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9 Things to Consider Before Buying a Term Plan

Things to consider before buying term policy

In India, where family takes center stage, ensuring their well-being is a primary concern. Life is unpredictable, and the unfortunate event of a family member's passing can leave loved ones facing emotional and financial turmoil. Term insurance acts as a financial safety net, providing a substantial death benefit payout to your designated beneficiaries if the unthinkable happens. However, with a multitude of term insurance plans available, navigating the options and choosing the right one can feel overwhelming.

9 Crucial Considerations Before Buying a Term Insurance Plan in India

Here's a comprehensive guide exploring 9 crucial factors to consider before buying a term insurance plan in India, empowering you to make an informed decision that safeguards your loved ones' future.

1. Understanding Your Needs - Assessing Your Coverage Amount

The foundation of a good term insurance plan lies in determining the right coverage amount (sum assured). This refers to the lump sum payout your beneficiaries will receive in the event of your unfortunate demise. To arrive at this figure, consider your dependents' financial needs and future goals. Here are some key factors to include:

  • Outstanding Debts: Ensure the payout is sufficient to cover outstanding loans like mortgages, car loans, or personal loans, preventing additional financial burden on your family.
  • Children's Education: Factor in the estimated cost of your child's future education, including tuition fees, hostel expenses, and books.
  • Spouse's Financial Security: Consider the amount needed to maintain your spouse's current lifestyle or provide for their financial independence in your absence.
  • Living Expenses: Estimate your family's monthly living expenses and factor in inflation to ensure the payout allows them to maintain their standard of living.

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2. Choosing the Right Policy Term - Aligning Coverage with Dependence

The policy term refers to the duration for which your term insurance plan remains active. It's crucial to choose a term that aligns with your dependents' financial dependence on you. Here are some key points to consider:

  • Children's Age: If your children are young, choose a policy term that extends beyond their expected graduation year from higher education.
  • Loan Repayment: If you have outstanding loans, ensure the policy term covers the loan repayment period to avoid your family inheriting debt.
  • Spouse's Retirement Age: Consider a policy term that extends until your spouse reaches retirement age, providing them with financial support even after your absence.

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3. Considering Your Age - Balancing Cost and Coverage

Age is a significant factor influencing the cost of your term insurance premium. Generally, younger individuals pay lower premiums compared to older applicants. This reflects the higher risk of mortality associated with increasing age. Here's how your age can impact your decision:

  • Start Early: The younger you are when you purchase a term insurance plan, the lower your premium will be throughout the policy term. This allows you to lock in a more affordable rate for a longer period.
  • Review Regularly: As you age and your financial situation evolves, revisit your term insurance plan periodically. You might need to adjust the coverage amount or consider additional riders to ensure your loved ones remain adequately protected.

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4. Lifestyle Choices - Habits Impacting Premiums

Certain lifestyle choices can influence your term insurance premium. Leading a healthy and responsible life can lead to lower premiums. Here are some habits that might affect your premium:

  • Smoking: Smoking tobacco is considered a high-risk behavior by insurance companies and can significantly increase your premium cost.
  • Alcohol Consumption: Excessive alcohol consumption can also be viewed as a risk factor and potentially lead to higher premiums.
  • Dangerous Hobbies: Engaging in risky hobbies like extreme sports might also influence your premium cost.

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5. Understanding Policy Exclusions - Knowing What's Not Covered

It's crucial to carefully read and understand the policy exclusions mentioned in the term insurance plan document. These are events or situations where the insurance company won't pay out a claim. Here are some common exclusions to be aware of:

  • Death by Suicide: Many term insurance plans exclude claims arising from suicide within a specific period (typically 1 year) of policy purchase.
  • Pre-Existing Medical Conditions: If you have a pre-existing medical condition, it might be excluded from coverage or require a higher premium.
  • High-Risk Activities: Death caused by engaging in certain high-risk activities (e.g., skydiving) might be excluded.

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6. Comparing Quotes and Premiums - Finding the Best Value

Don't settle for the first term insurance plan you come across. Take the time to compare quotes and premiums from various insurance companies. Here's how to approach this step:

  • Online Insurance Aggregators: Utilize online insurance aggregator platforms that allow you to compare plans from different companies side-by-side based on coverage amount, policy term, premium cost, and features.
  • Consider Claim Settlement Ratio: Research the claim settlement ratio of the insurance company. This ratio indicates the percentage of claims settled by the company. A higher ratio suggests a greater likelihood of your claim being paid out smoothly.
  • Read Reviews and Ratings: Read online reviews and ratings from existing policyholders to gain insights into the customer service experience offered by different insurance companies.

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7. Importance of Riders - Enhancing Your Coverage

Riders are optional add-on benefits that can be attached to your term insurance plan for an additional premium. They provide enhanced coverage and cater to specific needs. Here are some popular riders to consider:

  • Accidental Death Benefit Rider: This rider offers an additional payout in case of accidental death, providing greater financial support for your beneficiaries.
  • Waiver of Premium Rider: This rider waives future premiums if you become disabled and are unable to earn an income. This ensures your policy remains active without financial strain on your family.
  • Critical Illness Rider: This rider provides a lump sum payout if you are diagnosed with a critical illness covered under the policy, helping manage treatment costs.

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8. Online vs. Traditional Term Insurance - Convenience vs. Personal Touch

Traditionally, term insurance plans were purchased through insurance agents. However, online term insurance plans are gaining popularity due to their convenience and potentially lower premiums. Here's a breakdown of both options:

  • Online Term Insurance
    • Convenience: Apply and purchase a policy online at any time.
    • Potentially Lower Premiums: Reduced overhead costs for insurance companies might translate to lower premiums for you.
    • Transparency: Information readily available online for easy comparison.
  • Traditional Term Insurance
    • Personalized Service: An insurance agent can provide guidance, answer your questions, and explain complex terms.
    • Face-to-Face Interaction: Some individuals prefer the personal touch and interaction with an agent, especially for complex financial decisions.

9. Seeking Professional Advice - Making an Informed Decision

While the internet offers a wealth of information, consulting a financial advisor can be extremely beneficial. Here's how a financial advisor can assist you:

  • Needs Assessment: A financial advisor can assess your unique financial situation, risk tolerance, and family needs to recommend suitable term insurance plans.
  • Plan Comparison: They can help you compare different plans, analyze features, and choose the one that aligns best with your requirements.
  • Understanding Riders: A financial advisor can explain the benefits of various riders and guide you in selecting the ones that enhance your coverage effectively.


By understanding these 9 crucial factors, you can embark on a well-informed journey towards securing your loved ones' future. Remember, term insurance plays a vital role in any comprehensive financial plan. Starting early, comparing options, and prioritizing your family's well-being empower you to make the right choice. With the right term insurance plan in place, you can face the future with greater peace of mind, knowing your loved ones will be financially protected even in your absence.


*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

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