Younger customers should opt for increasing cover as their financial commitments are likely to rise in the future.
The GST exemption on term insurance has made these plans cheaper and led to a rise in first-time purchases, according to media reports.
Large insurers such as HDFC, Axis, and SBI have reported higher sales.
Go for right coverage amount
Buyers may adopt either a thumb rule or a need-based approach to decide the sum insured.
"A simple thumb rule is 15 to 20 times annual income for salaried individuals, and 10 to 15 times average annual profit for self-employed buyers," says Narendra Bharindwal, president, Insurance Brokers Association of India.
The needs-based method is more objective.
"It considers liabilities, like home loan, education loan, and business debt; future family expenses like children's education, marriage and lifestyle costs; income replacement or the number of years your family will depend on your income," adds Bharindwal.
Reduce this amount by the value of existing assets.
"Young earners should start with a minimum Rs 1 crore cover to stay protected against rising costs and inflation," says Shilpa Arora, cofounder and chief operating officer, Insurance Samadhan.
Suitable policy tenure
The policy period should last so long as dependants require financial compensation if the breadwinner is no more.
"The coverage should end when you no longer have outstanding financial obligations or need for income replacement for loved ones," says Bhavna Verma, chief & appointed actuary, IndiaFirst Life.
She adds that the realistic retirement age should be the minimum benchmark, with some buffer for adverse outcomes.
Arora says extending cover beyond 60 to 65 increases premiums without offering real value.
Level or increasing cover
A level cover ensures a fixed sum assured throughout the policy term.
"It suits buyers with plateaued liabilities," says Milind Tayde, head - employee benefits, Anand Rathi Insurance Broking.
In the increasing cover option, the sum assured grows annually.
"This helps the cover keep pace with inflation and rising lifestyle costs," says Rajeev Chugh, chief financial officer, Generali Central Life Insurance.
According to him, younger customers should opt for increasing cover as their financial commitments are likely to rise in the future.
Nochiketa Dixit, managing director -- industries, EdME Insurance Brokers, points out that it ensures continued insurability without fresh medical tests.
Right payout option and riders
Customers can choose lump sum, monthly income or a combination.
"A lump sum works better in a scenario where the family can manage large amounts of claims payout in a responsible manner.
"A monthly payout is recommended when the family is not financially evolved," says Tayde.
The optimal payout method, according to him, is a combination of the two. Add a few essential riders for more comprehensive coverage.
"Essential riders that enhance protection at a modest cost include accidental death benefit, critical illness, and waiver of premium," says Dixit.
Key parameters to check
Claim settlement ratio (CSR): It is the percentage of claims paid of the total claims received in a year.
"A consistently high CSR, ideally above 97 per cent, indicates that the insurer honours claims reliably and has efficient claim-processing practices.
"Check the three-year or five-year average CSR, as a single year's data can be misleading," says Verma.
She suggests looking at the claim amount settlement ratio also to understand how insurers handle large claims.
"Reviewing turnaround time, reasons for claim repudiation, and grievance data gives a fuller picture," adds Verma.
Persistency ratio: It shows how many customers continue their policies year after year.
"A higher persistency ratio indicates trust, better service and fewer disputes," says Arora.
Premium comparison: A non-competitive premium is a non-starter in a price-sensitive market, according to Tayde.
"Make sure you compare the premium for the same sum assured, tenure, riders and payout options," says Bharindwal.
He suggests not choosing solely on price, as very low premiums could indicate limited features or stricter underwriting.
Underwriting terms: Go with a player with transparent underwriting practices.
"Check medical requirements, how health conditions are evaluated, and whether lifestyle disclosures impact premiums," says Arora.
Exclusions to watch out for
Before purchase, understand the major exclusions.
"Common exclusions include death due to self-inflicted injuries within a specified waiting period, participation in hazardous activities without declaration, non-disclosure of pre-existing conditions, and deaths arising from unlawful acts," says Chugh.
Key dos and don'ts
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Feature Presentation: Ashish Narsale/Rediff