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10 Questions everyone should ask before purchasing a term plan

dateKnowledge Centre Team dateApril 22, 2021 views211 Views
Questions Everyone Should Ask Before Purchasing a Term Plan

In today’s world, having an insurance policy is a suitable way to protect the future of your loved ones. A term life insurance plan is one of the most popular ways in which people protect their dependents and their family in today’s age.

Buying a term life insurance can help you in protecting your financial future. However, making the wrong choice from the myriad of options available can also cause great damage to your long-term financial goals. Judging by the fact that the life insurance penetration rate in India remains one of the lowest on the planet at 2.74%, it is assumable that many Indians still have qualms about buying a term insurance policy.

These doubts are perfectly reasonable and necessary before you make any purchase. In this article, we attempt to answer some of the most frequently asked questions and doubts people raise regarding term insurance policies.

1. Will the term insurance premium amount fluctuate after purchase?

It is a common practice to plan premium payments far ahead in the future, so it is no surprise that this is a very pressing query that many customers have. A fluctuating term premium amount can cause many complications in the planning and achievement of long-term financial goals and can jeopardize the financial stability of a family.

Fortunately, the premium amount of an ordinary term insurance policy should remain the same throughout its duration unless it is specifically mentioned otherwise in a clause at the time of the purchase. Of course, it is a different case if the policyholder develops a disability/lifestyle disease later on in their life, in which case most banks retain the capacity to increase their premium amount.

Here are 14 reasons you might be paying a higher premium.

2. How does a lifestyle disease or life-threatening habit impact a term plan?

Customers who tend to develop addictions should think twice before purchasing a term insurance policy because habits like frequent smoking or drinking allow insurers to move the policyholder’s case into what is called a different risk pool. Because the policyholder’s life now remains endangered thanks to their lifestyle disorder, insurance companies reserve the right to impose higher premiums, or in extreme cases, complete cancellation of the plan.

To prevent the decline of the death benefit claim by the dependent in the case of unfortunate death, it is well-advised that policyholders divulge any information about such bad habits to the company well in advance.

3. Do bad habits affect the price of a term insurance policy?

While this depends largely on the company’s rules, habits like smoking or drinking that have detrimental effects on a person’s life expectancy do impact the cost of a term life insurance policy and the price of each premium payment.

Some companies require clients to disclose at the time of the purchase whether they have any life-threatening habits, while other companies will accept policyholders who have refrained from such a lifestyle for a few years before the purchase. It is recommended that you go through your preferred bank’s company rules before going ahead.

Learn how smoking and drinking can impact the cost of your term insurance?

4. Can nominees claim the death benefit in case of accidental death?

Usually, yes. Regardless of how the policyholder meets his death, term insurers are liable to pay the dependents the assured sum. However, you can boost your existing term life insurance plan by paying for additional riders that include accidental death, permanent disability, or critical illness. This will ensure that the nominee gets additional money other than the sum assured upon the policyholder’s death.

ULIPs for planning your retirement

5. Can nominees claim death benefit if the demise occurs outside Indian borders?

Yes, provided that the policyholder has informed his insurer that he has moved to a non-Indian residence, as he should with any change in personal information - this includes phone numbers and address.

However, keep in mind that the insurer can defer the death benefit if the policyholder dies in a country that is considered to be high-risk, like countries that are infamous for terrorism and violence against its residents. For countries like the UK or France, term insurance policies are usually valid.

6. What if the policyholder outlives the date of maturity?

Insurers are not liable to pay any sum assured if the policyholder outlives the maturity of the term insurance policy. This usually upsets people, which is why it is important to ask such questions before the purchase of a plan.

Learn how to estimate minimum sum assured in a term plan?

However, many banks allow you to upgrade your policy using a conversion privilege, which allows you to trade in the old policy for a new and permanent one. It is highly advised to pick a policy that offers a premium rise and the capacity to pay for additional liabilities like your children’s education/mortgage etc.

7. What happens if one person holds more than one policy?

Transparency is everything in the world of banking, which is why you should always declare that you possess multiple policies before signing up for a new one, especially if it is from another company. It is paramount that the person making the claims submits the death certificate to the company that has the longest-running policy under the deceased individual’s name.

The companies should also be informed of the same, along with the acknowledgment from the first company that the settler approached.

8. How well do insurers investigate the details of the death?

This depends on what kind of claim it is. An early claim, when the policyholder dies within two years of purchasing the term insurance, requires thorough investigation because of how costly it is for the insurer. However, if it is an ordinary claim where the policyholder has paid off his premiums for more than a decade, the company will be relenting and will settle the claim without an in-depth investigation.

Learn how to select term plan benefits for stress-free claim settlement.

9. Are there deaths that insurers can refuse to pay claims for?

Yes. If the policyholder dies due to terrorist attacks, natural calamities like earthquakes or tsunamis, etc., the insurer is not liable to pay the nominee the sum assured. Such claims do get settled at times, thanks to the interference of the Insurance Regulatory and Development Authority. It is always well-advised to go through such terms and conditions before the purchase.

10. Can NRIs purchase Term Insurance?

Yes, they can be provided they have documents that prove that they are not a liability - this includes age/address proof that they currently reside in India. Such documents can be sent to the insurer remotely when you purchase online term plans in India, and the necessary medical reports can be completed when the individual makes their next visit to the country.

When you are looking for the best term life insurance, you will find several options; one of them is iSelect Star. This Canara HSBC Oriental Bank of Commerce Life Insurance term plan offers the following benefits:

  • The return of premium, ensuring that the nominee will receive every penny you invest in the plan.
  • An increasing sum assured, which guarantees better returns on investment.
  • An option to cover your partner as well, negating the need to purchase a secondary plan.
  • Limited premium payment option, which allows you to plan your long-term financial goals with better precision.

Purchasing a term insurance plan is essential for the completion of your financial portfolio and can provide a basic safeguard for the future of your loved ones. It will help you ensure the financial stability of your family after your time. However, before choosing the best term life insurance plan, it is necessary to ask the right questions.

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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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