While the first wave of the COVID-19 pandemic shook the world economy, it was the second wave which had a harsher impact on millions of people in India with four lakh daily infections reported at its peak in May 2021. ^[1] Towards the end of June 2021, the total number of reported infections in India had crossed the 30 million mark, behind just the US at 34.5 million. Almost four lakh COVID-related deaths have also been confirmed in India. ^[2]

This very real threat to life led to a sharp rise in awareness about the importance of life insurance with individual life insurance seeing a rise of over 27 per cent in sales during the first two months of the current fiscal year. ^[3] Meanwhile, the second wave of Coronavirus also pushed up claims for life insurance companies by five to ten times, according to media reports. ^[4] Life is unpredictable, and the chance of dying prematurely is very real, especially in times like today when a global pandemic is causing havoc. As a result, everyone, especially the family's breadwinner, must be covered by life insurance so that his or her family will be financially secure even if they are not around to provide for them.

A term insurance policy provides this financial protection and assists the family in coping with the financial loss if the breadwinner is not around due to his or her untimely demise.

Why Term Insurance is a Must-Have?

Term insurance is a protection plan which ensures that the deceased's family receives financial support after the unfortunate and untimely demise of the policyholder. As a policyholder, you can decide the exact amount to be given to your nominee(s) in case of your passing within the policy period. All you have to do is to regularly pay the term insurance premiums. The money your nominees receive as part of the insurance claim would not only be helpful in financially securing their day-to-day expenses, but also in fulfilling important milestones such as children's higher education, their marriage and so on provided you have planned well for it.

Term insurance has made financial security more accessible by offering a considerable level of coverage at an affordable cost. With term insurance, you do not have to worry about your family's financial security even in your absence.

Choosing the suitable Term Insurance Plan

Just having a term life insurance plan is not enough. There are some crucial factors that you must take into account to ensure that your family and loved ones are well taken care of in your absence. Here are a few things you should keep in mind while choosing a term plan -

Sum Assured

The fundamental idea behind buying a term plan is ensuring a comfortable life for your dependents in your absence. That is possible only if the claim pay-out is enough to compensate for the lost income and any other liabilities you might have. So, you must choose a sum assured after carefully evaluating the future needs of your family. Failing to do that may lead to the insurance proceeds exhausting sooner than you would like. Generally, the sum assured should be at least 10 times the policyholder's annual income, if not more. However, there is no one-size-fits-all formula and you must estimate the right amount for you based on your family's lifestyle, existing liabilities, and future needs. The amount you choose should be sufficient to cover all recurring bills while maintaining your family's current lifestyle. You must also account for inflation and rising expenditure.

Suitable pay-out options

Many term plans provide you the opportunity to pick your pay-out mode. You can choose whether your family receives a lump sum payment, a monthly income, a mix of lump sum and income, or even a rising income which grows with time. Monthly income alternatives would be excellent for those who may not be as financially well-versed with investments and who may find handling a huge sum of money all at once stressful. You should choose a suitable pay-out option based on the needs and feasibility of your dependents.

Premiums

As you can acquire a large sum assured for an affordable price, the cover amount to premium ratio is very high in case of term insurance plans. There will still be a significant variance in premiums between different insurance companies and also depends on the features of the product. As a result, it's a good idea to compare term insurance premiums from a few different companies before deciding on a plan. It is also important to note that the cheapest premium plan may not always be the best option. So, you must analyse what term insurance benefits you are getting and what price you are paying for those benefits. Make a choice taking all factors into account.

Claim Settlement Ratio

Say you did all your homework and bought a sound term insurance plan, but when your nominee makes the claim, he/she may have to run from pillar to post to get the money. Or worse still, the claim may get rejected altogether. This is why it is crucial that you buy the policy from a reputed insurer and not just looking at the premium the insurer is charging. You should compare term insurance plans and buy one from an insurer with a high claim settlement ratio. This ratio is a solid indicator that may help you assess whether or not a particular insurance company is trustworthy. Your insurance provider is unlikely to renege on their compensation pledge if they have continuously maintained a high claim settlement ratio over a long period.

Add-on Riders

When you buy a term life insurance policy, you can also choose some extra benefits on top of the base policy at nominal extra cost. These extra benefits are called "riders". You can choose from a critical illness rider, accidental death or disability rider, waiver of premium rider, and so on. A critical illness rider will pay out a lump sum amount if you get diagnosed with any of the listed critical illnesses the policy covers. One the other hand, a disability rider does the same if you are left totally or partially disabled due to an accident. In case of a waiver of premium rider, all future premium payments are waived, in case of occurrence of the underlying event covered by the rider. Meanwhile, the policy continues uninterrupted until the end of the policy term.

Choose the insurance company carefully

After taking all these factors into account, you may be able to choose a term insurance policy that would help serve your requirements. Bajaj Allianz Life Smart Protect Goal - A Non-Linked, Non-Participating, Pure Life Term Insurance Plan offers a Rs 1 crore cover at a premium starting from Rs 21 per day^[5]. You can buy this plan through a completely online or offline process. Apart from the convenience, you also get a three per cent discount for making the online purchase ^[6]. The plan offers additional benefit of critical illness that covers 55 listed illnesses ^[7]. You can also choose waiver of premium benefit. Moreover, with this plan, you can also choose a child education cover which offers extra protection of up to 100 per cent of base cover for the child's education expenses in case of the policyholder's death^[7].

By choosing a trusted insurance partner like Bajaj Allianz Life Insurance, you can have peace of mind knowing that it has maintained a claim settlement ratio of 98.48%~ for FY 20-21. So, without wasting any time, secure your family's future now by buying a term insurance plan and bring in some financial certainty in the lives of your family in the midst of all the uncertainty that surrounds us.

References -

[1] https://www.worldometers.info/coronavirus/
[2] https://www.worldometers.info/coronavirus/country/india/
[3] https://www.indiatoday.in/diu/story/indians-more-inclined-towards-life-insurance-during-covids-second-wave-1816701-2021-06-19
[4] https://timesofindia.indiatimes.com/business/india-business/life-cos-see-5-10x-surge-in-covid-claims-in-april/articleshow/83493244.cms
[5] Above illustration is considering Male aged 25 years | Non-Smoker | Life Cover Variant | Policy term (PT)- 30 years | Premium Payment Term (PPT) - 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Non-medical rates | Annual Premium Payment Mode | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only.
[6] 3% Discount is available for regular premium and limited premium payment frequency under all variants of Bajaj Allianz Life Smart Protect Goal - A Non Linked, Non-Participating, Pure Life Term Insurance Plan
[7] Product feature/benefit mentioned above are dependent on variant
~ Individual Claims Settlement Ratio for FY 2020-2021
BJAZ-WEB-ECNF-01290/21