5 Things to Know Before Buying a Term Plan in India Today

Investing in a term plan in India is perhaps the most rational thing anyone can do for the economic well-being of their family. As life is becoming more uncertain and expenses rise, having your family economically well-off in the event of your demise is not only a rational thing to do, but also a necessary one. Term plans, being affordable and easy, have surged in popularity over the last few years. However, to utilise this protection instrument at its best, there are a few extremely critical aspects that every purchaser needs to think about.

Below are the top five things you should know before purchasing a term plan in India today.

1. Understand What a Term Plan Truly Offers

A term plan is a level life cover policy. It does not have any maturity return, as in the case of an investment-linked insurance policy. The sole intention is to deliver the lump sum amount (the sum assured) to the nominee in the event of the death of the insured during the policy term.

Since it is not associated with savings or investment returns, a term plan is very affordable compared to other insurance policies. This makes it the best option for those who want maximum coverage with minimal premium. However, do not confuse its simplicity with a lack of value; it is designed solely to provide your dependents with financial support during difficult times.

2. Start Early for Lower Premiums

The earlier you buy your term plan, the lower the premium. The healthier and younger you are, the cheaper the premium. The earlier you buy a term plan, i.e., in your 20s or early 30s, the better protection at affordable rates.

Waiting for a few years and then buying the policy will increase the premium manifold, particularly if medical issues arise after a few years. Insurers also charge extra or place restrictions if pre-existing health conditions are discovered during policy application.

3. Choose the Right Sum Assured

One of the common questions is, "How much coverage do I need?" The right amount of sum assured would depend on your salary, your expenses, your lifestyle, and your long-term goals. A simple rule to remember is that the term plan should offer a minimum of 10 to 15 times your annual salary.

For instance, if your annual salary is ₹10 lakh, ideally, you would want a cover of ₹1 crore or ₹1.5 crore. This guarantees your family can continue to live their lifestyle, pay off any debts (mortgage) and plan important life events, such as education or marriage, in the absence of your support. Many insurers have calculators online to assist you in determining the amount of coverage needed based on your needs and expenses.

4. Choose the Appropriate Term Policy and Riders

Policy term or policy duration is another important factor. Ideally, the policy should continue until your dependents are independent or you retire. Most people like to opt for policies with terms ranging from 30 to 40 years.

Also, term policies enable you to personalise your coverage with riders or add-ons. Riders typically include critical illness cover, accidental death benefit, and waiver of premium. These add to your policy by providing extra coverage for certain scenarios.

For instance, a critical illness rider can cover a lump sum if you are diagnosed with a critical illness during the policy term; this could be a big help in covering the cost of treatment.

5. Compare and Opt for Digital Solutions for Greater Transparency

Gone are the days of buying insurance from middlemen and long documents. Now, the entire term plan process, from comparing and calculating premiums to documentation and buying, can be accomplished online in a few easy steps.

Not just for you to compare different schemes, premiums, benefits, and claims history, but also you are able to buy directly without the additional cost of agents. Online medical assessment is provided even by most insurers, which makes it even easier.

Also, check the claim settlement ratio of the insurer. The greater the ratio, the greater the dependability, so your family members do not have to struggle to settle claims.

Final Thoughts

Purchasing a term plan is not another financial choice; it's a promise to safeguard your family when they may need it most. One of the most affordable and sensible instruments for life insurance, a term plan allows you to obtain high coverage at comparatively low premium rates, provided it is purchased early in life.

Before making a decision, take the time to determine your dependents' financial needs, shop online with apples-to-apples comparisons, and select a term and sum assured that aligns with your target. The wiser you are, the more beneficial the outcome will be for both you and your loved ones. A term plan never guarantees riches, but it guarantees something of equal value: peace of mind.