A term plan is a cost-effective life insurance policy that provides you with financial coverage for a specified time period. If the insured dies during the policy tenure, a sum assured (death benefit) is paid to the appointed nominee. On the other hand, in case the insured survives the policy term, the sum assured is no longer payable.
A term insurance plan doesn’t offer any maturity benefits. Keeping that aside, there’re several questions that may arise in the mind of buyers regarding the features of this policy.
Having said that, let us try to answer some of the most frequently asked questions about term insurance.
Most Frequently Asked Questions – Term Insurance FAQs
Here is the list of Term Insurance FAQs
Q1. Should I buy term insurance if I am not married?
You should buy term insurance only if you have dependents. So, if you aren’t married but have dependent parents, you should buy term insurance, though for a less sum assured.
Q2. How much cover should I opt for?
Normally, it is suggested that the cover you opt for should be around 15-20 times of your annual income. In simple words, this is known as income replacement method. You can also calculate the amount with the expense replacement method. Moreover, you can go through the article and use our life insurance need calculator to determine the required coverage amount.
Q3. Till what age, should I buy term insurance cover?
You should buy term insurance cover till age 60 i.e. retirement age. If you’re interested in knowing the reason for the recommendation, click on the link given below.
Q4. Should I buy a term plan with return of premium (TROP)?
No, you should never buy a return plan with return of premium. It’s so because the premium is very high in such plans. For more information, you can read the complete review here.
Q5. Does the premium increase during the policy term?
No, the premium remains fixed throughout the tenure of the policy. The premium doesn’t increase during the policy term.
Q6. How many term insurance policies can I buy for myself?
You can buy as many term insurance policies as you want as it wholly depends on your income criterion. But it’s suggested that you should buy only one policy. Otherwise, your family would’ve to run from post to pillar in case the claim arises.
Q7. Can I get term insurance of 5 crores if my monthly income is 50,000?
No, you cannot get term insurance of 5 crores if your monthly income is 50,000. You must understand that there’s something called financial underwriting in insurance policies. Accordingly, you can get only get a sum assured around 15-20 times of your annual income. Nevertheless, some companies also offer sum assured around 25 times as well.
Q8. Can I buy term insurance if I am an NRI?
Yes, you can buy term insurance even if you are an NRI. Other than all the necessary documents, you should also have a passport with an entry stamp on it i.e. you should be in India while purchasing the term plan. Another thing to remember is that you cannot buy term insurance online while sitting in some other country. Also, insurance companies have a list of countries where term insurance cannot be given. If you are staying in such a country, there’re high chances that the company might reject your proposal.
Q9. Do I need to declare my profession?
Yes, you definitely need to declare your profession while opting for a term plan. A person working in oil rigs may have to pay a much higher premium than an IT professional. Similarly, the premium also depends upon how hazardous your job profile is.
Q10. Do I need to declare other policies?
Yes, you’ve to declare other insurance policies while taking a term plan as it’s required for determining your financial eligibility. Also, it helps the underwriter to see whether you’re eligible for the combined cover of all the insurance policies.
Q11. Can I get term insurance for my wife who is working?
Yes, you can definitely get term insurance for your wife provided that she’s working. Again, the eligibility for the term insurance policy will be determined on the basis of her income level.
Q12. Can you get term insurance for a housewife?
Yes, you can get term insurance for a housewife, though most of the insurers have capped the limit of the sum assured. Secondly, the condition is that the husband should be having the same amount of cover.
Q13. Can I get term insurance if I have some health issues like diabetes, Blood pressure, thyroid?
It totally depends upon the severity of the disease. Furthermore, the final decision would be in the hands of the underwriter who would be checking your proposal form. So even if you get it, the premium would be loaded.
Q14. Does drinking alcohol occasionally, say once/twice in a month, count as a drinking habit for the Term insurance?
It may not be counted as a drinking habit, but you should declare that you drink occasionally. It’s so because the underwriter can take a call on whether you need to undergo medicals or not.
Q15. Should I declare if I have stopped smoking/drinking long back?
Yes, you should declare it if you have stopped smoking/drinking long ago. In term plan, smokers usually pay 1.5 times more premium than non-smokers. Therefore, this comes under material facts which can be one of the major reasons for declining the claim.
Q16. What if I have started drinking after 3-4 years of taking the term plan?
You do not have to declare any such thing to the insurance company once the policy is issued. On this account, any change need not be declared after issuance of the policy.
Q17. Are tele medicals safe?
Yes, tele medicals are completely safe. The company decides to go for tele medicals if they find your proposal to be less risky. Besides that, insurance companies also have a norm called jet limits. The jet limits may be 50 lakhs, 75 Lakhs or even 1 Crore. It’s the underwriters who decide whether the customer has to go for tele medicals or an actual medicals test. While giving tele medicals, the entire conversation is recorded and you can also ask for a copy of the same.
Q18. Which option should I choose for Sum Assured – lump sum or income options?
You should always go for the lump sum option for these two essential reasons.
- Income option is not inflation adjusted.
- Time value of money.
Q19. Is there any option of increasing cover every year?
Yes, there’re some companies that provide you with the option of increasing cover every year. For example, ICICI Prudential allows you to increase cover during certain life-changing events like getting married or having a child. Whereas, HDFC Life gives you the option of increasing some percentage of cover every year.
Q20. Should I opt for riders like personal accident and critical illness in term insurance?
No, you should buy it from general insurance companies. The reason being that if you opt for riders in a term plan, the conditions and rules are extremely strict.
Q21. Can I change the nominee?
Yes, you can change the nominee at any point of time during the tenure of your policy.
Q22. What if I stop paying the premium in between?
You will be given a grace period to pay the premium after the last date of premium payment has passed. Once the grace period is over, the policy will be lapsed and no benefits will be paid in case of an unfortunate event.
Q23. What if I take term insurance when I am employed in India — then after some years I take up employment abroad?
Yes, the term insurance will still be valid in this case.
Q24. Are small companies safe to buy term insurance?
Yes, it’s absolutely safe to buy term insurance from any life insurance companies irrespective of their size. All the companies are regulated by IRDAI.
Q25. What if I lose my job and die after that then how much will this term plan pay?
It does not matter whether you lose or quit your job once the term plan is issued. It’s just that you have to pay the premium regularly. Moreover, the amount would be settled to your nominee if you had paid all the premiums regularly.
Q.26 Does Life Insurance covers death outside India?
Yes, if a person had purchased life insurance in India and had died in some other country, the sum assured would be paid to the nominee.
Q27. Does Term Insurance pay in case of Accidental Death?
Yes, the basic sum assured is paid in term insurance if death has occurred due to an accident. If you had opted for a personal accidental rider, you’d get the sum assured in accidental riders along with the base cover. Nevertheless, there can be variants in such scenarios. For instance, if you’re driving while drunk and die in an accident, only the basic sum assured will be paid. Accidental rider sum assured would not be paid in this case.
Q28. Is death due to critical illness, like cancer is covered under the term insurance policy?
Yes, death which results from critical illnesses such as cancer is covered under the term insurance policy.
Q29. Will I get a claim if I commit suicide?
Suicide is covered after a time period of 1 year. So, no claim is paid in case a person commits suicide within 1 year of purchasing the policy.
Q30. Are natural calamities covered under term insurance?
Unless exclusively mentioned, natural calamities are normally covered under term insurance.
Q31. Does claim settlement ratio matter?
No, claim settlement ratio does not matter in today’s time. Ten years ago, people used to run after LIC because of the claim settlement ratio. As of now, approximately all the companies have claim settlement ratio of more than 90%. Also, your claim cannot be rejected after a time period of 3 years on any grounds.
Q32. What are the documents required for death claim?
Please refer to the article mentioned below for the checklist of death claim documents.
Q33. Should I review my term insurance?
Yes, it’s extremely important to review your term insurance before you make the investment. It’ll help you check whether it would be sufficient during life-changing events like getting married, taking a home loan, etc.
Q34. Which is the best term insurance policy?
Please don’t ask me this as there’s no definite answer for such a question. Speaking of the best term insurance policy, it’s more of an individual choice and depends on your requirements. Therefore, choose a brand you’re comfortable with, verify policy terms, and the chances of claim rejections would be very less.
Last but not the least, feel free to comment and share your valuable opinion with us.