8 Questions Before Buying Term Insurance 

Table of Content

1. How Much Term Insurance Coverage Do I Need?

2. What is the Ideal Term Insurance Policy Tenure?

3. Can Term Insurance Premiums Change Over Time?

4. Does Smoking Affect Term Insurance Premiums?

5. Does Term Insurance Cover Accidental Death?

6. Does Term Insurance Provide Coverage After Migration?

7. What Happens If You Outlive a Term Insurance Policy?

8. What Happens If You Miss a Term Insurance Premium Payment?

 

Here are questions you should ask yourself before purchasing a policy:

How Much Term Insurance Coverage Do I Need?

A: The minimum life insurance coverage you require is ten times your annual salary. Assume you currently earn INR 24 lakhs per year. You could opt for a policy that offers a minimum sum insured of INR 2.40 crores. If you have a lot of financial obligations, such as loans, you can opt for a sum insured amount that is 15 or 20 times your annual income. Alternatively, if you're looking for affordable coverage, a 1 crore term insurance plan could provide sufficient protection for your family while keeping premiums manageable.

What is the Ideal Term Insurance Policy Tenure?

A: Ideally, opt for a tenure that will keep you covered until you intend to retire. The idea is that the payout from the plan will help replace your income and support your family financially. Once you retire, you may not want to spend money on a monthly or annual premium.

Can Term Insurance Premiums Change Over Time?

A: Generally, your term insurance premium will remain the same for the entire tenure. That’s why most insurance companies encourage individuals to purchase plans when they are young. You can get a higher sum insured amount at a better premium when you’re young and healthy. As long you maintain your lifestyle, your term insurance premium amount will remain the same for the policy duration. Some policies describe certain conditions under which they may revise the premium. For example, if the policyholder develops a life-threatening habit, the insurance company may increase the premium. Using a term plan premium calculator can help illustrate how premiums might vary under different conditions, giving a clearer picture of your long-term policy costs.

Does Smoking Affect Term Insurance Premiums?

A: Yes, but it may come at a cost. Individuals who smoke or have smoked must inform the insurance company before buying a policy. Smokers are in a different risk pool and frequently pay greater rates than nonsmokers. If you develop a habit of smoking after purchasing a term plan, you must inform your insurance company. They will likely revise the rate based on your new habits and life expectancy. Your insurance company can cancel your policy or deny claim requests if they find out you did not honestly disclose your history.

Does Term Insurance Cover Accidental Death?

A: Yes, term plans will provide the payout benefit in case of accidental deaths. Since these policies act as pure life insurance plans, they offer a payout in case of accidental, natural and illness-related deaths. You can choose to purchase an accidental death add-on with your term plan to boost your policy benefits. Your nominee will receive an additional payout above the sum insured amount in case of a fatal accident.

Does Term Insurance Provide Coverage After Migration?

A: Yes, it will. You must inform your insurance company that you are changing your country of residence. They may allow you to keep your policy active if they deem the country safe. They may reject your application and terminate the plan if you migrate to a dangerous or unsafe country.

What Happens If You Outlive a Term Insurance Policy?

A: Once the policy term gets over, the policy ends. Most often, there are no maturity benefits with term plans. You could receive a return of premiums if you opted for the facility when you purchased the policy. If you’re concerned about losing your coverage, you can choose to convert your policy into a life-long plan. Contact your insurance company if you’d like to opt for this. But remember that the new coverage will come at a price.

What Happens If You Miss a Term Insurance Premium Payment?

A: An overdue premium can cause a lot of concern. Your insurance company will likely offer a grace period when you can make the payment without losing your insurance coverage. The grace period will depend on how frequently you pay premiums. You can opt to pay monthly, quarterly, once in six months, or annually.

You can use these answers to identify and purchase the best term insurance plan for your needs. Remember, before you buy a policy, you must consider your annual income, retirement age and financial obligations.

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