Term Insurance FAQs
(Frequently Asked Questions)
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Term Insurance Frequently Asked Questions

One of the most foolproof ways to secure your family's future financial health is to invest in a Term Insurance plan. A Term Plan essentially guarantees a pure life cover for the policyholder for a fixed tenure. In the unfortunate event that s(he) succumbs to death while the policy is active, the nominees assigned by her/him receive promised death benefits. This amount can then be used to fund future expenses, debt obligations and fulfil long-term and short term goals. In order to understand about the intricacies of Term Insurance.

Term Insurance FAQs

This article discusses some of the most relevant and Frequently Asked Questions by customers who are looking to get insured under a Term cover. Read along to find your answers.

1. Should I buy a Term Insurance plan or a traditional plan such as Whole Life cover, Endowment plan, ULIP etc.?

The idea behind buying an Insurance Plan should be to effectively accomplish your goals. If your goal is to safeguard your family's interests in your absence, a Term Plan offers the opportunity to do so at affordable premiums, especially if you are the only earning member in your family with several dependents.

On the other hand, if your goal is to save or earn returns on market-linked investments or wealth creation, you should opt for traditional endowment plans or ULIPs.

2. Can I switch my term plan to a different type of plan (such as a whole life cover) after buying the policy?

As you age, your needs will change. Several Term Plans come with the option to port your plan to Whole Life Cover. You should check with your particular Insurance Provider for details on Term Insurance portability.

For your information, the IRDAI (official regulatory body of insurance in India) does not currently allow switching Insurance Providers for an existing Term Plan. However, you could switch to a different policyholder at the time of policy renewal.

3. Does Term Insurance cover deaths occurring as a result of natural disasters?

No, Term Insurance Plans do not cover deaths resulting from natural disasters. Further, there are a few other exclusions against which Insurance companies do not offer death benefits. These exclusions are death due to Self-inflicted injury, HIV/AIDS, Intoxication, or Homicide.

4. What is the cost of Term Insurance?

The cost of a Term Insurance Plan depends upon various factors such as age, annual income, basic sum assured, tenure of insurance coverage, health conditions, and whether you are a smoker/non-smoker.

However, please note that the premiums increase with age, therefore it is always advisable to get a plan as soon as possible. Visit 'Price Index for Term Insurance' for more clarity on how premiums rates for Term Insurance in India vary as per age, gender and other factors.

5. How do I decide how much cover I need?

Financial advisors are of the opinion that a Term Cover should ideally be a minimum of 10 times your current annual income. In fact, it is always advisable to go above and beyond, if your finances allow. This is for the simple reason that recession and inflation along with additional financial liabilities that you might have, may further deter your family's financial health in the absence of the earning member.

Therefore, we would strongly recommend that you get a cover that is sufficient to at least fulfil debt obligations such as outstanding loans for housing, education etc. The primary advantage of Term Insurance is that you can get a high life cover, to the tune of Rs. 1 Crore and above, at affordable premium rates.

For further assistance, you should visit our page on 'Term Insurance' and/or make use of online calculators.

6. Should I declare myself as a smoker if I don't smoke on a regular basis?

Yes, it is important that you declare yourself as a smoker if you have smoked in the last 12 months. If you don't declare the same and the Life insurance provider finds it out later on, your policy might stand cancelled without benefits.

7. Is it important to add riders to my base plan?

Riders are meant to enhance your coverage. While not mandatory, we suggest that you explore the range of add-on benefits that come with the Term Plans and pick the most suitable one for you.

For instance, in the off chance that you are diagnosed with a critical or a terminal illness or fall victim to an accident, a rider could save you a lot of money.

Cover your Family by term insurance Cover your Family by term insurance

8. Can I invest in multiple Term plans?

Yes, you can. In fact, experts are of the opinion that it is ideal to have two or more Term Plans for an individual. As you age or reach certain milestones in your life, your needs tend to change. A single Life Cover may not be sufficient to sustain your family's needs at the time of need.

It is important that you align your financial obligations to your plan features and then review them as and when required. A major advantage of investing in multiple Term Insurance Plans is that it reduces the risk of having claims rejected.

9. Why are smokers charged more premiums than non-smokers?

Smoking leads to a number of health complications which directly incurs a higher mortality risk. Therefore, Insurance Companies charge higher premiums for smokers to counter this risk.

10. What are the important documents required to purchase a Term Plan?

Standard documents required to purchase a Term Plan are valid ID and address proof. These can include Passport, Voter's ID, Aadhaar Card or PAN Card. Furthermore, you need income proof in the form of bank statements showing salary credited for the last 3 months, Latest Form 16, Income Tax Returns of last 2 years.

If you are self-employed, you are required to submit Income proof in the form of an audited Balance Sheet (certified by CA), Profit & Loss account for the last 2 years, and income tax returns for the last 3 years.

11. Do I get any benefits if I survive the policy term?

Term Covers are usually pure risk Life Covers that offer the sum assured to the nominees on death of the policyholder. Mostly, these plans do not come with survival benefits.

However, there is the 'Return of Premiums' option offered by a number of Term Insurance providers that will pay back the premiums if you survive the policy term. For such benefits, one must go through the policy brochure or talk to the agents directly.

Written By : Naval Goel

Last Updated : Aug, 2021

Naval Goel is the CEO & founder of PolicyX.com. Naval has an expertise in the insurance sector and has professional experience of more than a decade in the Industry and has worked in companies like AIG, New York doing valuation of insurance subsidiaries. He is also an Associate Member of the Indian Institute of Insurance, Pune. He has been authorized by IRDAI to act as a Principal Officer of PolicyX.com Insurance Web Aggregator.

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