17 Important Tips For Buying A Term Insurance Plan

Feb 22, 2019 | 4 months ago | Read Time: 3 minutes | By iKnowledge Team

A Term Insurance is pure life cover product, designed to give your loved ones financial stability in case of an unfortunate incident.

When you are buying a term insurance plan, it’s important to evaluate your financials needs first. After you have assessed your requirements, you should understand the various factors for a term plan before buying one.

We share a checklist of 17 points to know for buying a term plan:

  1. Buy early

The earlier you buy, the less amount of premium you must pay, because the likeliness of having a health problem when you are young is minimal.

  1. Buy only till your retirement age

Buying a term plan beyond your retirement age will only leave you with expensive premiums to pay during your retirement. This may eat up your retirement corpus.

  1. Don’t get mislead with ‘per day premiums’

Insurance companies tend to offer 1 crore term insurance for say, Rs 25/day. However, note that these numbers might be applicable only for the younger age group for a specific tenure. Also, the terms and conditions may vary. So be wary of such term policies.

  1. Premium increase post medical is natural

Increased premiums post your medical exam prove that you may be prone to health risk but your term insurance policy is still willing to cover you. It’s completely natural.

  1. Avoid single premium policies

A yearly premium policy allows you the flexibility to stay up-to-date with your term insurance plan and amend when necessary.

  1. Stick to the basic version of your term insurance plan

Most available options are designed for very specific situations and they are not “better” or “bad” compared to the base policy. To check this, you can go to any term insurance premium calculator and find out the premium with rider as well as without rider.

  1. Term insurance riders are optional

Riders may come across as additional expenses if you don’t plan them right. You need to carefully assess your priorities before you purchase one.

  1. Disclose your activities

From your health history and family health history to your smoking or drinking habits, all must be disclosed or you risk the chances of claim rejection.

  1. Ensure that your cover is substantial

Thumb rule: Add up all existing liabilities, 300 times of your monthly expenses and then some more. If your life insurance requirement to meet your family’s needs is Rs 1.3 crore, purchase a plan of Rs. 1.5 crore instead of opting for Rs. 1 crore. This means, it is only wise to opt for an additional cover than for one that falls short to protect your family’s financial needs, thereby risking their security.

  1. Overthinking is not good

It’s better to have a good term insurance cover with any company, rather than delaying for the ‘best offer’.

  1. Clarify nominees

Ideally it should be a wife, children or someone whom you want to pass the term plan money. But try to avoid very old people as the nominee (in general).

  1. Avoid more than 2 term insurance policies

You should ideally have 1 term plan policy in your life insurance portfolio, the max can be 2 policies. But nothing more than that.

  1. Notify old insurance policy to Insurer

It is mandatory as per company rules to disclose old insurance policies you already have. Failure to declare that could result in a rejection of your claim.

  1. Read the fine print

One of the things which you should immediately do after receiving the policy is to check all the fine points and the copy of your medical examination. Cross-check for errors and rectify them with the company, if any.

  1. Calculate by expenses and not income

As mentioned above, to find out your coverage use the thumb rule that is, 300 times of your monthly expenses in addition to your outstanding liabilities. Round it off and include 30-40 lacs more into the final number to insure future financial goals like your child’s education.

  1. Choose a strong and good brand while choosing Insurer

There are 24 life insurance companies in India (year 2017) right now. Do you think each of them are equal in terms of surviving, claim settlement experience (not ratio), dealing with clients, depth of medical examinations, integrity in conducting business and what not?

  1. Communicate to your family that you bought a term plan

It is better to include and discuss the decision of buying a term insurance plan along with the policy papers and the contact number of the insurer – with your family.

Aegon Life’s iTerm Plus insurance plan is designed to give your loved ones’ adequate protection, if the worst were to happen. You can choose from a choice of four plan options which offer different in-built benefits like accidental death and critical illness.

II/Feb 2019/4843

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