Life Insurance Checklist
Life insurance provides financial security for your loved ones. Choosing the right plan involves considering coverage, policy term, premiums, and additional benefits. This checklist will guide you in making an informed decision.
Insurer-Specific Features
Selecting the right life insurance company is just as important as choosing the right policy. Here are key factors to evaluate when shortlisting an insurer:
1. Assess the Claim Settlement Ratio
A good insurer ensures that claims are processed smoothly and on time. To gauge this, check the claim settlement ratio averaged over three years and the proportion of claims settled within 30 days. Ideally, both should exceed 97%. You can find this data in IRDAI’s annual reports or consult our advisors for guidance.
2. Evaluate the Complaint Volume
A high complaint volume is a red flag. If an insurer records more than 20 complaints per 10,000 claims, reconsider your choice. This information is publicly available on insurers’ websites as part of mandatory disclosures. You can also consult our advisors for insights.
3. Look Beyond Just the Claim Settlement Ratio
Some insurers approve smaller claims while rejecting high-value ones to maintain an impressive settlement ratio. To get the full picture, check the total amount settled as a percentage of the total value claimed. A ratio above 90% indicates reliability. You can verify this in IRDAI’s annual reports or seek expert advice.
Must-Have Policy Features
When choosing a term plan, understanding key policy features can help you secure the best coverage for your needs. Here are some essential and valuable benefits to look for:
1. Critical Illness Benefit
A serious illness can disrupt your income and put financial strain on your family. A term policy with a Critical Illness Benefit ensures a lump sum payout upon diagnosis, helping you manage medical expenses and other costs. However, not all policies offer the same coverage, so reviewing the specifics is crucial.
2. Survival Period Clause
Many critical illness benefits come with a mandatory survival period, meaning the payout is made only if the policyholder survives for a set number of days post-diagnosis. Ideally, choose a policy that disburses the benefit immediately upon diagnosis, eliminating unnecessary waiting periods.
3. Accelerated Payout Option
Some policies deduct the Critical Illness Benefit from the total term cover, while others offer it as an additional payout. The best option is one that pays out the critical illness benefit on top of your total cover, ensuring your loved ones remain financially secure even after the claim.
4. Waiting Period Consideration
Most policies impose a waiting period before the Critical Illness Benefit becomes active. Ensure that the waiting period is no longer than six months to guarantee quicker access to financial support when needed.
5. Terminal Illness Benefit
If diagnosed with a terminal illness, some policies provide an immediate payout of the full cover amount, allowing you to use the funds however you need, even before death. This is a valuable feature to consider.
6. Waiver of Premium
In case of permanent disability or critical illness, certain policies waive all future premium payments while keeping the coverage intact. Ideally, your policy should offer this benefit for both scenarios, ensuring continued protection without financial burden.
Good-to-Have Policy Features
While the must-have features provide essential coverage, these additional benefits can further strengthen your term plan, offering flexibility and better financial security.
1. Zero Cost Option
Certain insurers allow you to exit your policy before maturity and receive a refund of all premiums paid, provided you withdraw within a specified period. This ensures you get financial protection while retaining the option to recover your investment. Check if your policy offers this feature and whether the exit process is hassle-free.
2. Increasing Cover Benefit
As you grow older, inflation can reduce the real value of your coverage. Some policies automatically increase your sum assured over time to ensure your protection keeps pace with rising costs. Verify if your policy includes this benefit.
3. Top-Up Option
Many insurers allow you to increase your coverage later, subject to a medical evaluation. Having this flexibility ensures you can scale up your policy when needed without buying a separate plan.
4. Life Stage Benefit
Your financial responsibilities change as you reach key milestones like marriage or parenthood. Some policies allow you to increase your cover at these stages without additional medical tests. This ensures your policy adapts to your evolving needs.
5. Accidental Death Benefit
Certain policies offer an extra payout in case of accidental death, allowing you to set different coverage amounts for natural and accidental deaths. While a comprehensive term plan is ideal, having this additional layer of security can be beneficial.
Frequently Asked Questions
For most individuals, a well-structured term plan is sufficient. However, as your financial responsibilities and income grow over the years, you might need an additional policy to ensure adequate coverage.
0%