How to Choose Term Insurance

Where To Start

How to choose term insurance plan comes down to a few parameters that actually matter — and a lot of marketing noise that doesn’t. The premium is the number everyone compares first, but it’s rarely the most important one. What matters more is whether the insurer will pay your family reliably when the time comes, and whether the policy is structured to keep that claim valid. This guide walks through the parameters in the order a careful buyer should weigh them.

The core idea: a term plan is a promise to pay a large sum to your family if you die during the policy term. Since you won’t be there to chase the claim, you’re really buying the insurer’s reliability as much as the cover itself. So the decision starts not with price, but with the insurer’s track record of paying.

You won’t be there to fight the claim. So you’re buying the insurer’s reliability as much as the cover itself.

Parameter 1

Claim settlement — and the ratio most people read wrong

The most quoted number is the Claim Settlement Ratio (CSR) — the percentage of death claims an insurer settled out of those it received in a year, as published by IRDAI. A 99% CSR means 99 of every 100 claims were paid. Most large private insurers now sit very high on this measure, which is reassuring but also makes it a weak differentiator on its own.

The more revealing number is the amount-based settlement ratio — the percentage of the total claimed value that was actually paid. This matters because an insurer could settle many small claims quickly (lifting the count-based ratio) while disputing the large ones — and a term policy is a large claim. A high settlement rate by count alongside a noticeably lower rate by amount is a flag worth noticing. A third angle is speed — how quickly claims are paid — because a family relying on the payout can’t wait months. Read all three together.

To put this in context, here is how five of India’s largest life insurers handled individual death claims in FY 2024-25 — by number of claims settled, by claim amount, and how quickly they paid — as reported by IRDAI. The figures are shown as published, with no ranking or recommendation implied:

Life insurer	Settled by number	Settled by amount	Paid within 30 days
HDFC Life	99.68%	97.96%	100.0%
Tata AIA Life	99.41%	98.38%	98.7%
ICICI Prudential Life	99.31%	98.06%	98.1%
SBI Life	98.34%	95.26%	99.1%
LIC of India	97.59%	96.08%	97.1%
Industry (all insurers)	97.82%	96.29%	—

Three things to read from this. First, the settlement rate by amount tends to run a little below the rate by number — confirming that larger claims face slightly more scrutiny, which is exactly why a term buyer should weigh the amount column. Second, the paid-within-30-days figure shows how quickly a family actually receives the money, which matters as much as whether a claim is eventually paid. Third, most large insurers cluster very close together at the top — so small differences between two already-strong insurers matter far less than the next parameter, which is entirely within your control.

The count-versus-amount gap is worth dwelling on, because it’s where a high headline ratio can hide a weaker reality. The table below shows the insurers (with meaningful claim volume) where the two diverged most in FY 2024-25 — again, as reported by IRDAI, without judgement. These are not “bad” insurers; the point is to show how much the two measures can differ, so you read both:

Life insurer	Settled by number	Settled by amount	Gap
Shriram Life	98.31%	81.71%	16.6 pts
Reliance Nippon Life	98.93%	92.04%	6.9 pts
Bajaj Allianz Life	99.29%	93.04%	6.2 pts

Take the widest example: an insurer settled 98.31% of claims by count but only 81.71% by amount — meaning that while almost every claim by number was paid, close to one rupee in five of the total value claimed was not. For a term policyholder, whose claim is large by definition, the amount column is the one that describes your own likely experience. A single year’s gap can be driven by a few large contested claims and isn’t a verdict on an insurer — but it’s exactly why you read the amount ratio, not just the headline number.

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Parameter 2

Solvency ratio — can the insurer actually pay?

The solvency ratio measures whether an insurer holds enough capital to meet its obligations. IRDAI sets a minimum of 1.50, and the major insurers comfortably exceed it. A term policy is a 30- or 40-year promise, so the insurer’s long-term financial strength is not a detail — it’s the foundation. When two insurers look similar on claim settlement, solvency is a sensible tie-breaker.

Here are the solvency ratios of some of India’s largest life insurers as at 31 March 2025, as reported by IRDAI. These figures are presented as published, without ranking or recommendation — read them alongside the IRDAI minimum of 1.50:

Life insurer	Solvency ratio (31 Mar 2025)
LIC of India	2.11
ICICI Prudential Life	2.12
SBI Life	1.96
HDFC Life	1.94
Tata AIA Life	1.80
IRDAI minimum	1.50

All five sit well above the regulatory floor, which is what you’d expect from established insurers — the figure is most useful as a reassurance check and a tie-breaker, not a ranking. A solvency ratio is a snapshot in time and moves each quarter, so treat these as the position on the reporting date, not a permanent score.

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Parameter 3

The application — where most rejected claims are born

Here’s the parameter no advertisement mentions: most term claim rejections trace back to something the buyer got wrong at the application stage, years earlier. The single biggest cause is non-disclosure — hiding or understating a health condition, smoking habit, income, or existing policies to get a lower premium or easier acceptance.

• Declare your health honestly. A condition disclosed and accepted is covered. The same condition hidden is grounds for rejection.
• Declare smoking or tobacco use. The non-smoker premium is tempting, but a tobacco-related death on a “non-smoker” policy can sink the claim.
• State your income accurately. Cover is granted in proportion to income; an inflated figure can be challenged later.
• Prefer a medically-underwritten policy. If the insurer tests your health upfront, there’s far less they can dispute afterwards.

A buyer who discloses fully turns a high settlement rate into a real promise. A buyer who cuts corners can be rejected by even the best insurer. This is the single most important thing within your control.

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Parameter 4

Cover amount and term length

A common rule of thumb is cover worth roughly 10 to 15 times your annual income, but the better approach is to add up what your family would actually need: outstanding loans, children’s education, years of household running costs, and a margin for inflation. The how much cover you need guide and our Human Life Value calculator help you size it properly.

For the term, a good default is to cover yourself until the age you expect to be financially independent — typically around retirement, by which point loans should be cleared and children earning. Buying cover that runs well past the years your family depends on your income usually adds cost without adding much protection.

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Parameter 5

Riders — useful add-ons, and ones to skip

Riders are optional add-ons that extend a term plan. A few are genuinely worth considering; others mostly add cost. The judgement is whether the rider covers a real gap in your situation.

• Waiver of premium — if you’re disabled or critically ill and can’t earn, future premiums are waived while the cover continues. Often worth it.
• Accidental death benefit — pays an extra sum if death is by accident. Useful for those with higher accident exposure; optional for others.
• Critical illness rider — pays a lump sum on diagnosis of a listed serious illness. Can be valuable, but compare it against a standalone health or critical-illness policy before adding.

The principle: add a rider because it closes a real gap, not because it was offered. Each one raises your premium.

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A Quick Checklist

How to Choose Term Insurance: Six checks before you buy one

1. Does the insurer have a consistently high claim settlement ratio — and a healthy amount settlement ratio too?
2. Is the solvency ratio comfortably above the IRDAI minimum of 1.50?
3. Is the cover amount enough for your family’s real needs, not just a round multiple of income?
4. Does the term run until you expect to be financially independent?
5. Have you declared health, smoking, income and existing policies fully and honestly?
6. Are you adding only the riders that close a real gap for you?

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How We Can Help

Comparing and buying through us

Reading these parameters is one thing; comparing actual plans across insurers is where most people get stuck. We work across most of the major life insurers, so we can help you compare term plans side by side — settlement track record, solvency, cover, riders and premium — and place the policy that fits your situation, with your application completed correctly so the claim stays protected. If you’d like a no-pressure comparison for your own numbers, reach out and we’ll walk you through it.

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Frequently asked questions

Should I just pick the insurer with the highest claim settlement ratio?

It’s a good starting filter, but not the whole answer. Read the amount settlement ratio alongside it, check solvency, and remember that your own honest disclosure at application matters more than small differences between two already-high insurers.

Is a cheaper term plan worse?

Not necessarily — but never choose on price alone. A slightly higher premium from an insurer with a stronger settlement and solvency record can be worth it, because the entire point of the policy is that the claim gets paid. Compare value, not just cost.

What’s the difference between CSR and amount settlement ratio?

CSR is the percentage of claims settled by count; the amount settlement ratio is the percentage of the total claimed money actually paid. A term claim is large, so the amount ratio better reflects how an insurer treats high-value claims. Read both.

Do I need riders on a term plan?

Only where they close a real gap. Waiver of premium is widely useful; accidental death and critical illness riders depend on your situation and should be weighed against standalone covers. Each rider adds to the premium, so add deliberately.

Can I buy term insurance through you?

Yes. We can compare plans across most major insurers and help you complete the application accurately. Reach out and we’ll guide you through choosing and buying the right cover.

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