I often get asked “what is the one decision which affects or improves a person’s financial life”. My reply is to take “Term Life Insurance” .This will be the best investment or financial decision one can make in your life. The insurance industry purposely keeps a lot of insurance to keep you away from buying term insurance.
It is time to update this post as it was published 3 years ago. Now in 2019-20, has the list of top insurance companies or policies changed?
Have you have just started earning or have a family? You should spend your first salary on the best term life insurance policy you can find. Agreed you can’t enjoy the benefits of your term plan. But it secures the financial requirements of your family when you’re gone.
I don’t want my daughter’s education or my mother’s medical treatment to be unavailable because of lack of money. I also don’t want to burden/thrust my wife with these responsibilities.
Considering how important family is to me (and I assume same for you), a term plan becomes inevitable. To have peace of mind that the claim will be paid, you need to choose the best. So which is the best term life insurance plan in India ?. Let us try to brainstorm that.
If you don’t know what term life insurance is, then read. – Types of life insurance
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Best Term Life Insurance Plans for 2020 -Policy in India
There are different life insurers operating in India after the insurance industry was opened up. We have stalwarts like LIC, ICICI, HDFC Life, Max Life and newbies like ING, Future Generali, Exide Life all operating in the same space.
Since we want to be covered by a good policy we have had some filtering criteria. We’re not
interested in variety , we’re interested only in the best. So what are the filtering mechanism or criteria used? Following in order of preference
- Good claim settlement ratio. (minimum 95%)
- Claim settlement ratio in terms of number of policies settled as well as total value of claims settled.
- Reputable management.
- Good financial background (solvency ratio) or trust factor ( minimum net worth of Rs.200 crore)
- Policy features, add-on and riders.
- Premium rates.
- Customer service or satisfaction.
- Average time to settle a claim
When we applied these filters, most of the new insurers got filtered out. As a consumer I’m interested in how quick and often our claim will be honored. We’re not looking to test any waters. Rather I’m interested to go with the sound & tested insurers and their policies.
Claim settlement ratio of insurers
Claim settlement ratio is nothing but how many claims were paid by the insurer against claims submitted. IRDA releases claim settlement ratio every year on its website. A company with high claim settlement ratio means a consumer friendly insurer.
Claims Settlement Ratio = (Total Claims Approved / Total Claims Received)
.This is one of the important criteria for selecting the best term insurance plan. So when you choose a term plan you need to look for a high settlement ratio. Below is the tabulation of latest year claim settlement ratio from IRDA website of big insurers.
|Sl.No||Company||Number Claims Received||Claim Settlement Ratio (%)|
|2||ICICI Prudential Life||11459||97.88|
|3||HDFC Standard Life||12566||97.8|
There are also a lot of other good insurers but they have not reached critical scale in terms of number of policies paid out.
Must read: 12 tips when buying life insurance
Claim settlement ratio (Percentage of value of claims settled)
Just looking at total number of claim settled can be misleading , we also need to look at total value of claim settled.Why?
Because an insurance company can always settle the small amounts and reject their big amount to artificially bump their claim settlement ratio. More value of claim settled means better payout by the insurance company.
Assuming a company paid of 99 policies of 1 lakh each but rejected single policy of value of 1 crore, then they have 99% claim settlemnt ratio by numbers. But ratio of value settled drops down to 50%.
ie., approx Claim settlement ratio by value = (99 lakh paid /2 crores claim made) = 50% approx
Claim settlement ratio by value = (Total Value of claims paid out/Total value for claims made)
Good Financial Background (Solvency ratio, Trust factor)
Solvency Ratio is a financial ratio that denotes the ability of a company to meet its financial obligations and debts. The solvency ratio of an insurance company is defined as the ratio of the size of capital divided by cumulative risk taken based on its premium. For more details check Wikipedia here
Solvency Ratio=(Net Profit+Depreciation/Total Liabilities)
|Company Name||Solvency Ratio(as of March 2018)|
|Birla Sun Life||2.14|
It should be a minimum of 1.5 as per IRDA . Higher the ratio the better. A good solvency ratio ensures that a company can meet all its obligations in of case large claims in a short period like earthquake, tsunami etc.,
However a high ratio is not just enough. You need to check for good financial background, reputation, longevity and trust factor. Every company in Insurance industry takes 7-10 years before turning profitable. So better to be associated with insurers who have deep pockets, trust, making profits consistently and been around a while.
For eg., LIC, HDFC, ICICI, Kotak are well-known brands with deep financial muscle. LIC is the most trusted brand in India not just in insurance. LIC is the most trusted company in India for 5 years in a row across all industries.
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Online Term Premium Rates- Price of policy
The premium and cost of the policy are among the major influences when buying life insurance India. But the best term insurance plan cannot be decided just based on the cost factor. Agreed, it’s important but must not be the sole criteria.
I have tried to compile the premium rates for standard life insurance policies.The values are close and may vary slightly based on your input criteria. The values are provided based on Rs.75 lakh Sum Assured for a 30 year non-smoking male.The term is 30 years. Actual rates may change when you search or buy policy.
|Sl.No||Company||Policy Name||Online Option||Premium(Rs)|
|1||Reliance Life||Online Term Plan||Yes||5,720|
|2||Max Life||Online Term Plan||Yes||6,395|
|3||HDFC Life||Click 2 Protect||Yes||8,250|
|4||Kotak Life||ePreferred Plan||Yes||8,827|
|5||Bajaj Allianz Life||iSecure||Yes||9,395|
|7||Birla Sunlife||BSLI Protector Plan||Yes||10,291|
|8||ICICI Prudential Life||iCare II||Yes||10,845|
We hope the above premium rates will give you a fair idea. Remember, the cheapest option is not always the best. Shop around, compare features, settlement ratios and then decide.
Tip: Don’t try to be smart and hide facts. Provide all truthful information. If you smoke or drink then mention them in your application form. Hiding facts is one of primary reasons for insurance claims to get rejected.
Related Read: Why term insurance is best form of life insurance
Policy Features and Riders
Policy Features and additional Riders are usually added to term life insurance plans. There are multitude of options among riders to accommodate with term life plans. However, pure life coverage is the only criteria you must focus on. Also note that, there is additional premium payable when you opt for riders.
Why? Because the other riders and add-ons like accidental death cover, critical illness and partial disability claims can all be purchased separately. These are decided based on the requirements of every individual. We present some common types of riders below. Review if you need these additional riders before purchase and add as required.
1) Accidental Death Benefit
This is an addition to the sum assured. When you have an accident and disabled, you’re not dead, but have loss of income. This rider is to compensate for that loss of income either by Partial disability or Permanent disability. For eg., if your sum assured is 40 lakhs and you have an accidental death benefit riders for Rs. 10 lakh. The total amount paid to your nominee in case you die by accident will be Rs.50 lakh.
2) Critical Illness Rider
– You are paid when you are diagnosed with one of the diseases listed under the rider clause. Each insurer has their own list of Critical Illness diseases . The common ones include Heart attack, major types of Cancer, kidney/renal failure.
The difference between a critical illness and mediclaim is that as follows:
Critical Illness – You get the fixed Sum assured you’ve opted under Critical Illness rider upon diagnosis. This is irrespective of medical costs. For eg., if you have Rs .10 lakh critical illness rider which includes heart attack, then you’ll be paid that amount once diagnosed with heart attack even if you spend only Rs 5 lakh.
Mediclaim – You’re paid the actual medical expenses upon submission of bills. So the benefit is restricted to actual expenses.
3) Partial or full Permanent disability Rider
– In this rider, you will be paid the sum assured under the rider when you get disabled as defined under your policy terms. The settlement is different for full and partial disablement.
Note: In all these riders, the sum assured benefit refers to sum assured of the rider and not the whole sum assured of the policy.
For riders from HDFC check here
For ICICI policy check here
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Top online Term Plans features
In below, please note actual policies terms and details may have changed on date you decide to buy the policy. So please check your policy terms and condition. Below is more of a reference on term insurance plans in India as of date .
- ICICI iProtect Smart II
This online term policy from ICICI is one of the easiest to buy online. The minimum and maximum entry age is 18 and 60 years respectively.
They have Option 1 which provides only Sum Assured and have Option II which provides both Sum Assured and Personal Accident benefit(max Rs 50 lakh)
You can buy the policy online directly from here
2) HDFC Click2Protect Plus
HDFC Click2Protect Plus is a good term insurance plan. It is one of term plans which I personally have.
It has various options like Life Option, Extra Life option, Income Option. My suggestion is don’t select anything other than Life Option. You can read my review about HDFC Click2Protect Plus term insurance
Check for more details and buy online from HDFC directly without any broker.
LIC has one of best track records of paying genuine claims. LIC eTerm is one of the best term insurance plans available online though the premium is bit higher.
There are two options – Aggregate for Sum Assured less than 49 lakhs. For Sum Assured 50 lakh and above there is special discount for Non-smokers where premium gets cheaper but you must undergo medical test.
Minimum term is 10 years and max is 35 years.You can be covered until 75 years.
NRIs can also avail this plan provided you bear the medical costs and accepted on case to case basis. This is a pure online term insurance plan with no unwanted features. I suggest you go for it here.
4) Max Life Online Term Plan
Again Max Life Online Term Plan provides 3 options. Basic Cover, Basic Life COver+Monthly Income, Basic Cover+ Incresing Monthly Income.
Just go for Basic Life Cover if you choose to go with Max Life Insurance. Other options are waste of money.
You have 30 free-look period where you can cancel the policy. There is less premium for non-smokers too. 18 and 60 years is minimum and maximum age of entry.
Minimum cover is Rs 25 lakhs and maximum is 100 crores.
5) SBI e-Shield Term Insurance
You can get more details about SBI eShield from here
The maximum age at maturity is 70 years. You can go for Level Cover with Increasing Cover option which has minimum tenure as 10 years.
Min Sum Assured is Rs 20 lakh and no maximum limit.
6) Kotak Preferred e-term Plan
This e-Term online policy from Kotak waives off all future premiums if you are totally and permanently disabled.
Another unique feature is the ability for getting staggered claim payout or 100% payout. This means you can ask for 15% SumAssured paid at death and rest in monthly intervals.
I however feel option 1 is for only very risk averse people and total payout should be ideal. It depends on your choice.
Take regular premium option as Single, Limited premium pay option work out costlier and rigid instead of flexible.
Click here for more details on Kotak Preferred e-Term policy
Best Term Plans in India – my picks
An online term plan is a better option than an offline plan. You can eliminate the commission paid to the agent which makes an online term plan attractive. The following is my opinion of the best term plans in India now in order of my preference.
1) LIC Online e-Term – LIC recently launched an online term plan after long demand from customers. The plan has become hugely popular for looking for trust of LIC and economical value of an online plan.
There are no additional riders at the moment but this is not a major drawback. At the moment it costs around Rs.11000 for a 30 year term for 30 year male for Rs75 lakh Sum Assured. There are 2 categories like smoking and non-smoking for sum assured above Rs.50 lakhs.
2) MaxLife Online Term Option I – Max has come a long way since launch. They have even overtaken LIC in terms of claims paid out . After recently joininh hands with HDFC they have become even stronger. It is a good plan and among the cost effective ones. One of definitive candidates for consideration.
3) HDFC Click2Protect – HDFC is a financial powerhouse in India. They were among the first to enter the insurance industry when it was opened up. They teamed up Standard Life Insurance initially. They charge around Rs.8300 for 30 year male for a 30 year term for Rs75 lakh Sum Assured.
The user interface is extremely friendly. So far we have received good customer service response based on client interactions. You need to pay extra for additional riders should you choose to add them.
4) Kotak Life ePreferred Term Plan – Kotak’s ePreferred plan is among the comprehensive well made online term plans. There is option to increase life cover in event of marriage (50%) and child birth.
The additional riders have been priced economically. Kotak also seems to have a consistent claim settlement ratio of 90% and above last 3 years.
5) ICICI Prudential iProtect
I personally have two term insurance plans – one is HDFC Click2Protect and other is Max Life Online Term Plan. It is always advisable to split your life cover into policies. I will write a post soon explaining why. So stay tuned for that.
The above is my personal opinion. You should decide your plan based on your requirements. What suits me may not suit you. I have chosen my term insurance based on my own needs. You should evaluate your options and choose accordingly. The above options seem a right fit for majority of Indians.
Also some may not agree with above order. It is totally fine as long as you know what you need.
We hope the best term life insurance plans in India will help you to evaluate your best fit. Compare real-time price quotes on PolicyBazaar here
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