Pick insurer with consistently high claim settlement ratio

The goods and services tax (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.

- HIMALI PATEL

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 15-20 times annual income for salaried individuals, and 10-15 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 %1 crore cover to stay protected against rising costs and inflation,” says Shilpa Arora, cofounder and chief operating officer, Insurance Samadhan.

Suitable policy tenure