Whole life insurance policy. Is the Cheapest Term Plan the Best One to Choose?

In today’s market term plan is considered as the cheapest plan available, it provides pure protection plan and designed for protection from unexpected circumstances. Term plan is a form of life cover which provides coverage for a certain period of time. These types of plans are designed specifically to secure family needs in case of uncertainty or death. It is provided for a specific period of time for coverage of specific amount. Best term insurance.

These plans are cheapest when available online as there are no Agents and no commission. It contributes to about 15-18% of overall reduction from offline premium.

In below table we have compiled the rates of several insurers at different ages 30, 35, 40 and 45. A comparison between the cheapest plans can be done with this.

Is cheap insurance plan a wise choice??

Term insurance are mostly appropriate for a person who has low income and are requiring a large cover to safeguard family’s future in case of demise. But choosing a cheap plan may or may not be the best. Below are listed few factors on the basis of which best insurance plan can be purchased according to the needs & requirements.

Insurance premium

In today’s scenario people are very aware about this factor. It is diversified widely in India. LIC charges highest premium while some private companies are using predatory pricing of low premiums. When a company charges low premium it does not mean it is most efficient and capable. Similarly, when company charges high premium it does not state that it is best suitable, the company may be inefficient as well. You have to keep balance between premium and efficiency.

The best form of term insurance is life insurance because it provides more cover at low prices. For Example- A 28-year-old man will have to pay Rs 1200-1300 a month for a cover of Rs 2 Crore for 32 years. That’s roughly what one spends on one outing with friends.

There are many factors upon which premium depends-

Age: Younger the age lower will be the premium. At younger age probability of deaths are less likely to occur therefore it is less risky by the insurance providers. For example a person at the age of 30 buying insurance policy will have to pay lower premium as compared to a person buying at the age of 50.

Heath Record: Any history of diseases, previous surgeries, potential ailment developing in present, and the overall health record will all be considered in account while computing the premium. For example: buyer suffering from diseases like diabetes or blood pressure will be charged higher amount of premium.

Medical History: Even if there is no aliment, but having a family history of genetic disorders, then they might need to pay higher premiums on their insurance. For example; a person whose father, mother or anybody in immediate blood relation, having diabetes which can occur in future so they will be charged higher premium.

Gender: According to scientific study and research conclude that women on an average live more as compared to men, so women are charged lower premiums as compared to men. This means that the insurance company gets premiums for a longer period, hence, the lower amount.

Where to purchase life insurance

Smoking or Drinking: While providing the information about lifestyle and unhealthy habits, the smokers and drinkers are considered to be extremely risky customers and many a times have to pay substantially more the premium as compared to a non-smoker/drinkers.

Policy: The type of policy buyer is investing in affects the premium. For example; if one is obtains a life insurance cover for a long term and will be paying the premiums for longer period hence, they will pay lower amount of premium. However, if one obtains a short-term plan, it will result in an increase in the premium amount.

Liability: There are often many liabilities associated with an individual such as outstanding loans (car loan, home loan etc.), to higher education of children, their marriage plans, etc. higher the liability the grater coverage will be required.

Profession: Profession which indulges risk of any person’s life then the term plan will require more amount of premium. For Example: mining, oil and gas industry.

Lifestyle Choices: If one is involved in activities relating to adventure sports, racing cars etc then premium charged will be more as compared to others.

However, the cost alone should not be the factor while selecting a term plan.

Why Premium get higher in Term Insurance?

Premium get higher according to the needs or additional benefits and they are as follows:-

Riders: Below are the few riders available with the term insurance plans;

Accidental death and dismemberment

Partial and permanent disability

Whole or term life insurance

With additional benefits of riders taken, the premium for a Term Insurance Plan may be higher but that leads to larger scope of coverage though.

Some term plans like Term Plan with Return of Premium option or TROP are more expensive term plans wherein the premiums are returned at the end of the policy tenure. You may not want to opt for the cheapest term plan as there is NO maturity benefit. In that case, opting for a TROP might be a better choice.

However, TROP plans are always more expensive because the premiums are returned at the end of the policy tenure and hence there is some maturity benefit.

So, premium should not be the only point of consideration while opting for your ideal term insurance coverage. There are other factors that need to be considered while opting for your ideal Term Plan.

Factors to consider while choosing your Ideal Term Plan, other than Premium

To analyse between the best and the cheapest one must keep in mind below parameters for making the best decision because cheapest plan may or may not be the best.

There is no particular definition of reputation but it can be calculated on two basis mainly (i) Financial stability (ii) Past experience. These factors might change from time to time but it creates a confidence among the buyer.

In India, the Insurance Regulatory and Development Authority of India or IRDAI is present and very active in order to oversee the activities of the Insurance Company and ensure that claims are duly paid.

The coverage of the Life Insurance Policy is a very important factor that needs to be considered. Underinsurance defeats the very purpose of insurance coverage and is best avoided. Hence choosing the adequate coverage is of utmost importance.

Claim Settlement Ratio of the Insurance Company

Short term insurance

One of the most important criteria for selecting any life insurance company is the claim settlement ratio. Claim Settlement Ratio is defined as the total number of death claims paid by the insurance company as compared to the total number of death claims applied.

The Claim Settlement Ratio is the numerical value which represents the number of claim settled against those filed. Higher the claim settlement ratio, easier it’ll be for the nominee to avail the claim in your absence and continue their lives.

Be specific about the time you would require the cover because tenure is equivalent important criteria as the amount of cover. These policies cover till the age person wants to work. In past times this was 60 years but as of now people are tending to work more because they are marrying late and are having children at even higher age. So it is certain a person would require cover for more years.

Preferably the individual would select the policy tenure by taking into account at the age he would want to retire i.e. the difference between the current age and the estimated retirement age would be the policy tenure. It would be best if you buy term plan at a younger age as the amount of premium is low as compared to an older age.

After evaluating, a cover of say, Rs. 1 Crore that one individual buy today may not be sufficient for them to sustain 20 years later. Let us comprehend, due to inflation there will be rise in the product and services which will lead to downfall in the value of rupee. Assuming the value of Rs.1 Crore will only be Rs.60 lakh after 20 years inflated by 5%. To cure this problem, many insurers provide hike in covering amount. This kind of periodical increase in the amount insured would help in overcoming the inflation.


After considering all factors, it makes most sense to weigh all the pros and cons and then choose the best term plan according to your needs instead of opting for the cheapest plan. Cheapest term plan may or may not be the best plan for you. All you need to do is to choose according to your needs and then opt for the best coverage. Once all the factors have been considered, then the premium might be the factor to opt for the term plan.

However, premium is not the stand alone factor for opting for a term insurance plan. Sum assured, tenure, scope of coverage, riders, etc. and all possible factors need to be considered and then the best term plan according to your requirements need to be chosen! Premium is surely an important factor but not the only factor that needs to be considered! Once that is taken into account, all other factors will fall into place. So, what are you waiting for? Go ahead, compare the plans and then opt for the one which is best suited for your needs!

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Posted by at 09:03AM

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