10 Questions Everyone Should Ask Before Buying a Term Plan

Written by : Knowledge Centre Team

2022-04-23

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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. Purchase your term plan now!

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.

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 Smart360 Term Plan. This Canara HSBC 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.