We will today discuss some of the best practices and must do things while taking a Term Insurance.
Click here to read what is Term Insurance and its Importance
1. Take a policy just before your Birthday .
Term Insurance premium depends on your Age . So if possible try to avoid taking the policy just after your Birth date . What i mean by this is that try taking it before you turn +1 year in age . If your Date of birth is 10/11/1983 , and you take the policy on or before 10/11/2008 , you will be considered of age 24 . But if you do a delay of 2 days … and you take a policy on 12/11/2008 . You will be considered 25 yrs old and hence your premium will increase by 4-5% .
Note : It does not mean that if your birthday just passed by and now you want to take Insurance , then you should wait for another year . thats not what i am saying 
For a male with DOB on 10/11/1983 (24 yrs old), the premium for Rs 50,00,000 cover with tenure of 25 yrs , is 10157 , if the policy is taken on 09/11/2008 (just 1 day before the birthday) . Where as if he takes the policy on 12/11/2008 , the premium will shoot up to 10647 (Rs 490 more) .. though 490 is a small amount , but if we can avoid it by taking the policy little early .. always try to do it .
Even a small amount like 490 saved over 25 yrs in a PPF would give 45,000 and in mutual fund with 12% return will give 77,000 .
Note : The gist of the point is that try to see this small point while taking the Term insurance , it does not mean that you wait for 8-9 months just to take the policy before a birthday .
2. Try to diversify your Policy
If possible try to diversify your policy amount over different Insurance companies . If you want to take an Insurance of 50,00,000 , it would be better if you take 2 polices , rather than 1 single policy .
How it helps ?
- If you hold a single policy and the company does not honour the claim , dependents wont get anything , but if there are 2 parts , then there are less chances that both the companies with not honour the policy .
- If your liabilities come down or you have less dependents after a couple of years and ultimately you need to bring down your Life insurance cover , you can simply stop one of the policies and continue the other one .
- It helps in diversifying the risks involved with the Insurance company.
3. Buy a policy early in life and for longer Tenure .
Its always recommended to buy a Term Insurance early in life and for maximum tenure possible . In your early life you are more healthy and hence your premium will be lowest . Also by taking insurance for a large tenure you are making sure that you are covered for a large period , but the premium will be marginally more .
For example : For a cover of 50,00,000
You can see here that you have to pay marginally more for an extra cover of 5 yrs . So for example , a person with age 25 will pay 14,000 more than the 30 yrs old , but he will be insured for 5 additional years . So it always pays in long term .
Also taking a 30 years term insurance once will be very cost efficient than taking a 20 yrs term insurance now and then taking a term insurance of 10 additional years after 20 yrs . Because after 20 yrs , the premium you will pay for that 10 yrs tenure term insurance will depend on your Age that time and health that time .
Note : Premiums are from Aegon Religare Life Insurance .
{ 64 comments… read them below or add one }
LIC considers the nearest birthday as your age. So 1 day before your 25th birthday, you will be considered of age 25 and not 24.
@anonymous
Yes , i agree ..
But what is the point i am trying to make ? I am trying to say that whenever you take the policy , please investigate if a little delay can affect your Premium ? If yes , then dont be lazy , try to utilize the opportunity …
There has to be some time in a year when with a 1 day delay , the premium can increase .
Btw , SBI Life Insurance will not consider your completed number of years only . So if you are 24 completed and if you take the policy just before 1 day of your birthday , you will not b e considered 25 , but 24 .
Note : Taking the policy before 1 day means , it has to be processed , not when you give the forms for the agent .
I took a policy and a week after that Aegon Religare was launched. Looks like their premium is far less than Kotak.
Religare i term & i protect is not available to persons residing in others cities listed on sites. is there solution for others
I dont think so .
Mahadevan
You have taken a good decision . If you want more Insurance , Diversifying it across one more insurer would be good idea , that way if you want to lower your exposure later , you can just stop one of them rather than taking a new policy .
Manish
Should we diversify in to 3 insurance companies ? Is there a harm in doing that ?
Also, is there a clause in insurance that you can claim insurance from one company. So for .e.g, I take 50L from LIC & 50L from SBI then is it possible that SBI can reject the claim after my death on the grounds that LIC has already approved. I know what I am asking is silly but in India you never know
Deepak
In Life insurance you can claim from all the insurance providers. Dont worry .
taking cover from 3 company is over diversifying , we split in 2 for the worst case .. even 2 is too much
Manish
Manish,
Can you please blog on some good insurance companies and policies (with names) for Term Insurance ? I have been reading your blogs for the past few weeks and am convinced to go in for a Term Insurance (was considering LIC Jeevan Tarang before I read your review of it
)
If you already have blogged on this can you please guide me with a link to the same ?
Keep Blogging … you are too good at it …
Cheers
Nilesh
@Nilesh
Buy the cheapest term Insurance , split it into two . You dont need more information that this . Try apnainsurance.com to find out which is the cheapest for you .
Manish
I read your article on religare term insurance well said, my age is 40 an nre, 3 children 2 daughters 5 and 3 year old, son 3 year old, wife also works, ihave company provided life insurance free cost to me for Rs. 30 lakh, my personal life insurancw for Rs. 22 lakh, do I take term insurancw from religare, annual income for both is RS. 30 LAKHS YOUR KIND ADVISE IS REQUESTED
You should read this article
: http://www.jagoinvestor.com/2009/11/how-much-insurance-cover-is-enough.html
.-= Manish´s last blog ..iTerm , Cheapest Term Insurance from Aegon Religare =-.
Hi Manish,
I would like to know one thing may it seems silly question but still want to ask. All Term Insurance are having same terms and conditions for claim settlements, i.e. if a person after taking term pland dies after 3 years and have paid the premiums regularly then his claim will get settle. If in case this person has died in due to Accident (will claim settle only if accident rider is taken?) or a person dies due to Heart Attack (will claim settle only if health critical rider is taken?) or a peron dies in some riots or terrorist attack?
Please discuss.
.-= Nilesh Panchal´s last blog ..Why and When Do We Need Counselling? =-.
Nilesh
No , When you take an insurance , it means you will get the money whenever you die , Even if you die from accident or heart attack you are going to get the money . Riders just enhances the features . With accident cover you will get extra money when you die from accident , also it covers you from permanent and temaporary disablement .
Same with critical rider . Riot and terrorist attack will depend on the company policy document .read that .
Manish
Manish
Hi Manish,
Your blogs are very nice and informative. I am from Mumbai 30 year old. From last 1 month I am hunting for best Term plan for the coverage of Rs.50,00,000/-. I want to opt for the maximum duration (like 35-40 years). But in policy market only 35 years plans are available with LIC (Amulya Jeevan) and MetLife (Suraksha Plus). The premium for LIC plan is Rs.20,700/-, whereas for MetLife it is Rs.14,560/-. Other insurance company having the term plan maximim for 30 years only. Please guide / suggest to make my decision worth.
Divekar
the best place to find the answer would be apnainsurance.com . you can get details on this. I would suggest take 25 lacs from LIC and 25 lacs from some less premium company . LIC i am suggesting because you seem to be less risk appetite and sensitive to safer-looking companies.
Manish
Hi Manish,
I am 27 years old. Recently, I have taken a term plan from ICICI prudential (Pure protect Elite) of 25 Lac with accidental & disability rider for term of 30 years. I am looking for another term plan of 25 Lac for 25 years/35years with same rider from a different company, which is cheapest. But I could not find the best composition. Please suggest, which product should I go for? Also suggest, whether I should go for term of 25 years or 35 years.
Madan Mohan
You should go for the cheapest one , which is iTerm from Aegon Religare .
You should make sure that it covers you till your retirement start .
manish
Hi Manish,
Thanks for your reply. Off course I also like iterm very much. But as you know, it does not cover any temporary/ permanent disability. Also it cannot provide me cover till my retirement, because its maximum term is only 25 years.
Madan , in that case you can take it for some part .. not whole
manish
I want to take term insurance (I am 31.7 as of now). I have taken quotation from LIC and SBI, which are:
LIC Amulya Jeevan – 30 yrs (max 35 yrs), 25L sum assured. Cost=9500.00.
SBI Life Shield – 25 yrs, 25 Lakhs [5% increase every year], Accident+Premium waiver riders, cost = 16,813.00
Few questions:
Does it make sense to go for 5% increase of Sum assured every year (SBI Lifeshield)?
The agents I talked to so far have said that they do not pass back the commissions. Is it a normal practice? The last policy I took some 10 years back, that advisor gave me 25% of the 1st year premium.
Any other tips while taking term insurance ?
Thanks in advance,
Deepak
Deepak
5% increase makes sense because the inflation will also rise with almost same rate and then your cover needs to go up too .
Agents might not pass the commision back , its his personal choice, its not a rule . Anyways they make very less commission on term insurance .
Manish
i want to know shall i get term insurnace at the age of 54 if not possible then which is one of best for me. please suggest
Pradeep
Now term insurance premium will be very high for you , but anyways if you have lot of financial resposibility then you can take insurance even at this stage of life . LIC would work best for you I think .
Manish
Hi,
Manish,
I have question does the premium raise with each year as you grow old or you have to pay the same premium throuth the policy term.?
Generally Same .. however depending on govt policies , it can affect premium later
manish
Also Do we need take separate Accindental insurance to cover permanent disability or the partial disablity.Kindly let me know
Krishna
Yes , thats what accidental rider covers
manish
Dear Manish,
I had 2 queries related to these term insurance products. While the premium being paid is an important factor,
a) should one also find out what the claim ratio for a particular product by an insurance company is? it will give an idea of how good is the company in honoring claims.
b) with all these private players, there is always a question of their own longevity. What happens to a policy if an insurance company like Aegon Religare goes under or shuts down?
Thanks
Sam
Sam Mehta
a) Yes you can , however most of the rejection happens because of buyers mistake and not filliing information properly and not from company side , If your information is correct , there are no chances of rejection . If you are still not comfortable , you can split in something safe and other one .
b) Dont worry on this , this can happen with any product , the company will be bought by some other company in case it collapses.
Manish
Hi Manish,
Can you please elaborate what is mean by
“most of the rejection happens because of buyers mistake and not filliing information properly”
Does it mean,information we fill like what other policies you have while filling
forms of any insurance plan.
Please reply, Thanks in advance
Regards,
Anush
Anush
Most of the policies gets rejected because of the wrong or incomplete information provided in the form , this happens because most of the agents fill in the form and being in hurry they dont ask your very well all the details and also purposefully fill in / dont fill in the information which makes them more money . This results in policies getting rejected at the end .
Manish
hi,
i am 39years10months. i want to the polices similar to sbi life shield in other companies like lic etc
Murali
Its not clear what you want ?
Manish
Hello Manish,
I want to take term insurance (I am 30+ as of now) for Max period of 35 Years. I have quotations (Anuual and Single Premium) from LIC, which are:
LIC Amulya Jeevan – 35 yrs (max 35 yrs), 25L sum assured. Cost=10350. (Annually)
Single Premium Cost = 150200 Rs
Which one, Single premium or Annual payment, is more advisable? What is he basis of arriving at single premium?
Regards,
Ratnesh
Ratnesh
This will depend on your paying capability. Yearly premiums will be good on pocket and also allow you to enjoy tax deduction for small amount every year + you can back out anytime from the policy
One time premium might turn out to be little cheap , but then you will loose out all these advantages . The way they are calculated can be clumsy for you to understand , but its more about present cost of all the premiums in future + some discount .
Manish
Hi Manish,
Very thanks for this brilliant article.
BTW, I already have a term insurance plans from LIC. And now I’m planning to buy another term insurance plan. My queries are;
1. When I will buy new term plan, do I need to disclose to LIC or vice versa…
In other words, Do I need to inform both the insurance that I’m already holding term insurance plan from other company as well, if yes, then how do I do that?
2. In case of claim, my family has to submit the documents (I guess original document). How the claims will be made from two different insurance companies as all the original documents has already been submitted either to one company? How the second insurance company will honor the claim?
Regards
Harish Handa
Harish
You should disclose to the first company that you hold an insurance policy already .
Regarding claim from 2 companies , its possible , I am not sure at the moment how to do it , but it happens , will find out .
Manish
You dont have to permanently submit original documents for claims.
Hey Manish,
Nice article.I have been reading your articles from couple of months now and truly its a value add to my knowledge.
Btw your articles get lots of comments & many useful info come from those comments also but its hard to go through each of them in detail.I may miss some imp comment which i dont want to happen.
Would be glad if you can update the main article with any imp info/conclusion you make in comments .
Chetan
Great to hear that . I do “Learning from Comments” articles once in a while which has lot of learnings from comments .
Manish
Hi Manish, really great work with term insurance thing dude, you will lessen the hardship of many families who lose their breadwinners .
I am 33 and have been lucky and smart enough to avoid any endowment plans by LIC agents, had so many near misses. I have always advised my freinds and colleagues to go for a term insurance and other product combo.
Recently two of my colleagues applied for 25 lacs insurance policy and the agent tried hard to convince them not to go for term policies as they wont get any money back. Well, i beat the cr*p out of his logic and he very disheartenly forwarded their applications.
Now LIC proposal sanctioning office has put a condition (the agent showed me the internal papers of LIC) that they must buy endowment policies (that too from certain group of schemes only) to pay premium of at least 5k per month and only then term insurance will be given. Man, it did raise my BP . Is LIC within its rights to do so? if they reject the policy on medical, income or any other ground its logical but such a condition about other policies is not advised on lic website also. Can we do something about it, may be complain to IRDA after getting all in writing from LIC.
And yea, since aegon religare i term is not avaialble in Jabalpur we have to go for LIC. Plus LIC has the only term insurance that provides cover till 70 years.
Adarsh.
Adarsh
Thats really absurd !! .. I am not sure if LIC as a company is doing it , they should not be , it might be a trick of LIC agents itself . Can you send me some documents/emails which you got regarding this ?
Manish
Hi Manish, i think lic is the only company sells policy up to 70 years. After 60 years the mortality rate is really high in india, I did a lot of research and found that LIC term insurance is the best term thing. ( i-term of aegon religare is giving coverage up to 65 years and i guess we should go for a policy each from LIC and aegon religare)
Adarsh
Hmm.. makes sense, for LIC , i cant comment on anything except that confidence from people is huge and that adds to satisfaction when they take it from LIC, so tehy can go ahead
Manish
Hi Manish,
I really go impressed by your analysis on insurance. I am 25 years software employee.I used to smoke when i was 16 years of age.But I quit smoking at the age of 17.Do i need mention i am smoker while fill the policy form.
Durga
Yes , you should mention this .
hi Manish
1.Are there any term insurance policies which are valid for more than 30 years.
and if there are what are the best.
2.I heard there are some insurance(non term insurance)which will have life time coverage..they sound better as any way you will get all the money even in case of natural death..heard these are from LIC.
Thanks
Phani
Phani
Term insurance does not have those kind of plans . The plans which you are talking about are whole life plans for example Jeevan Tarang , read this review : http://www.jagoinvestor.com/2009/08/review-of-jeevan-tarang-policy-from-lic.html
Manish
Hi Manish,
I am quite impressed with the information and knowledge you share on this, it is really helpful.
1) I want to take term insurance (I am 42+ as of now) for a period of 25 -30 yrs. for 25 to 50 lacs from LIC? Which term insurance policy should I opt for? What will be approximate premium (One time / Yearly).
2) What could be the best combintion for Term insurance + Investment.
Regards,
Ashish
Hi manish,
I read that the claims settlement ratio of aergon religare is 48%,what is the reason for such variations in different companies.
Ashish
Any company which is very new in its operations , for them all the claims are early claims (which is before 2 yrs) . As the amount is so big , they investigate in detail and if there are any discripencies then its their right to reject the claim .
Manish
Hello All,
The Best Term Plan offered in the industry.
The oldest & first (I believe the only) ISO certified private insurance company in India has been missed out in this forum which is Max New York Life which I believe also offers the best and must have term plan in the insurance industry. Max New York Life offer Platinum Protect Term Plan and sample illustration is mentioned below
The Claim Settlement ratio of Max New York Life Insurance (90% in case of term plans) is the best / highest in private sector and on the 2nd position (just behind LIC which has 95% Claim Settlement ratio for term plans) in the overall insurance industry.
Benefits which are not available in any other Term Plan
1. Reduced Insurance Cover even if you stop paying Premiums
If Premiums have been paid for at least 15 consecutive Policy Years beginning with the Effective Date and the Policyholder discontinues payment of further Premium(s), the Policy will continue with a “Reduced Insurance Cover” as per the formula shown below.
Reduced Insurance Cover = [((Policy Year* – 1) / Policy Term) – 25%] * Sum Assured.
* Policy Year refers to the year of discontinuance of premiums
Example – Male aged 30 takes Platinum Protect plan for Rs. 50 Lac sum assured and a 20year term. If he stops paying premium 16th policy year onwards, he will be eligible for 50% of sum assured as Reduced Insurance Cover for the remainder of the policy term.
2. A cost effective term plan.
3. Low premium rates for non-smokers/preferred non-smokers.
4. Optional Presonal Accident Benefit & Dread Disease Rider which cover 10 critical illness.
5. Premium Discounts on High Sum Assured.
6. Comprehensive Medical Report at the time of policy issuance.
7. Tax Benefits under Section 80 C & Maturity Benefit under 10 (10D) are subject to changes in tax laws
Minimum/ Maximum Age at Entry : 18 years / 60 years
Expiry Age : 75 years
Policy Term 10 years, 15 years, 20 years, 25 years or 30 years
Sum Assured Minimum: Rs. 25 lacs
Sum Assured Maximum: No Limit
Special Rates for special customers :
1. Lower premium rate for Females and non-smokers.
For Sum assureds Rs. 50 lacs and above, there are two additional benefits:
2. Special high sum assured discount.
3. Additional discount to healthier policyholders who do not consume tobacco in any form
Thank You,
Bhavna Gandhi
Bhavna
Thanks for your review and knowledge .
I would like to know why Max Newyork has just 66% of claim paid ? As its one of the biggest companies in terms of size , having rejected 34% is not a small thing . can you clarify : http://dl.dropbox.com/u/5973996/Users/Komal/g-money%20%28money-isurance%29.pdf
Manish
Hello Manish,
Thanks for statistics. Firstly, If you observe carefully the MYNL stats then only 12% of the claims are refused. Secondly here I believe here we are discussing about the Term Plan hence it would make sense to compare term plan claim settlement records rather than overall death claim record. 90% Claim settlement ratio which I have mentioned above is specifically of the term plan excluding the claim settlement ratio all other life insurance products offered by the company.
Hope this helps!!!
Thank You,
Bhavna Gandhi
Would just like to know where can I get the claim settlement ration for term plans for Insurance companies.
Rajeev
You cant get seperate numbers for term insurnace ,all the numbers are combines for term + endowment + ULIP
hi,
i my father wants a term insurance policy . he is of 50 years and want policy with minimum premium .
he is ready to invest an amount of 50 lakh in it
pleasse suggest some good policies in LIC
Drishti
Term Insurance is just a plain product which pays one death of a person . Its not an investment product . Who all are financial deppendent on your father income and to what extent ?
Manish
yes true i used wrong word a” invest”. we are single family with 3 children all totally dependent on him(as we are completing are education). my mother is also a houswife
Drishti
then he should go for a term plan , but for protection . not for investing … for investments he can go for balanced funds or debt funds , because he does not a lot of earning years .
Manish
Manish,
Im 26 and working in Software and married Female. Would like to do planning for investments. After reading your blog decided to go with PPF + MF + Pension plan. Could you please advise best for current market situation as inflation is going high in India. Till today i haven’t done any investment and want to start with Rs.60,000 per year. Suggest me
Santhi
You have not said anything about what you want to create ? What is your requirement , only giving your situation is not enough
manish
PPF for secure investment – 20-25 yrs
MF for better returns – 5-15 yrs
Pension plan for future security – 30-35 yrs
I haven’t included Term plans as my company provides health and life insurance for myself.