Top 5 Term Insurance Plans in India
As the term insurance is a plain insurance policy without any embellishments, it is very important to know the yardstick to measure one policy over the other. There are two basic standards that can help you to cherry-pick the best insurance company:
- Compare the Claim Settlement Ratio of the insurance provider
- Compare the premium offered
My previous editorial on Term Insurance- A necessity!, can help you to understand the fundamentals of Term Insurance policy and how it is better than other insurance plans. In this article, I present you 5 famous term insurance plans offered by different insurance providers in India. Let us first understand the meaning and significance of Claim Settlement Ratio before you zero in a term insurance plan.
Claim Settlement Ratio: As we all know, insurance is a life protection tool. In case of unfortunate demise of the policy holder, the family members/ nominee approach the insurance company to claim the sum assured. As an expectation, the insurance company, after completing the pre-requisites, should hand over the claim to the family of the deceased. But it does not happen always. Insurance regulator IRDA’s annual reports for 2012-13 reveal that of the total 23 private life insurers, only five have a claim-settlement ratio of over 90% (in terms of number of policies). The figure tells you that many insurers are stingy when it comes to passing on the benefits to nominees.
The claim settlements ratio of an insurance company indicates the percentage of claims that have been approved out of total claims that are unsettled. Higher claim settlements ratio indicates that a life insurance company is making the payments when they are outstanding, in this case a premature death.
It is very important for the insurance buyers especially for those who are availing the term plan to verify the claim settlement ratio of a company before the commencement of their policy.
Top 10 insurance providers in terms of their Claim Settlement Ratio:
| S. no. | Insurance Provider | Claim Settlement Ratio (2011-12) |
| 1 | LIC | 97.70% |
| 2 | ICICI Prudential | 96.30% |
| 3 | HDFC Life | 95.80% |
| 4 | SBI life | 94.40% |
| 5 | Max life | 94.30% |
| 6 | Kotak life | 92.00% |
| 7 | Star-Union Dai-ichi | 89.70% |
| 8 | Bharti Axa | 89.50% |
| 9 | Bajaj Allianz | 88.70% |
| 10 | Canara HSBC | 88.40% |
*Source: IRDA’s annual report for 2012-13
Let us now explore the Term insurance plans offered by different insurance providers. Let us assume that Mr. Arun Grover, a 30 years old healthy male who needs a life cover of Rs.1 crore is looking for a policy. Let us look into the policy offered by each insurance company and compare the annual premiums that Arun Grover needs to pay for a life cover of Rs.1 crores. Please refer to my article on Term Insurance-A necessity to know the perfect life cover that you need.
Life insurance corporation of India is offering two term plans. One is “LIC’s Anmol Jeevan II” that offers a maximumcover (sum assured) of Rs 24 lacs with a very high premium. However, the other term plan “LIC’s Amulya Jeevan- II” is better as there is no maximum limit on the cover. Premiums can be paid regularly during the term of the policy at yearly or half-yearly intervals. However, it is advisable to make payment annually as you have to shell out additional premium of 2% when you pay half-yearly. A grace period of 30 days is allowed for payment of premium. If premiums are not paid within the grace period then the policy lapses. A lapsed policy can be revived within a period of 2 consecutive years from the date of first unpaid premium but before the expiry of policy term, by paying all the arrears of premium together with interest (compounding half-yearly) at a rate fixed by the Corporation at the time of the payment.
Let us now have a look at the premium that you need to pay to LIC under this plan:
| LIC’s Amulya Jeevan- II | |
| Gender | Male |
| Age | 30 |
| Policy Term | 20 Years |
| Premium Payment Option | Annual |
| Sum Assured | 1,00,00,000 |
| Annual Premium | 16400 (plus taxes) |
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Following are some of the features of this policy:
| Criteria | Minimum | Maximum |
| Sum Assured | Rs.25,00,000 | No Limit |
| Age at entry | 18 years (completed) | 60 years (nearest birthday) |
| Policy term | 5 years | 35 years |
| Max cover ceasing age | 70 years (nearest birthday) | |
PS: The Sum Assured shall be in multiples of Rs. 1, 00,000/-
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Following are the sample premium rates (exclusive of taxes) offered by LIC as per your age and the policy term:
| Annualised premium rates per Rs. 1000 Sum Assured | |||||
| Term of the Policy (years) | |||||
| Age (yrs) | 5 | 10 | 15 | 20 | 25 |
| 20 | 1.15 | 1.15 | 1.15 | 1.15 | 1.17 |
| 30 | 1.28 | 1.29 | 1.42 | 1.64 | 1.96 |
| 40 | 2.03 | 2.41 | 2.97 | 3.57 | 4.23 |
| 50 | 4.85 | 5.85 | 6.89 | 8.05 | - |
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LIC does not offer either paid up value on maturity or surrender value on premature withdrawal of the policy.
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2. ICICI Pru icare II Term Insurance Plan (by ICICI Prudential):
Under this plan, ICICI offers its buyers the flexibility to choose protection cover from two options:
Option I: Death benefit equal to Sum Assured chosen by you (i.e. plain insurance cover)
Option II: An additional death benefit equal to Sum Assured chosen by you or Rs. 50 lakhs, whichever is lower, payable only in case of death due to accident. This option is available only with the regular pay option.
ICICI Prudential Life insurance offers two modes of payment of the premium i.e. regular pay wherein you can pay the premium on yearly, half-yearly or monthly basis and one pay wherein you pay only single premium. The policy term offered on regular pay is 5/10/15/20/25/30 years. No paid up value in case of survival to the end of the policy and no surrender value if you opt for regular pay. However, if you pay your premium in a single pay mode, then ICICI Prudential provides some proportion of your premium as a surrender value:
| Policy year of surrenderPolicy Term | 5 years | 10 years |
| Year 1 | 30% | 45% |
| Year 2 | 25% | 40% |
| Year 3 | 15% | 35% |
| Year 4 | 10% | 30% |
| Year 5 | 0% | 25% |
| Year 6 | N/A | 20% |
| Year 7 | N/A | 15% |
| Year 8 | N/A | 10% |
| Year 9 | N/A | 5% |
| Year 10 | N/A | 0% |
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Let us now look into the annual premium under both the options offered by ICICI Pru that Arun Grover has to pay when he needs a life cover of Rs 1 crores.
| ICICI Pru iCare II | |
| Gender | Male |
| Age | 30 |
| Policy Term | 20 Years |
| Premium Payment Option | Annual |
| Sum Assured | 1,00,00,000 |
| Annual Premium | 13,105 (Net of Tax) |
| Get an additional Accidental Death Benefit of Rs. 50,00,000. An additional death benefit is equal to Sum Assured or Rs. 50 lakhs, whichever is lower, payable only in case of death due to accident. | 15,857 (Net of Tax) |
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3. HDFC Life Term insurance:
HDFC Life offers different premiums for online and offline term insurance policies.Thepremiums ofonline term insurance are very less as compared to the one when you apply offline. The HDFC Term Assurance plan (offline), gives the flexibility to opt for single life or joint life basis (first claim) also provides you the option of selecting some add-on benefits like Critical illness, Accidental and Accelerated Sum Assured benefits. These optional add-ons are in addition to the regular term plan offered by HDFC Life. The premium payment frequency allowed is quarterly/half-yearly/annual. The three Optional benefits are as under:
- Critical Illness Benefit – Under this option an amount equal to sum assured is paid on diagnosis of 6 pre-specified critical illnesses
- Accidental Death Benefit– Under this option an additional amount equal to the sum assured is paid in case of death by accident
- Accelerated Sum Assured Benefit – Under this option an amount equal to sum assured is paid on diagnosis of 6 pre-specified critical illnesses and policy terminates
The online Term insurance plan, HDFC Life Click2Protect offers lesser premium in comparison to its offline plan. The sum assured under this category ranges from 10 lacs to 10 crores. Under this plan, HDFC offers discounted rates for non-tobacco users. Following table shows different premium rates under different plans:
| HDFC Life | |
| Gender | Male |
| Age | 30 |
| Policy Term | 20 Years |
| Premium Payment Option | Annual |
| Sum Assured | 1,00,00,000 |
| Annual Premium (Online Plan for non- tobacco user) | Rs.10,600* |
| Annual Premium (Online Plan for tobacco user) | Rs 16,100 |
| Term Assurance Plan (Offline) | Rs 22,900 |
| Accidental Death Benefit Rider | Rs 14,400 |
| Critical Illness benefit | Rs 44,200 |
| Accelerated Sum Assured | Rs 24,800 |
*the premiums mentioned above are exclusive of taxes
4. SBI life Smart Shield:
SBI Life – Smart Shield is a traditional non-participating pure term plan. You can alsocustomize your coverage by choosing from a range of additional benefits such as Accidental Death Benefit Rider, Accidental Total and Permanent Disability Benefit Rider and Accelerated Critical Illness cover option. All these can be availed at an additional cost. There are different options available under this plan:
| i) | Level Term Assurance – the plain term insurance plan |
| ii) | Increasing Term Assurance @5% p.a – This add-on is designed keeping in mind the inflation, higher living standard etc. This option increases your insurance cover year on year but you need to pay additional premium. |
| iii) | Decreasing Term Assurance (Loan Protection)- This option helps to cover the outstanding amount and ensures in case of any unfortunate event, these liabilities do not affect your family |
| iv) | Decreasing Term Assurance (Family Income Protection)- So as to secure a regular and stable monthly income for your family, the sum assured can be divided as monthly income for a specific time period. |
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| SBI Life | |
| Gender | Male |
| Age | 30 |
| Policy Term | 20 Years |
| Premium Payment Option | Annual |
| Sum Assured | 1,00,00,000 |
| SBI life smart shield (single premium) | Rs.1,77,715 |
| SBI life smart shield (Yearly premium for non-smoker) | Rs 11,925 |
| SBI life smart shield (Yearly premium for smoker) | Rs 14,975 |
5. Max Life
Under this plan, the buyer has a choice of adding Max Life Comprehensive AccidentBenefit rider to make your protection plan more comprehensive. The premium can be paid only annually. The online term plan of Max Life is very famous wherein they offer three different options:
- Basic life cover
- Life cover plus monthly income – 100% of the policy Sum Assured plus 0.4% of the policy sum Assured per month, for 10 years. Effective total protection including Monthly Incomes is 148% of sum assured
- Life cover plus increasing monthly income- 100% of the policy Sum Assured plus increasing monthly income for 10 years wherein the first year monthly income shall be 0.4% of the policy sum assured and shall increase every year by 10% p.a. (simple interest) of the first year monthly income. Effective total protection including monthly incomes is 169.6% of sum assured.
Following is the premium rate for different plans:
| Max Life | |
| Gender | Male |
| Age | 30 |
| Policy Term | 30 Years |
| Premium Payment Option | Annual |
| Sum Assured | 1,00,00,000 |
| Max Life online term plan (Non Smoker) | Rs.7400 |
| Max Life online term plan (Smoker) | Rs 11,700 |
| Max Life online term plan (Life cover+ monthly income) | Rs 10,100 |
| Max Life online term plan (Life cover+ increasing monthly income) | Rs.11,100 |
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You always strive to give your family the best in life and have ensured they fulfill their dreams. However, in your heart, you always feel insecure about their future in your absence. Will your family be able to sustain the same lifestyle even in your absence? Please think and opt for the best term plan today. It is never too late!
ReplyDeleteThank you for sharing such great information. It is informative, can you help me in finding out more detail on Insurance Policies, i am interested and would like to know more about this field and wanted to understand the basics of online life insurance policy
Claim Settlement Ratio of any company matters a lot and it helps in deciding whether to go for it or not. It was wonderful going through this post because even I was looking for a company for making some investments and good insurance plans.
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