Written by
Alok Mishra
Insurance Writer
Alok Mishra is a Digital and Content Marketing specialist with 10 years of experience. He has spearheaded Web Content, Social Media & Branding, and Community Building initiatives to drive growth for prominent brands.
Reviewed by
Bhaskar Sinha
Insurance Expert
8+ years of experience in Life Insurance with expertise in Developing Life and Health Products, Digital Sales, Conducting effective trainings and Key Account Management.
Buying term insurance at a young age, preferably as soon as you start earning might sound unusual but has a list of benefits that cannot be ignored. Let’s take your through them:
The foremost advantage of buying term insurance early is comparatively lower premiums, reason being fewer liabilities and good health while you’re young, which automatically makes the term insurance cost affordable.
As per section 80C of the Income Tax Act 1961, you can claim deductions on your annual tax amount for the term insurance cost paid by you in the form of regular premiums.. So, the sooner you invest in term insurance, the sooner you can avail these tax benefits and save on your income.
4Tax benefits as per prevailing tax laws, subject to change
An excellent way to get your finances in order and increase your savings is by investing in term life insurance. Not only do you enjoy low term insurance cost while you’re young, but you also learn the important skill of financial management. You can also secure the financial future of your loved ones giving you the opportunity to plan for your financial milestones.
The best and easiest way to calculate the premium for a term insurance policy is to use a term insurance plan calculator. But if you’re wondering how term insurance cost is calculated, here are some factors on which term insurance rates are determined:
An insurance provider takes your personal information along with a few policy details into account to calculate your term insurance cost. However, you can also feed some of these details into an online premium calculator to get an estimate.
When buying term insurance, the most common query people have is ‘How much term insurance cover do I need?’ While there is no right or wrong answer to this question, the general thumb rule dictates that your term insurance cover should be at least ten to fifteen times your yearly income. Some policy buyers even go higher and purchase term insurance cover that is somewhere around twenty times their annual earnings.
For instance, if you earn rupees eight lakhs per year, your term life insurance cover should be a minimum of eighty lakhs. However, you can opt for an even higher life cover if you wish, but make sure the term insurance cost is affordable and manageable for you.
If you want a more accurate and clear answer, you can try using a Human Life Value Calculator. You will have to enter information such as age, annual income, savings, existing loans & liabilities, etc. to find the right coverage amount and term insurance cost.
The cost of purchasing a life insurance policy i.e. the overall premium payable has historically been a barrier among Indians seeking to purchase life insurance policies. However, the recent Axis Max Life IPQ 6.0 Survey has recorded a shift in this behavior. IPQ 6.0 survey results clearly show that life cover has gained nearly the same level of importance among Indians as life insurance premiums. For more insights into the current protection trends in India, please read the complete Axis Max Life IPQ 6.0 survey report.
A rider is an optional cover that you can add to your existing term insurance plan. By opting for riders, you can avail some extra benefits with your policy Each rider you add to your plan will have an additional premium and an independent sum assured which might increase your term insurance cost.
Here are some of the most popular riders available with term life insurance policies:
As per accidental death riders, if the insured individual dies in an accident, the nominee is entitled to receive the death benefit along with the rider sum assured which might lead to a marginal increase in the term insurance cost.
This rider acts as an income replacement in an unfortunate event where the policyholder suffers a partial or permanent disability due to an accident.
We all know that treatments and tests for critical illnesses such as cancer, kidney stones, stroke, and heart failure can cost a lot of money. But you can save yourself from exhausting all your savings as a critical illness rider provides you with a lump sum amount upfront in case you are diagnosed with such conditions
Premium waiver riders offer financial support in dire times. For instance, if you cannot pay the term insurance cost due to a critical illness or permanent disability, the insurance company takes care of the remaining term insurance cost and the life cover stays intact.
The claim settlement ratio (CSR) is an indicator of the number of claims an insurance company has settled against the number of claims received in a fiscal year. You might be thinking, ‘Do I really need to know this?’ - which is something most people think. However, by checking the claim settlement ratio, you can assess whether the insurer is committed to their policyholders.
For instance, if an insurance company receives around one thousand claims in a year and settles nine hundred out of them, then its claim settlement ratio amounts to 90%. The ratio should be a minimum of 80%, but the higher it goes, the better.
So, before you purchase a term life insurance, make sure to go through the insurer’s claim settlement ratio so you know your loved ones’ future is in good and safe hands. Axis Max Life Insurance has a claims paid ratio of 99.65%^ for FY 2023-24.
ARN NO: Oct22/Bg/12K
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