Thread by @FinFloww

How to choose a Term Life Insurance?

A memeflied explanation in a thread🧵

Always Remember,

You can avoid term life insurance if

Which we know this is not the case, so here we have a definitive guide on how you can be financially amar...

Now, of course you want your family to be financially secured in case you die. But, how? You can’t go like..

Assuming that you are a term life insurance holder, term life insurance is a plan which guarantees a payment of a certain amount to your beneficiary, if you die during the specified time period.

Nah, don’t imagine, this was just an example. It is just about a backup plan if something unexpected happens.

Although, the premium is fixed. And, you or your beneficiary will not get any amount at the maturity if you do not die.

Now, there are a plethora of companies in the industry that provide term life insurance. They all be like - buy insurance cover from us because,...

Insurance policies are available in both modes. You can purchase it from insurance agents i.e. via offline mode or from website i.e. online mode. Though, an online option is better as less cost is involved.

Insurance agents charge their commission which makes the offline ones more costly in terms of premium.

Also, you can purchase an insurance policy online by comparing various options on your own without agents' influence.

Another important factor you should consider is the ‘Term Insurance Coverage’.

Simply, it is the amount of insurance.

You can determine this amount based on the number of dependents you have and how much financial resources they will need in future.

You can decide this amount by multiplying the monthly expense of your family by 150 times. 150x just assuming inflation over time. Then add any debt you have like personal loan, home loan, etc.

Then add any big future expense you are expecting such as for children's education, or their marriage, etc. You can also add retirement corpus for your spouse. And subtract any liquid investment such as stock, mutual fund investment, etc.

This way you can decide on the amount for which you can take the insurance. Take the insurance as soon as possible. Taking it later will result in more premium.

One more point is the tenure of an insurance policy.

Do not go for shorter tenure just for premium benefits.

On the other hand, do not go for too long.

You can decide a perfect tenure just by thinking at which time, your dependents will no longer be dependent on you.

For example, it might be possible that after 30 or 40 years, your children will start earning and will not be dependent on you for financial resources. Then, you can take insurance till that time. You can decide accordingly.

After considering the above mentioned points, you can filter out the companies based on Claim Settlement Ratio (CSR) and Claim Rejection Ratio of the company.

Suppose a company passes 97 claims out of 100 claims made by the insurance holders, which means 3 claims are rejected.

So, the Claim Settlement Ratio of that company is 97%.

A Claim Settlement Ratio above 95% is considered good. Higher ratio is better. You can check this CSR from the IRDA website or from the company's official website or from online insurance portals.

In addition to the Claim Settlement Ratio, do not forget to check the Amount Settlement Ratio. Companies happily share their CSR but Amount Settlement Ratio is something you should find from IRDA for comparison purposes.

Let’s continue the above example. Suppose, 100 claims made by the insurance holders amounted to 20,00,00,000. From which 97% claims passed amounted to 15,00,00,000.

This means the amount settlement ratio is 75%. It is an indicator that major claims of 5,00,00,000 i.e. 25% are rejected. So, only considering CSR can be misleading sometimes.

After filtering out, choose the company which is most reliable for you, where you will not regret paying a rupee of premium.

You can also add riders such as Critical Illness cover, Death due to accident, Waiver of premium on disabilities, etc. It will increase the overall premium. Choose these add-ons wisely.

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