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Aditya Birla Sun Life Insurance Company Limited

How To Choose the Right Term Insurance Plan

February 19, 2025

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Disclaimer : ABSLI Nishchit Aayush Plan (UIN No 109N137V12) is a non-linked non-participating individual savings life insurance plan.
^ Provided 0 year deferment & Annually in Advance payout frequency is chosen at the time of inception of the policy. Annually in Advance payout frequency is only available in "Annual" premium payment mode. ^*Male- 25 yrs invests in ABSLI Nishchit Aayush Plan with Level Income + Lumpsum Benefit. He chooses premium payment term 10 yrs , policy term 40 years, benefit option -Long Term Income, Sum Assured 7 times of Annualized Premium and Deferment Period 0 years. Annualized Premium is ₹1,00,000 (Exclusive of GST.). Annual Income of ₹ 32,750 (32,750*40=  13,10,000) + Maturity Benefit (₹20,00,000)= ₹ 33,10,000 ADV/3/24-25/3076.

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Choosing the right term insurance plan is one of the most significant decisions you'll make regarding your financial planning. It ensures that your family is protected financially in the event of your untimely death. However, with various alternatives available, selecting the right plan can seem daunting. This blog aims to simplify the process by offering practical tips on how to choose a term insurance plan that best fits your needs and provides the necessary financial security for your family.

6 Tips to Choose the Term Insurance Plan

1. Assess Your Coverage Needs:
Before looking at different plans, determine how much coverage you need. Consider your current income, financial obligations, future goals for your dependents, and any debts you may have. A good rule of thumb is to choose a coverage amount that is 10-15 times your annual income.

2. Consider the Policy Term:
The length of the policy should cover the period during which your family is most financially vulnerable. Ideally, the term should extend until you retire, or your children are financially independent. Think about your age and the age of your dependents to make an informed decision.

3. Compare Premiums:
Shop around and compare premiums from different insurers. However, don’t base your decision solely on cost. Consider the features, benefits, and exclusions of each plan. Sometimes, a slightly higher premium might offer additional benefits that provide greater value in the long run.

4. Check Insurer’s Claim Settlement Ratio:
The claim settlement ratio of an insurer indicates the percentage of claims the company has paid out. Choosing an insurer with a high claim settlement ratio is crucial as it reflects the insurer's reliability and ensures that your claim is more likely to be settled without hassle.

5. Review Policy Exclusions and Terms:
It’s important to thoroughly understand what is not covered by your term insurance plan. Read the policy terms and conditions carefully to know the exclusions and the circumstances under which a claim might be denied.

6. Choose Riders That Add Value:
Consider enhancing your term insurance plan with riders that add value according to your needs. Common riders include critical illness, accidental death, and disability riders. These provide additional coverage and make your insurance more comprehensive.

By following these tips, you can choose a term insurance plan that not only fits your budget but also provides adequate protection for your family. Remember, the right term insurance plan is a crucial component of your financial safety net, ensuring that your family’s future is secure, even in your absence.

Why Choose ABSLI Term Plans?

ABSLI (Aditya Birla Sun Life Insurance) offers a range of term insurance plans designed to meet the diverse needs of its customers. Here’s why considering ABSLI for your term insurance needs might be a wise decision:

1. Comprehensive Coverage Options:
ABSLI term plans come with a variety of coverage options that can be tailored to suit different life stages and financial needs. This flexibility allows policyholders to select a plan that best matches their circumstances.

2. Competitive Premium Rates:
ABSLI is known for offering competitive premium rates that make term insurance affordable for a broader audience. This ensures that more people can access quality life insurance solutions without straining their finances.

3. High Claim Settlement Ratio:
ABSLI boasts a high claim settlement ratio, which is a crucial factor when choosing a life insurance provider. A high ratio indicates reliability and the assurance that your claims will be processed smoothly and efficiently.

4. Value-Added Riders:
ABSLI term plans offer various riders such as critical illness, accidental death and disability, and waiver of premium riders. These add-ons enhance the basic term plan, providing extra security for specific circumstances.

5. Customer Service Excellence:
ABSLI is renowned for its customer service, offering easy policy purchase and claim processes, alongside excellent support through multiple channels. This commitment to customer service simplifies the management of your term plan.

6. Innovative Tools and Resources:
ABSLI provides customers with innovative tools such as premium calculators, needs analyser, and educational resources that help in making informed decisions about the type and extent of coverage needed.

7. Reputation and Stability:
Being part of the well-established Aditya Birla Group, ABSLI benefits from a strong market presence and stability, giving policyholders confidence in the company’s ability to meet its financial obligations.

Conclusion

Choosing the right term insurance plan is critical for ensuring your family's financial security, and ABSLI’s offerings make it a strong contender in the insurance market. With its flexible coverage options, competitive premiums, and robust customer service, ABSLI empowers you to secure a financial safety net tailored to your needs. Remember, the key to finding the best term plan is to assess your personal needs carefully, consider the financial strength and reputation of the insurer, and understand the specifics of the policy you are considering. With these factors in mind, ABSLI could be the right choice for safeguarding your family’s future.

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FAQ-How To Choose the Right Term Insurance Plan

Is purchasing a term plan worth it?

Yes, purchasing a term plan is worth it, especially if you have financial dependents. A term plan provides financial security for your family in the event of your untimely death by helping them pay off debts, maintain their standard of living, and meet future financial goals without your economic contribution.

What factors affect the term insurance premium?

Several factors affect the premium of a term insurance plan, including:

Age: Younger applicants usually pay lower premiums because they are considered less risky.
Health: Good health leads to lower premiums, whereas pre-existing conditions may increase the cost.
Smoking Status: Smokers are at higher risk of health issues and, therefore, pay higher premiums.
Policy Term: Longer terms might result in higher premiums.
Coverage Amount: Higher coverage amounts lead to higher premiums.
Lifestyle: Risky professions or hobbies can increase premiums.
Gender: Based on statistical life expectancy, gender can influence premium rates.

When is the right time to purchase term insurance in my life?

The best time to purchase term insurance is now and/or as soon as you have dependents or significant financial obligations. Typically, the younger you are when you buy a policy, the lower the premium you will pay, and you will have coverage when unexpected life changes occur.

Should I purchase a term plan if my employer already provides life insurance coverage?

Yes, it is advisable to purchase your term plan even if your employer provides one. Employer-provided policies often offer limited coverage and are only active during your tenure with the company. Your term plan ensures you are covered continuously and allows you to choose a coverage amount that meets your family's needs.

How can I select the best payout option for my term insurance plan?

The best payout option depends on your family’s needs:

Lump Sum: Provides a single payment upon the policyholder’s death, useful for paying off large debts.
Monthly Income: Ensures a regular income stream for your family, helping them manage daily living expenses.
Combination: Offers part of the death benefit as a lump sum and the remainder as monthly payouts, providing immediate financial support and long-term security.

Consider your family’s ability to manage large sums of money and their ongoing financial needs when choosing.

How to benefit from tax while purchasing term insurance plans?

Term insurance premiums are tax-deductible under Section 80C of the Indian Income Tax Act, allowing you to reduce your taxable income by up to ₹1.5 lakh annually. Additionally, the death benefit received is tax-free under Section 10(10D)¹, provided certain conditions are met. This makes term insurance not only a tool for financial protection but also an efficient tax-saving instrument.

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^*LI Age 21, Male, Salaried, Non Smoker, Option 1: Level Cover, PPT: Regular Pay, SA:  ₹ 1 Cr., PT: 10 years, Premium paying term: 10 years, Death Benefit Payout as Lumpsum. Annual Premium: ₹ 6900/- ( which is ₹ 575/month), 1 Cr SA is paid and the policy terminates. 
ABSLI Super Term Plan - This Policy is underwritten by Aditya Birla Sun Life Insurance Company Limited (ABSLI). This is a non-linked non-participating individual pure risk premium life insurance plan. UIN: 109N153V02