Insurance
How to Choose the Right Term Insurance Plan
HomeFin · 9 November 2025 · 6 min read
Quick answer
Choose a term plan on: the right cover amount (10–15× income + loans), a tenure lasting until dependents are independent, a high claim-settlement ratio (95%+), and only the riders you need. Don't just pick the cheapest — the point is that the claim actually pays.
You've decided to buy term insurance — the right call. But choosing which plan involves more than sorting by premium. Get these factors right, and your family is genuinely protected; get them wrong, and you may have cover that falls short exactly when it's needed.
1. The cover amount
Start here, because it's the whole point. Aim for 10–15× your annual income plus outstanding loans, minus existing savings — see how much term insurance you need. Under-insuring to save premium defeats the purpose; this number matters more than any other.
2. The tenure
Insure yourself for as long as others depend on you financially — typically until retirement, or until your loans are cleared and children are independent. Too short a tenure leaves a gap; buying young locks in a low premium for the whole term.
3. The claim-settlement ratio
This is the factor people skip and shouldn't. The claim-settlement ratio is the percentage of claims the insurer actually pays. Favour insurers with a consistently high ratio (ideally above 95%) — because a policy is only as good as its willingness to pay your family when the time comes. A slightly higher premium for a stronger record is often worth it.
4. Riders — only what you need
Riders add specific extra cover for extra cost. The genuinely useful ones:
- Waiver of premium — future premiums are waived if you become disabled, keeping the cover alive.
- Accidental death benefit — extra payout on accidental death (though a separate personal accident policy may cover this better).
Don't load up on riders you don't need — each one raises the premium.
5. Honest disclosure
Whichever plan you pick, disclose everything — health, habits, income. Honest disclosure is what ensures the claim is paid; a non-disclosure discovered later can void it. Never risk your family's payout to shave the premium.
Buy well, then keep it active
Choose on cover, tenure, claim record and honest disclosure — not on price alone — and you'll have protection your family can truly rely on. Then make sure it stays in force: HomeFin tracks your premium as a recurring due and reminds you before each renewal, so a cover you chose carefully never lapses by accident. And remember the golden rule — pure term for protection, invest separately for growth (here's why).
Frequently asked questions
How do I choose a term insurance plan?
Pick the right cover amount (10–15x income plus loans), a tenure that lasts until your dependents are independent, an insurer with a high claim-settlement ratio, and only the riders you truly need. Compare on these — not just the cheapest premium.
What is a claim-settlement ratio?
It's the percentage of claims an insurer pays out. A high ratio (ideally above 95%) suggests your family is more likely to receive the payout when it matters. It's one of the most important things to check.
What term insurance riders are worth buying?
Useful ones include waiver of premium (on disability) and accidental death benefit. Avoid loading up on riders you don't need — each adds cost. Buy the ones that genuinely fit your risks.
Should I buy the cheapest term plan?
Not blindly. Price matters, but a slightly higher premium from an insurer with a stronger claim-settlement record and better terms can be worth it — the whole point is that the claim actually pays.
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