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5 Tips to Buy the Best Term Insurance Plan in India

dateKnowledge Centre Team dateMay 04, 2021 views221 Views
5 Tips to Buy the Best Term Insurance Plan in India

Life is full of uncertainties some pleasant and some unpleasant. Few of these uncertain incidents can affect the dreams and lives of your loved ones. For such events, you cannot prepare financially in a day or two. But you can have an insurance to take care of their needs when you cannot.

A term insurance plan is one such life insurance plan. This plan acts as a financial cover for your dependent family members in the case of your untimely death. Getting the best term plan in India can make life easier for both you and your family.

But how do you find that one policy out of many which will work as per your family’s needs? Simply follow the five steps given below:

1. Measure the Effect of your Life-Stage & Family Size

Your income may grow each year by a certain percentage, but life progresses in stages. Each life stage can have a different number of people depending on you financially and emotionally. Also, each life stage marks a milestone in your financial life.

For example, marriage, childbirth, purchase of your first house, etc. are all life-stages.

Each life stage has a specific relation with your income, savings and financial needs. For instance, marriage means you now either share your financial responsibilities with another person or have someone depending on you. Similarly, childbirth would mean a whole different list of immediate financial needs and long-term goals.

Each of these stages means your financial responsibilities are growing, and so should your term insurance. Thus, you need to make sure your term insurance can keep up with your growing life needs. You can either look for a term insurance plan which continues to grow every year at a fixed rate. Or you can also look for a term plan which allows you to increase your sum assured upon every key life event.

Know more about increasing sum assured in a term plan.

2. How much Money will your Family Need?

Will your family need Rs. 1 Crore to live out their lives without the support of your presence and income? Or will they need Rs. 2 Crores to maintain their lifestyle as well as meet their important life goals?

These are the questions you need to answer if you want to buy the best term insurance plan for your family. Here are the three primary objectives your family will need money for in your absence:

  • Running the kitchen and lifestyle
  • Paying off any ongoing debt
  • Investing for long-term future goals

Usually, as a rule of thumb, you can assume 10-15 times your annual income will sufficiently provide for all three needs. While you are already looking for a growing term insurance cover, this is where the term cover should start.

So, if you are earning Rs. 2 lakh a month, you can start with a minimum term cover of Rs. 2.5 crores.

3. Pay Attention to the Pay-Out Options

The purpose of term insurance is not to ease your life but to ease out the survival of your dependents in your absence. The way the plan pays out the benefit is important for your family members, especially if they are financially dependent on you.

Imagine, if your spouse and children are dependent on your financial intervention and decisions, and suddenly they become the owner of Rs. 2 Crore from your life cover. Although the sum is huge, it is the only sum of money they may receive for many years to come. They also need to decide the following three:

  • Pay-off the debts
  • Invest for future goals
  • Run the kitchen

While the first two are still easy to do, as you only need to put aside a lump-sum amount, the third option is where the challenge lies. Withdraw too little and you risk shrinking your lifestyle, withdraw too much and you risk running out of money in future.

Thus, a term insurance plan which can help you set up a regular monthly benefit pay-out is a better choice. As the term insurance plan itself will bear the burden of providing a regular income to the family.

4. Maximising your Coverage with Riders

Riders are additional covers that you can add to your life insurance policy. These covers will enhance your risk coverage by providing financial assistance under different circumstances. For example, in the case where you met with an accident, the accidental rider will support you financially. If you end up losing any two limbs, the rider will ensure that your term cover continues without further premium payments.

The best term policy is the one that provides useful riders, like:

  • Accidental death and disability cover
  • Terminal illness benefit
  • Premium waiver benefit

Term insurance plan from Canara HSBC Oriental Bank of Commerce Life Insurance, iSelect Star term plan, offers all these benefits and a rider for child support benefit. Child support benefit ensures a lump sum payment for the child’s future upon your demise.

Buy Best Term Insurance

5. Insurance Providers with High Claim Settlement Ratio

The claim settlement ratio is one of the important parameters to check while purchasing life insurance plans. This ratio tells you about the following two things:

  • How smooth is the claim settlement process of the insurer?
  • How fast the insurer settles a new claim?

Both factors are an important measure to judge how easily your family members will get the financial support you have planned for them. Nowadays, insurers like Canara HSBC Oriental Bank of Commerce Life Insurance promise to settle the eligible death claims within one working day.

Additionally, the best insurers have processes to handhold the bereaved family members through the claim filing process.

Buy Only the Best Term Insurance for your Family

A term insurance policy is an instrument made to ease your family’s survival in your absence. While nothing can replace you for your family, the least you can ensure is that they don’t face financial and social hardships without you. Be financially responsible by buying a term insurance plan.

Thus, the criterion for selecting the best plan makes life easier for your family. Additionally, you can look for options like online availability, payment options and other features.

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Frequently Asked Questions (FAQs) for Term Insurance

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to Ask while Buying a Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
  9. 9. Does the term insurance plan have a cash value if you decide to cancel the policy?
  10. 10. Under what circumstances can a term insurance plan be cancelled?
  11. 11. Can I pay the premiums online or make electronic payments?
  12. 12. What will happen to the term plan if the life assured starts smoking after purchasing the policy?
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