Insurance policies need no introduction. The insurance sector in India can be traced back to the early 90s and it has only kept growing ever since. In fact, India is at the 10th rank globally when it comes to life insurance. The assurance of safety that insurance policies bring is undeniable, especially in these years where the pandemic has taken a hold of our lives.
Of all the life insurance policies available, term insurance policies are the most popular as they are simple and affordable. Term plans offer nominees death benefits upon the demise of the policy holder within the tenure of the policy. The premium to be paid for large coverage is affordable, making it perfect for first timers and small families in the middle-class sector.
In this article, we look at a few facts about term insurance policies that are not very well-known, and are bound to surprise you.
- Purchasing term plans online is significantly more beneficial
Term insurance plans can now be purchased online. It is significantly easier and more convenient as opposed to an offline purchase. In addition to this, purchasing term plans online has numerous other benefits. To start with, it allows you to compare different policies and their features easily. You can also make use of online tools to calculate the premium, and the term that would best work for you. All the riders available can also be examined while on the insurance company’s website. The time taken to do all of this is significantly lower than the time it takes to do so offline. And as they say, ‘time is money’, and you will save lots of it when you purchase term life insurance plans online.
- Ratio Solvency is just as important as CSR
Claim Settlement Ratio (CSR) is the ratio of the claims raised to the claims settled by the insurance company. It is a critical factor to determine the trustworthiness of the insurance company. Generally, insurance companies with a CSR of over 95% are deemed trustworthy. While CSR is vital, another metric that is just as important in determining the trustworthiness of an insurance company is the ratio solvency. This metric reveals whether the company has the capacity to settle the claims you raise when necessary. The Insurance Regulatory and Development Authority (IRDA) of India prescribes a minimum 1.5 ratio solvency for insurance companies. Before you decide to zero in on an insurance company from whom to purchase your term insurance from, make sure you look at both the CSR and ratio solvency.
- Non-disclosure can lead to rejection of application
Term insurance plans are essentially contracts between the insurance company and the insured. There is an underlying understanding that the insured will disclose all the relevant facts of their lives to the insurance company while applying for a term life insurance. In the event that a complete disclosure is not done, the insurance company has the right to reject your application. Term life insurance policies are rarely rejected, because of which a casual approach to disclosure is adopted. This should be avoided at all costs. Irrespective of how simple the term plan is, non-disclosure can lead to the rejection of your application and your loved ones will not receive the security of a term insurance plan.
- Even the nominee can claim tax benefits on pay-outs
It is a known fact that premium paid can be availed as tax deductions under the Income Tax Act. However, not everyone is aware of the fact that the death benefit received by the nominee under term insurance plans can also be claimed as a tax benefit. Under Section 10 (10D) of the Income Tax Act, nominees can claim exemption of tax on the amount received as a death benefit from term life insurance policies.
- General insurance is not the same as life insurance
There is usually a confusion regarding whether general insurance policies will also double up as life insurance policies. The answer is, they do not. It is very easy to differentiate between life insurance and general insurance policies. The key is in their names itself. Life insurance is a protection given in the event of loss of life, whereas general insurance is protection given in the event of loss or damage to assets.
- Health insurance is not the same as life insurance
It is common to confuse health insurance with life insurance. After all, both are related to the human body and its functions. Despite this commonality, they are both different. Health insurance policies cover a myriad of health issues that one could face in their lifetime. It is concerned with the quality of life, whereas life insurance is concerned with the existence of life. In fact, even health insurance policies fall within the category of general insurance.
The above facts about term insurance policies are lesser known, but important to know as they can help you make wiser choices to protect your loved ones.