If you are looking for a black and white answer to this question, you are going to be disappointed. I don’t have the answer myself. In my opinion, there is no such thing as the best term insurance plan. A lot depends on what you need and are comfortable with.
The purpose of this post is not to find out which is the best term life insurance plan. The intention is to help you find out which is the best term insurance plan for you.
In this post, I will focus on how you should go about finalizing the best term insurance plan for yourself. Should annual premium be the only criteria? Or there is more to it?
Let’s first focus on the parameters that you might consider at the time of purchasing a term life insurance plan.
Parameters to consider while purchasing term insurance plans
- Annual premium (after loading for health condition): Lower the better.
- Payout option (Lump sum, income or both): Your choice must be driven by investment management skills of your nominee.
- Features/Coverage: Though the life insurance is supposed to cover only death, you can add a few riders to the base plan to augment insurance coverage. Not all term plans offer all the riders. If you are looking for a specific rider, your options may automatically be limited.
- Claim Settlement Ratio: I would ask you not to read too much into it. Even for the company which as 99% claim settlement ratio, you need to ask the remaining 1% whose claims were rejected. The Insurance Amendment Act, 2015 has a provision that a life insurance company cannot reject claim after three years (for death claim). Hence, I expect this to be less of a problem.
- Comfort with the insurance company: Most of us trust LIC better than others. Don’t we?
- Online or offline: Online is likely to be cheaper.
Comparison between various term life insurance plans
I have picked up a few plans from the universe of online term life insurance plans available. I do not, in any way, mean to say that these are the best term insurance plans in India.
To be honest, there is not much to differentiate between the plans in term of coverage. All terms plans provide nominee the Sum Assured amount in the event of demise of the policy holder.
However, depending upon the plan or choice specified, the manner in which the nominee receives the payment (lump sum, income or both) may vary across plans. For more on payout options and which payout option to choose, you can go through my post on Income Replacement Term Insurance plans.
Must Read: Do you need an Income replacement Term Insurance Plan?
Additionally, you can add a few life insurance riders to your plain vanilla term plan to fill a few gaps in your insurance portfolio.
Must Read: All you need to know about Life Insurance Riders
I have picked up the following six plans.
- HDFC Life Click 2 Protect Plus
- ICICI Prudential IProtect Smart
- Max Life Online Term Plan
- LIC e-Term plan
- Aegon Life iTerm Plan
- SBI Life eShield plan
I have compared the aforementioned plans on payout options and rider options available. The premium for a specific scenario is also provided.
I have only considered the premium for a healthy 30 year old non-smoker male. Sum Assured is Rs 1 crore. Payout option is Lump sum. The premium is for the plain vanilla term plan without any rider.
Remember the insurance company may choose to hike premium for you based on your medical history and outcome of medical tests.
To add riders to the policy, you will have to pay additional premium. In some of the plans, terminal illness rider and waiver of premium on disability may be part of the base plan.
Choice of Payout Option and Riders can affect your annual premium
Let’s see how the annual premium gets affected by adding a few riders. I pick Max Online Term Insurance plan and see the impact of purchasing riders.
What should be the policy term?
Typically, most people simply subtract their current from their retirement age to arrive at the policy term. For instance, if you are 35 and expect to retire by 60, the policy term will be 25 years.
The annual premium depends on the policy tenure too (apart from age, Sum Assured and your health condition). Lower the policy term, lower the premium.
For instance, premium for the same person for a 20 year term under HDFC Click 2 Protect Plus plan will be Rs 8,760 per annum. The annual premium for 15 year term will be Rs 8,256. Contrast this will annual premium of Rs 10,738 for 30 year policy.
To find out the right policy term, you need to go to basics of calculating your life insurance requirement. The Sum Assured along with your accumulated wealth should be sufficient to square off all your loans, meet all your financial goals and provides for expenses to maintain family’s lifestyle.
So, if you feel you will be able to amass enough wealth for all this in the next 15 years (based on your savings and cash flows), there wouldn’t be any need for life insurance policy after 15 years. However, you need to be doubly sure of this. There is not much scope for error.
In case you are in doubt, purchase the cover till your retirement. You can always stop paying further life insurance premiums when you think you have enough wealth for family and financial goals.
Which is the best term insurance plan for you?
The one with the lowest premium? In my opinion, the answer is no. You must first assess type of term life cover most suited for your family. Find out the life insurance coverage amount. Focus on annual premium subsequently.
For instance, LIC e-Term Insurance plan does not offer accidental disability benefit. If you are looking for a term plan that offers accidental disability benefit, then LIC e-Term plan is not the plan for you.
Do note I am not saying you must purchase a term life plan with accidental disability benefit. However, in my opinion, you need disability cover. If you have no other form of disability cover, purchasing accidental disability rider with term life plan might be a good idea.
Must Read: Do you need a personal accident cover?
Here’s what you should do.
- Decide the coverage amount (Do not get fixated with randomly large numbers)
- Decide the policy term
- Decide the payout option. Lump sum, income or both?
- Decide if you need to add a rider to augment your insurance coverage. I am talking about life insurance riders (and not traditional plans or ULIPs). Riders will add to the cost.
- Choose the insurer you are comfortable with. Go with the brand that you think is the most reliable.
- Consider the premium cost.
You may give weight to claim settlement ratios too. However, in my opinion, if you make adequate disclosures at the time of purchase of policy, there is little that the insurance company can do at the time of claim. In any case, the way claims settlement ratio is reported leaves much to be desired. Insurance companies may be much more comfortable settling claims in traditional plans or ULIPs as not much money is at stake. Term insurance is a different ball game altogether. There is no separate reporting for different kinds of life insurance plans.
Prepare your family
You will never be able to tell how good your life insurance plan is. Only your nominee can.
Don’t expect the insurance company to hand over the Sum Assured to your nominee on the platter. The insurer will try to find ways to reject your claim (or rather completely satisfy themselves before it settles the claim amount with you nominee). Prepare your nominee for the fight from today itself.
Personally, I don’t trust insurance companies beyond a point. Neither should you.
Must Read: What to do if your insurance claim is rejected?
Do not hide anything from the insurance company. You must make all medical disclosures. Let the insurance decide if the disclosure is material or not. If the insurance company loads the premium based on the disclosure, so be it. Paying a higher premium is much better than your family going through mental and financial trauma of claim rejection.
Must Read: Why insurance claims get rejected?
Addendum: How do you purchase a term insurance plan online?
- You select the plan, fill in the personal details and make payment online.
- Insurance company seeks more information and records about your medical disclosures. If required, the insurance company arranges for a medical test.
- Based on medical disclosures and findings of the medical test, the insurance company may choose to issue the life cover at the same price (as paid earlier) or at a higher premium. Do note the insurance company can even decline to issue the life cover altogether.
- If the insurance company increases the premium, you can refuse to accept the cover. Insurance company will return the premium paid after deducting the cost incurred for medical tests.
- Even if you purchase the policy, you have an option to return the policy within the free-look period of 15 days from the date of receipt of policy document. The insurance company will return the premium paid after deducting the cost for medical examination.
Links to Insurer websites
51 thoughts on “Which is the Best Term Insurance Plan for you?”
Do you have a review on SBI Wealth Builder . I took one with an annual premium of 1 Lac Rs in 2014. Now not really sure what is going on there as I don’t get any update on NAV or such. Shall I stop it or continue ?
Dear Jayant,
SBI wealth builder is a ULIP. ULIPs are not as bad as traditional life insurance plans.
You can continue.
Additional point to note is that if you do not pay premium for 5 years in ULIP, tax benefits availed by you in the previous years will be reversed.
I need your advise.
I have lic term plan covering 25 lac. I am paying premium of 8600/year for the same.
I started it in 2008 for 30 years.
I want to increase cover and looking for additional 1 CR cover.
When I check online term plans. These are much cheaper than I have from lic.
I am planning to go for online plan covering 1.25 CR.
Please advise should I continue lic term plan or stop paying premium.
Dear Utpal,
Term plans are annual contracts. If you don’t pay premium, the policy will automatically terminate.
Yes, LIC term plan premium is quite high as compared to private insurers.
I assume you have assessed your life insurance requirement at 1.25 crores.
Suggest you first purchase the online plan.
You can let the LIC term plan lapse after your new policy has been issued.
Don’t let the plan lapse before purchasing the new policy.
Oh ok, Understood now. Thanks a lot
Utpal.
I have read your articles and as you have suggested that we should not buy lic traditional plans. So, if i want to buy life insurance plan for my father which one i should choose.
My father’s age is 54 and we can’t afford high premium (1k will be enough per month) also.
Please suggest me something i am very confused.
Dear Kapil,
You need to see if your father needs a life insurance plan.
I won’t comment on any specific plan. There is not much difference between pure term plans.
To reduce premium, you can reduce policy tenor.
Hi
I want to buy an insurance plan from LIC.I don’t know anything about insurance. But I want a cover of 20 lake end of 15 years. So which will the better plan?
Hi Rohit,
You want maturity amount of Rs 20 lacs or life cover of Rs 20 lacs?
It is prudent to keep insurance and investment separate.
Hello, I am an central govt. Employee.Two months ago I got the job. My gross salary is 54k/month. 4.5k/month from 54k goes to my NPS. I am 23 years old. Don’t have any kind of knowledge of insurance and Investments and tax savings. So, I am so much confused about
1. Where to invest
2. What life insurance do I need to choose ?
3. Is there any plan that gives me life cover as well as money back.
Please suggest.
Dear Rajdeep,
Good to see someone your age getting serious about investment and insurance.
1. There are many places to invest. Since you are quite young, do consider atleast some exposure to equity funds.
2. Go for term life cover.
3. There are many such plans but you should avoid such plans as the returns are low.
If you want professional assistance, suggest you visit the Offerings section.
Hi Deepesh,
I have purchased SBI Wealth builder last week with the tenure of 20 years and paying annual term 60k for 5 years, invested 100% in bond fund. Sum assured is 6Lakhs. The proposal is yet to be approved to become policy holder. Could you please suggest whether this right decission or need to withdraw my proposal.
Note i paid: 60K
Thanks,
Vamshi
Hi Vamshi,
It is difficult to comment without knowing anything about you or your financial position.
I have not read policy details either. I assume it is a ULIP.
But yes, does not look a good choice.
Focus first on the life insurance. You need to see if Sum Assured is enough for you.
Rs 6 lacs seems inadequate.
Always remember cost of a poor financial decision is much higher than cost of professional advice.
Seek professional advice if required (Please understand my opinion can be biased).
Hello sir,
I am Ramesh of age 29 yrs. I am working in Govt. of India PSU (BHEL) and getting monthly grass income of Rs.80k. I am having kid of 3 yrs age.
I am having PLI for Rs.20 Lakhs(started in 2013 Nov’ with monthly payment of Rs.4700/-).
In addition to PLI, I want to take a term plan for Rs.1Cr. Can you suggest the right plan.
Hi Ramesh,
Go with the company you are comfortable with.
Dear sir,
Iam Arun Sunil, Working in a state organisation with income of 3.5 lakh per annum. Iam having two policies Jeevan Anand and Jeevan Tarang paying premiums monthly Rs.3859/-.( Jeevan Anand Rs.1765 and Jeevan Tarang Rs.2094/-). Started both policies in November 2013, Each policies Maturity amount is Rs.500000.
I have paid premiums upto december 2016.
I have term insurance for Rs.22 lakh. I have no other investments.
Now I need to end Jeevan Anand and Jeevan Tarang policies , after reading your article I felt like that.
Am I correct, I need to invest these amount to mutual funds.
MY insurance requirement will be sufficient with Term insurance which I have.
Aged 32 years.
Hi Arun,
Can you invest more (over and above LIC premiums that you are paying)?
Hi,
I have on basic doubt. Does term insurance will cover only natural death. In other words, does it cover accidents. Got confused because you have mentioned accidental riders needs to be purchased. Or did you mean rider is needed in case of disablilty?
Hi Srikanth,
A term plan covers all kinds of death.
I talked about accidental disability. Term insurance plan will not pay in case of accidental disability. That’s where a rider can add value.
In case of accidental death rider, only the amount paid is increased ( say you will get double the Sum Assured)
Hi Deepesh,
I am planning to take TATA AIG term insurance of 1 Cr cover for High income worth clients as described to me by my financial advisor. As per his suggestion this is specially designed for people with higher incomes and has lesser premium compared to other term plans. Pls suggest if its a good plan or shall I go ahead with some other?
Also, apart from this term insurance, I have been suggested to go with LIC Jeevan Lakshya for long term investment purpose. After reading your views, I conclude you do not suggest traditional insurance plans. But would it be a good choice to take this plan along with a term insurance just for secure long term investment purpose?
Pls note that I am currently 34 yrs old and I have couple of ULIPs for short term (5 yrs) investment.
For LIC Jeevan Lakshya, I am planning to invest 50K annually. LIC Jeevan Anand can also be an option instead of Lakshya. Pls suggest if I should go with any of these? If Yes, then which one?
Traditional life insurance plans make for poor investment products. Stay away.
Hi Shobha,
Won’t go into plan specifics.
“Specially designed for High income and High Net Worth individuals like you” is clearly to massage your ego. This is Sales manual 101.
Go for any term plan.
Wouldn’t be a bad idea to go through this post before you decide.
https://www.personalfinanceplan.in/insurance/claim-settlement-data-life-insurance-companies-hides-reveals/
You can do without LIC Jeevan Lakshya. At your age, you should take some risk and consider taking exposure to equities using mutual funds.
Thanks Deepesh for the quick response.
Hi sir, I have a SBI personal accidental term cover of 20 lacs. Now I would like to take 1 crore term insurance. Shall I cancel SBI term cover or shall I continue along with new term insurance. Any pros and cons in doing so. Pls advice. With Regards. If possible pls mail me.
Hi Nagaraju,
Personal accidental cover is different from term life insurance plan.
Hi Deepesh
I m Asit . i served in merchant navy. i m little confused with which term plan to take. As I work on ship, it is not written clear on any plan whether they cover any death or accidents occurred on ship. Can u pls suggest which and all point to check and confirm before taking a term plan and any other life insurance plan, if u r serving in merchant navy.
Hi Asit,
Do not have much experience in advising people from merchant navy.
However, I can see insurance companies getting uncomfortable if you travel in unsafe waters.
Many insurance companies may not issue plans to NRIs either.
Talk to the insurance company. Make disclosure about the profession and let them decide.
If the insurance company chooses to cover you, everything should be covered. Doubt they will put additional conditions.
Hello sir, i’m Anjali, central government employee and earning 70k gross salary. I got job at the age of 24….to save tax i started LIC new jeevan anand policy…. 8820 rs per month for 18 yrs. After reading yr article i’m confused that should i continue it or not. Recently i applied for SBI life traditional plan for 7 yrs with 50000 annual premium…. as i applied last week for sbi life i also want to ask whether to continue it or not as i hv’nt get policy yet. I Also want to invest in mutual fund….. should i go fot lum sump or sip…. which mutual fund is best to opt for…. which can provide interest rate of more than 20% and also saves tax. i want to invest 50000 per annum in mutual funds for 10 yrs. pls suggest….as i hv insurance policy now i want to go for savings… pls suggest me. I’m waiting for yr response. Thank u in advance.
Hi Anjali,
Cancel SBI traditional plan. You can purchase a term plan if you need life insurance.
You can start a SIP in a good balanced or a large cap fund.
Hello sir, i also want to ask for my brother… he is working on contract bases… earning 18000 per month…. so he can’t invest much but wants good savings for future… we are thinking to invest lum sump amt of rs 1 lakh in mutual funds for 10-15 yrs…. will it be good for him…. and we are also thinking to invest in sbi life smart bachat for 7 yrs…. ard 20-30 k annually…. will it be good for him…… pls suggest….. is it good for him.
Anjali,
Avoid mixing insurance and investment.
Your brother can follow the same recommendation.
Hi Deepesh,
I am confused between Icici Prudential IProtect Smart and Aegon Life Iterm Plan. Although Aegon has relatively lower annual premium than Icici, I am still skeptical about its brand reliability. Should I go ahead with Icici even if it has slightly higher premium or go with it considering it to be the more reliable brand name? Looking forward to your advice.
Hi Peeyush,
Go with the insurer that lets you sleep peacefully at night.
If that insurer is ICICI, so be it.
Hi Deepesh,
I am Suresh I am looking for Term insurance for tax benefit. Looking for cover up to 1 CR. I am of 32 yrs old. I am not aware about whether term insurance cover accidental death or not. Please guide me, also suggest best Term insurance provider.
Hi Deepesh ,
Suresh here, I have to invest up to 10 to 15 k annually for term insurance. Please guide me accordingly.
Hi Suresh,
When it comes to term insurance, I am not inclined towards any company.
Go with a company you are comfortable with.
Suggest you go with the following post too.
https://www.personalfinanceplan.in/insurance/claim-settlement-data-life-insurance-companies-hides-reveals/
Hi Deepesh.
This is Jogesh. I am 44 years old, I have jevan anand policy(from 2013) with lic. I am paying 56000 per annum. I would like to stop jevan anand policy and go for term policy and invest remain money into mutual funds. Please guide me, also suggest best Term insurance provider.
Hi Jogesh,
I have no preference for any life insurance company.
You can go with any company you are comfortable with.
https://www.personalfinanceplan.in/insurance/irda-claim-settlement-ratio-life-insurance-2017/
Hello Sir,
I am reading your blogs on Term Insurance plans and everything. In above blog you mentioned some term insurance plans which are updated in current date. So I want to ask you some question based on new plans, if you can answer, please.
Now e-term plan of LIC is giving accidental cover. Visit: https://eterm.licindia.in/onlinePlansIndex/login.do (select LIC’s e-term plan under plan selection and read “What kinds of death are covered under e-term ?” under FAQ’s)
Considering accidental risk now a days, term insurance with accidental cover is must for me. Critical illness cover is also important factor in current living standard. So,
(1) Should I select online LIC’s e-term plan or HDFC Click 2 Protect 3D Plus (https://www.hdfclife.com/term-insurance-plans/click-2-protect-plus-3d) which also includes disabilities and critical illness in single plan?
Not sure which one is more trusted in term insurance claim settlement because you mentioned in a blog that claim settlement ratio is misleading. But section 45 is some relief which gives claim surety after 3 years of policy as you mentioned in a blog.
(2) Should I select pure term plan without any riders(like accidental, disability, etc.) and buy a Personal Accident Policy Cover along with?
(3) Is online term plan safe to buy or should purchase from agents, in terms of claim and service?
I am 28 years old non-smoker healthy married man. My current income is Rs. 6,93,600. I have taken home loan of 29 lacs for 30 years of tenure and I denied bank to buy term insurance from their linked company(Max Life) for home loan protection plan and want to buy it myself to protect home loan and expenses for my family in case of my death. I am thinking to buy 1 cr. cover as lumpsum option for my need.
Please advice.
Regards.
Hi Hardik,
1. Choice, you will have to make.
2. I prefer purchasing accidental disability rider along with the term. That will cover permanent and total disability. You can purchase a standalone personal accident rider. Even for Critical illness cover, if you want to purchase, purchase a standalone plan.
3. Online is fine.
Suggest you go through the following two posts.
https://www.personalfinanceplan.in/insurance/critical-illness-insurance-plan-should-you-buy/
https://www.personalfinanceplan.in/opinion/do-you-need-a-personal-accident-insurance-plan/
i have paid online payment for termplan but forms r not filled but now i want to change sumassured before policy generates how can i .
if i dnt fill the online form can i get my money bk .plz reply soon
Please talk to the insurance company. They may allow you to change it.
Is there any difference in the premium amount if I purchase policy on line instead of an insurance agent?
If yes, how much is the difference?
Thanks
For term plans, in some cases there is while it is non-existent in other cases.
So, you will need to check on the insurer website and the quote that you get from the agent.
It can be upto 10-15% higher (but that does not always happen).
Hi Raghaw, after reading all your posts I have cancelled my LIC new Jeevan Anand plan which I took just 3days back, now here only I found one more policy which is jeevan labh policy for which I will be paying 45k yearly for 16years and on 25th year lump sum would be 27lakhs around, I think which is quite ok in terms of amount after 25years as a safe bet.. can you suggest whether to take this policy or not??
Hi Sarath,
Wouldn’t advise Jeevan Labh either.
Oh may I know the reason or your analysis? Then which is the better one to plan now?
Hi Sarath,
I had expressed my opinion about LIC Jeevan Labh in this post.
https://www.personalfinanceplan.in/there-is-no-labh-in-lic-jeevan-labh/
If you ask me, I would suggest you can without both these policies. You can structure a good investment and insurance portfolio even without these two plans.
You can seek professional advice from a SEBI RIA too.
Hi Deepesh,
I,m 33 years old and I want to buy term insurance, the sum assured 2 crores.
I’m confused between ICICI iprotect and LIC’s Tech term plans.
I’m okay to pay more premium if you suggest me LIC’s Tech term, only concern i need to get addressed is on the confidence who (ICICI or LIC) will be better in terms of claim settlement.