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8 Mistakes People Make While Choosing a Term Plan

8 Mistakes People Make While Choosing a Term Plan

8 mistakes people make while choosing a term plan

Term insurance, the simplest and most cost-effective type of life insurance, should be a part of everyone’s financial portfolio. However, the number of people who have actually opted for term insurance in India is on the lower end of the spectrum. Only 1 in every 5 urban Indians has a term plan. A lack of awareness about the basics of term insurance is partially to blame.

While term insurance is a sound financial option, for most individuals to make the most of its features and benefits, one should be thoroughly apprised of and refrain from making some fairly common errors. In building such awareness, one can derive the most benefits from their term plan.

Here are the 8 primary mistakes that you must avoid while taking a term plan.

Selecting a short term In pursuit of the lowest premium, you might select a plan with a short term. However, if one opts for a short term and ends up outliving the term, they would need to renew their old plan or purchase a new one, potentially increasing their premium rates. Put simply, term insurance is lifelong protection for your family, and a plan with a short term does not serve that purpose.

Selecting a lower sum assured A term plan's sum assured should ideally be 10-15 times your monthly income. One might find it tempting to select a lower sum assured owing to the lower premium that comes with it. This would, however, leave your family with an inadequate amount of money in your absence. Selecting a sum assured that fulfills the needs of your family and gives them the financial freedom to sustain their current lifestyle is crucial.

ProcrastinationLife insurance might not seem like a huge priority for those in the prime of their health. However, the older one gets, the higher the risk of mortality and, thus, the more expensive the term plan. To avail of the lowest premium rates and the best possible coverage, purchasing a term plan early can prove to be beneficial.

Giving insufficient information While applying for term insurance, you would be asked to supply the insurer with certain personal details, including your medical history and lifestyle habits. Not disclosing relevant information during the application

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Frequently Asked Questions (FAQs) for Term Insurance Plans

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 insurance 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 65 years of age. This is a term plan with return of premium option – that means all the premiums paid throughout the tenure will be paid back to you if you outlive the policy.

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 when you buy the best term plan in India.

If your key purpose is to give your Family financial protection, go for the best term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan. iSelect Star is a term plan with return of premium option. All the term insurance premium will be paid back to you, if you outlive the policy term.

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, the best term insurance plan pays a part of the sum insured to treat your disease.

Term life insurance plan 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 plan 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 insurance policy remains active until the expiration date.
  • Income Rider: This rider in a term insurance plan 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 insurance 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 the Best Term Insurance Plan?

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