The only insurance rule you need to know
Buy term insurance for protection. Buy mutual funds for investment. Never mix the two.
This one rule, followed consistently, saves most middle-class Indian families ₹20,000–50,000 per year in unnecessary insurance premiums while giving them 3–5x better life cover.
How much cover do you need?
Simple framework (DIME method):
- Debt: All outstanding loans (home, car, personal)
- Income replacement: Annual income × remaining working years (use 15–20 years)
- Mortgage (if not in debt): Cost of housing family doesn't currently own
- Education: Children's education fund
Add these up, subtract liquid assets and existing cover = your gap.
Claim Settlement Ratio — what it means
The CSR is the percentage of claims an insurer pays out. Top performers (FY 2023-24):
- LIC: 98.7%
- HDFC Life: 99.5%
- Max Life: 99.6%
- Tata AIA: 99.5%
All major private insurers now have 98%+ CSR. Don't pay a premium for LIC's slightly lower CSR — private insurers have caught up.
Online vs offline term insurance
Online direct-purchase term plans are typically 30–50% cheaper than the same plan bought through an agent. There's no difference in coverage or claims — the insurer pockets what used to go to agent commission. Always buy online.
Practical checklist
- [ ] Disclose all health conditions honestly (non-disclosure = claim rejection)
- [ ] Add nominee carefully — include children if spouse is also not working
- [ ] Inform family about the policy and claim process
- [ ] Keep premium payment up to date — lapsed policy = no cover