. 

All metrics are averaged over three years so that short term fluctuations do not distort the final rating.

Below is the expanded reasoning for every component.

1.1 Claim Settlement Ratio (CSR)
CSR measures the percentage of claims approved out of total claims filed in that year. A high CSR shows strong underwriting discipline, predictable processes and a bias toward paying rather than rejecting claims.

Why it Matters
Families don’t have the ability to “try again” during a claim. A consistently high CSR across years is one of the strongest indicators that the insurer honors claims without unnecessary friction.

Scoring Logic (0–10)

Interpretation

• 10 score: Extremely trustworthy. Strong internal controls and low repudiation culture.
• 8 - 9 score: Reliable but slightly conservative in certain profiles.
• 5 - 6 score: Adequate but not top-tier.
• <5 score: Buyer needs to review complaint ratios and ASR carefully before choosing.

1.2 Volume of Complaints
Complaint volume captures customer dissatisfaction across servicing, payouts, mis-selling, delays, or documentation issues.

Why it Matters
Complaint rates per 10,000 claims are one of the most practical measures of day-to-day servicing quality. Plans bought for decades should not come with years of follow-ups and escalations.

Scoring Logic (0–10)

Interpretation

• 10 score: Very low friction in claims and servicing.
• 7 score: Balanced and manageable.
• 5 score: Higher follow-ups required; expect occasional escalations.
• < 5 score: May need some scrutiny from the customer

1.3 Gross Written Premium (GWP)
This measures the size and scale of the insurer’s business.

Why it Matters
Large insurers tend to have stronger capital buffers, more predictable claim outflows, better technology and servicing infrastructure, broader distribution depth, and more stable processes.

Scale is not a guarantee of quality, but very small players can have limited claim management resources or inconsistent service.

Scoring Logic (0–10)

Interpretation

• 10 score: Top-tier scale, well-established systems.
• 7 - 8 score: Mid-sized but stable.
• 4 score: Slightly smaller footprint; monitor consistency.
• 1 - 2 score: Niche insurer; may not be for everyone

1.4 Online Presence
This measures whether the insurer offers a full D2C digital purchase and servicing journey.

Why it Matters
Insurers without full online infrastructure introduce avoidable friction and leave too much to offline agents.

Scoring Logic (0 or 10)

Interpretation
A low score does not mean “poor insurer,” but it does indicate: buyer has less control, servicing may depend on branch/agent quality, and pricing is not always transparent.

1.5 Amount Settlement Ratio (ASR)
An amount settlement ratio measures the percentage of claim amounts paid out of the total amount claimed and not the number of cases.

Why it Matters
This metric reduces the distortion caused by many small-value claims being settled while high-value claims face scrutiny. 

Scoring Logic (0–10)

Interpretation

• 10 score: Strong, transparent payouts even on higher-ticket claims.
• 6 - 8 score: Generally good figure 
• 5 score: Decent, but could be better
• Below 5: Needs some scrutiny

Features Rating - How It’s Calculated

This helps us measure how well a term insurance plan is built. In other words, how much protection and flexibility it actually provides to the insured and their family beyond the basic life cover.

While the core purpose of a term plan is straightforward i.e. to pay a lump sum to the nominee on death, insurers often add several features that can make the product more useful in real-world scenarios. 

These could include benefits like waiver of premium on disability, critical illness payouts, or the option to increase cover as responsibilities grow. Such features can add meaningful value to customers, and the Features Rating captures that value in a consistent, data-driven way.

Methodology
Each policy is broken down into key benefit categories, such as Critical Illness cover, Waiver of Premium, or Disability payout. Every category has:

• A raw score (0–10) based on defined rules 
• A weight that reflects how important that feature is for overall protection (total weights = 100).

The Features Rating is calculated as a weighted average of all individual scores:

Features Rating = ( Σ (Feature Score × Feature Weight) ) / 100

If a feature is not part of the base plan but is available as an add-on, it is included in the rating as long as it can be purchased along with the plan. This ensures that products offering modular protection are not penalised compared to all-in-one designs.

Weightage (in %) 

1. Critical Illness (30%)
   What it tells you: Whether the plan provides a lump-sum payout on diagnosis of a major illness like cancer or heart attack offering financial support while the insured is still alive. This benefit primarily addresses loss of income, since health insurance only covers hospital bills but not the long recovery periods or lifestyle impact that follow a serious illness.
   Why 22%: A major illness can completely derail a family’s finances by stopping income for months or even years. A well-structured critical illness benefit fills this gap, offering cash when it’s needed most. Because of its direct, high-value role in financial protection and the large variation in how insurers design it (number of diseases covered, payout triggers, survival period, etc.), it receives the highest weight in the framework.
2. Waiver of Premium (14%)
   What it tells you: Whether the plan continues to stay active even if the policyholder can’t pay future premiums typically due to a critical illness or disability. This ensures that protection remains intact when income stops.
   
   Why 17%: Loss of income from illness or disability often leads to lapsed policies exactly when cover is needed most. A waiver of premium benefit prevents this by automatically keeping the policy active. It doesn’t create new income like a Critical Illness rider, but it preserves long-term protection, which makes it one of the most valuable supplementary features.
3. Special Exit Benefit (8%)
   What it tells you: Whether the plan lets the policyholder exit early, usually around retirement age and receive back all or part of the premiums paid. This provides flexibility for those who may no longer need a large cover later in life.
   
   Why 10%: The special exit benefit adds real value because it’s often offered free of cost. It allows customers to recover premiums without buying a return-of-premium variant, making it a smart middle ground between affordability and flexibility. Since it enhances liquidity without altering claim payout, it carries a moderate weight in the framework.
4. Payout on Disability (10%)
   What it tells you: Whether the plan provides a payout if the policyholder becomes disabled either through an accident or a permanent total disability and can no longer work. This benefit helps replace lost income and offers financial stability during recovery.
   
   Why 10%: Disability is one of the biggest income risks during a person’s working life. A payout on disability ensures the family receives funds even when the insured survives but can’t earn. Since it directly supports income continuity but is not universally included across plans, it holds a moderate weight in the framework.
5. Terminal Illness (5%)
   What it tells you: Whether the plan pays out the sum assured early if the policyholder is diagnosed with a terminal illness - one expected to result in death within a defined period (usually 6 months). This ensures the family receives funds while the insured is still alive and can manage medical or end-of-life expenses.
   
   Why 5%: Terminal illness benefits are now standard and usually included at no extra cost, but the clarity and timing of payout still vary across insurers. It’s an important safeguard that improves liquidity in critical situations, though its financial impact is limited to very few cases. Hence, it carries a moderate weight in the framework.
6. Cover Increase (Milestones or Pre-Decided) (3%)
   What it tells you: Whether the plan lets the policyholder voluntarily increase their cover amount at a later stage, based on personal choice or preset milestones. The increase is usually by a fixed percentage or amount, subject to age and underwriting limits. This flexibility helps customers gradually scale up protection as income and responsibilities grow.
   
   Why 5%: The option to enhance cover on demand adds control and adaptability without needing to buy a new policy. It’s valuable for long-term financial planning, though it doesn’t alter the base benefit design or claim terms. Because it’s useful but not essential, it carries a moderate weight in the framework.
7. Increasing Cover (Inflation based - every year) (5%)
   What it tells you: Whether the plan automatically increases the life cover every year by a fixed percentage, usually linked to inflation or a pre-decided value. This ensures that the cover amount keeps pace with rising costs and income levels over time.
   
   Why 5%: An increasing cover helps maintain the real value of protection as expenses and responsibilities grow. It’s a useful feature for long-term policies but doesn’t fundamentally change claim outcomes, hence a moderate weight.
8. Decreasing Cover (5%)
   What it tells you: Whether the plan reduces the life cover each year by a fixed percentage or value, typically to match declining liabilities such as home or business loans.
   
   Why 5%: Decreasing cover options make sense for borrowers who want protection that mirrors their reducing financial exposure while keeping premiums lower. However, since it applies to a niche use case and isn’t relevant for most customers, it carries a moderate weight.
9. Cover Continuance Benefit (5%)
   What it tells you: Whether the plan allows the life cover to continue for a short period, usually one or two years, even if the policyholder stops paying premiums. This feature acts as a grace extension, giving the customer time to reinstate the policy without losing protection immediately.
   
   Why 5%: A temporary cover continuance or “1-year extension” provides breathing space during financial strain or oversight. It prevents abrupt lapses and protects the family while the policyholder recovers stability. Since it’s useful but available only in select products, it carries a moderate weight in the framework.
10. Accidental Death Benefit (2%)
    What it tells you: Whether the plan provides an extra payout if the death occurs due to an accident. This adds an additional layer of cover on top of the base life cover.
    
    Why 2%: While it increases the total payout, a well-chosen term plan should already cover all causes of death, not just accidents. Since accidental deaths make up a small fraction of total claims and this benefit duplicates what’s already covered under the base plan, it adds limited incremental value. Hence, it carries a low weight in the framework.
11. Insta Payout Benefit (2%)
    What it tells you: Whether the nominee receives a part of the death benefit immediately after claim intimation i.e. before the final settlement to handle urgent expenses.
    
    Why 2%: This feature improves claim liquidity and provides quick access to funds during emergencies. While operationally useful, its financial impact is small, giving it a low weight in the framework.
12. Return of Premium (2%)
    What it tells you: Whether the plan refunds all or part of the premiums paid if the policyholder survives till the end of the term. This feature appeals to buyers who want to “get something back” even if no claim occurs.
    
    Why 2%: Return of Premium plans are generally not recommended, as they come at a steep cost and dilute the value of pure protection. A standard term plan offers far higher cover for the same price. However, since some customers still prefer getting a refund on survival, we retain a small weight to reflect its emotional and perceived value.

Scoring Rules
With the weights set, each feature is now translated into a 0–10 score. These scores define what counts as strong, average, or weak coverage, ensuring every plan is evaluated by the same standard. The goal is to measure not just whether a benefit exists, but how well it is designed.

(a) Critical Illness Benefit

Critical Illness Score = (Duration Score × 0.30) + (Illness Count Score × 0.30) + (Survival Period Score × 0.05) + (Waiting Period Score × 0.05) + (Payout Type Score × 0.30)

(b) Waiver of Premium

Why it Matters
A Waiver of Premium ensures the policy remains active even when the insured cannot pay future premiums. It keeps the cover intact during financial hardship. For example, after a severe illness or a disabling accident when income typically stops.

What the Triggers Mean

• CI (Critical Illness): A major illness such as cancer, heart attack, or stroke that prevents the policyholder from working or earning.
• ATPD (Accidental Total & Permanent Disability): A permanent disability caused by an accident, leaving the person unable to engage in any occupation.
• TI (Terminal Illness): A condition diagnosed as likely to result in death within a defined period (usually 6 months).

Why the Scoring Bands

• 7 (CI + ATPD): The strongest combination, this covers both illness-driven and accident-driven loss of income.
• 6 (Only CI): Offers good protection but excludes accident-related disability.
• 5 (TI + ATPD): Protects you in fewer medical scenarios; terminal illness triggers are rare.
• 4 (Only ATPD): Covers accident-related disability but not illness, limiting usefulness.
• 0 (No Waiver): No protection from policy lapse; the customer must keep paying premiums regardless of health or income condition.

(c) Special Exit Benefit

Why it Matters
A Special Exit Benefit allows policyholders to exit early typically around retirement age and receive back premiums paid. It gives flexibility without turning the plan into a costly return-of-premium product.

What Do These Scores Mean?

• 10: Full refund, built-in and free, maximum flexibility at no cost.
• 8: Minor deductions are acceptable but slightly reduce value.
• 6: Add-on or separate variants limit accessibility.
• 4: Partial refund provides limited benefit.
• 0: No exit option removes flexibility altogether.

(d) Payout on Disability

Condition	Score
Covers both accidental and total permanent disability, with a lump-sum payout	10
Covers both accident and disability, but offers monthly income payout	8
Covers only accidental disability (lump-sum payout)	6
Covers only total permanent disability (no accident trigger)	4
No payout on disability	0

Why it Matters
A disability payout ensures financial protection when the insured survives but loses earning ability due to an accident or permanent disability. It replaces income during recovery or long-term incapacity.

What Do These Scores Mean

• 10: Full lump-sum payout for both accident and permanent disability offers the broadest and most immediate protection.
• 8: Monthly income option provides steady support but less flexibility compared to a lump-sum.
• 6: Covers only accidents; useful but incomplete since many disabilities are illness-related.
• 4: Covers only total permanent disability; lacks practical triggers for most real cases since total disabilities are rare.
• 0: No payout exposes the insured to complete income loss risk.

(e) Unique Features 

Each product’s Unique Features Score is the sum of the weights of all applicable benefits (up to a maximum of 10).

For example, a plan offering Spouse Cover (2), Premium Holiday (1), and Child Care Rider (1) will score 4 / 10.

Why it Matters
Unique features capture innovation and real-world utility that go beyond the standard term plan structure. They typically address niche needs, protecting family income, parents, or allowing flexibility in payments and collectively indicate how customer-oriented a product is.

(f) Terminal Illness / Accelerated Death Benefit 

Why it Matters
A Terminal Illness Benefit allows early payout of the life cover when a policyholder is diagnosed with an illness expected to result in death within 6 months. It provides immediate liquidity for treatment or family support during a critical phase.

What Do These Scores Mean

• 10: Full payout without any monetary cap ensures complete access to the insured amount.
• 8 / 6 / 4: Gradual reduction in scores reflects caps that restrict the benefit’s usefulness in high-sum-assured policies.
• 0: No such benefit removes early liquidity and limits financial flexibility near the end of life.

The scoring rewards plans that offer unrestricted, built-in terminal illness coverage, ensuring full payout when families need it most.

(g) Accidental Death Benefit

Why it Matters
An Accidental Death Benefit (ADB) offers an extra payout if death occurs due to an accident, typically matching or exceeding the base life cover. It can enhance overall protection but is a limited-use feature.

What Do These Scores Mean

• 10: Availability of ADB (either built-in or as a purchasable rider) ensures coverage for accidental deaths without leaving any gap in benefit.
• 2: No ADB rider is not a dealbreaker, but a bit underwhelming. While the base policy still covers all causes of death, the absence of an additional accidental payout slightly reduces flexibility for customers seeking that option.

This scoring recognises ADB as an optional yet valuable enhancement, rewarding plans that offer it for completeness, even if not essential to core life protection.

(h) Increasing the Cover at a Later Point in Time 

Why it Matters
The Increase in Cover option lets customers enhance their protection as income and responsibilities grow. It’s useful for long-term financial planning, allowing policyholders to adapt coverage without buying a new plan 

What Do These Scores Mean

• 10: Full flexibility - The customer can raise cover at any chosen time, offering the greatest control and long-term adaptability.
• 7: Life-stage based allows increase only at specific milestones, still valuable but less flexible.
• 0: No option to increase - the policy remains static, requiring new purchases for higher protection.

This scoring rewards plans that provide maximum flexibility to adjust coverage when the customer’s financial situation evolves.

(i) Return of Premium 

Condition	Score
Return of Premium option available	10
No Return of Premium option	2

Why it Matters
A Return of Premium (ROP) plan refunds premiums if the insured survives the policy term. It appeals to buyers who want something tangible back, even if no claim occurs. And while Return of Premium may not always work out on an economic basis, it remains popular among customers who prefer getting a refund at maturity.

What Do These Scores Mean

• 10: Offers ROP option - provides savings-like appeal for customers who prefer recoverable value.
• 2: No ROP - the plan focuses purely on protection. While financially more efficient, some customers value the optional return feature.

This scoring retains minimal weight to acknowledge consumer preference while recognising that term plans are primarily meant for protection, not returns.

(j) Cover Continuance Benefit 

Why it Matters
A Cover Continuance Benefit allows the life cover to continue for a limited period, typically one year, even if premiums are not paid. It acts as a grace extension to prevent abrupt lapses.

What Do These Scores Mean

• 10: Provides a built-in continuation period that safeguards coverage during temporary financial strain or oversight.
• 2: No continuation option i.e. coverage stops immediately on non-payment, increasing lapse risk.

This scoring rewards plans that extend protection beyond strict payment deadlines, giving customers crucial breathing space during financial difficulty.

(k) Insta Payout Benefit 

Why it Matters
An Insta Payout Benefit ensures that a portion of the death claim (typically ₹50,000 to ₹5 lakh) is paid immediately after claim intimation, giving nominees quick access to funds for urgent expenses.

What Do These Scores Mean

• 10: Built-in or optional insta payout improves liquidity for families during critical early days.
• 2: Absence of this feature delays initial access to funds, though full payout remains assured.

This scoring recognizes benefits that speed up claim access and reduce short-term financial stress for nominees.

(l) Increasing Cover

Why it Matters
An Increasing Cover feature raises the life cover every year by a fixed percentage to keep pace with inflation 

What Do These Scores Mean

• 10: Automatic, fixed annual increments can protect the real value of cover over time.
• 2: Absence of this feature reduces flexibility at some level

The scoring rewards products that maintain inflation-adjusted coverage without needing manual intervention.

(m) Decreasing Cover 

Why it Matters
A Decreasing Cover allows the life cover to reduce each year at a fixed rate, ideal for customers whose liabilities (like home loans) shrink over time.

What Do These Scores Mean

• 10: Availability of a decreasing cover makes the plan cost-efficient and tailored to real liability profiles.
• 2: No such option means coverage remains static even when financial exposure reduces.

This scoring recognises plans that align coverage with declining obligations, offering better value for borrowers or liability-linked protection.

Premium Rating - Methodology

The Premium Rating measures how competitively priced a term plan is for a standard benchmark profile. It captures affordability while ensuring products with sound features and reliable insurers are not overshadowed by lower-priced but weaker options.

Scoring Buckets

Scope & Inputs (Normalized)

• Variant: Only the base or standard product is considered. Optional riders are excluded unless they are mandatory or bundled.
• Health: Standard, healthy 30-year-old male, non-smoker, with no loadings or medical exceptions.
• Cover: ₹1 crore sum assured (next higher option used if unavailable).
• Channel: Official, publicly available Direct-to-Consumer (D2C) quote from the insurer’s website or app.
• Mode: Annual premium, excluding any loadings.
• Location: Bengaluru (PIN 560076) used for price normalization.
• Taxes: Premiums exclude GST.

If Premium Data Is Unavailable
When a plan’s D2C quote is not publicly visible or retrievable:

• We assign a Premium Score = 3, the default baseline.
• Mark such plans as “Premium Unavailable” in displays.
• These are excluded from “Best” or “Top” listings until verified pricing becomes available.
• Once official D2C premiums are published, the Policy Rating is recalculated using the standard formula (Premium contributing 15%).

This avoids skewed comparisons and keeps the framework reproducible using publicly accessible data.

Why Choose Ditto for Your Term Insurance?

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