Important Things to Know Before Buying Term Insurance
Why Is Term Insurance Important?
If the primary earning member of a family passes away due to illness or an accident, the family’s financial stability can be seriously affected. Existing loans or liabilities can further worsen the situation. Term insurance is essential to protect your family’s livelihood and financial future in such circumstances.
How Long Should You Take Term Insurance For?
Ideally, term insurance should cover your working years, usually up to the age of 60.
You may consider extending the policy beyond this age only if someone continues to be financially dependent on you.
How Much Term Insurance Coverage Do You Need?
A commonly recommended formula is:
20 × Annual Income + Outstanding Debts = Required Coverage
Example:
- Annual income: ₹5 lakh
- Total debt: ₹25 lakh
Required coverage = (₹5,00,000 × 20) + ₹25,00,000
= ₹1.25 crore
When Is the Right Time to Buy Term Insurance?
The earlier you buy, the lower the premium.
Example (₹1 crore cover up to age 60):
- At age 30: Approx. ₹14,200 per year
- At age 40: Approx. ₹30,300 per year
Buying early helps lock in a lower premium for the entire policy term.
Key Points to Check Before Buying a Policy
Declare habits honestly: If you smoke or consume alcohol, disclose it clearly to avoid claim issues later.
Disclose medical history: Inform the insurer about major surgeries and existing conditions such as diabetes, thyroid issues, cholesterol, or high blood pressure.
Medical check-ups: If the policy is issued after a medical test, the insurer cannot later accuse you of hiding health conditions.
Accident benefit rider: This is important, as it provides financial support if you become disabled due to an accident and are unable to work.
Critical illness rider: If you don’t already have health insurance, adding this cover can help you claim a lump sum if you are diagnosed with a serious illness.
Which Insurance Company Should You Choose?
- Prefer companies that have been in the market for many years.
- Choose insurers with a wide branch network.
- Check the claim settlement ratio (including death, maturity, and surrender claims).
- Do not choose a policy solely based on low premiums or discounts.
- Buying through a trusted agent is advisable, as the agent’s support can be crucial for your family during the claim process.
Conclusion:
Term insurance is not an expense-it is a long-term financial safety net for your family. Choosing the right coverage, buying it early, and being transparent while purchasing can ensure your loved ones remain financially secure in your absence.
