Do’s (Things You Must Do)
1. Assess Your Coverage Needs Carefully
- Calculate the Human Life Value (HLV) — your income, liabilities, family expenses, future goals (education, loans, etc.).
- Ideally, the sum assured should be 10–15 times your annual income to ensure your dependents can maintain their lifestyle.
- Use online HLV calculators or consult an advisor to get the right estimate.
Why: Underestimating coverage can leave your family financially vulnerable.
2. Disclose All Facts Honestly
- Provide accurate details about your age, occupation, income, lifestyle, and medical history.
- Declare smoking/drinking habits and any pre-existing illnesses truthfully.
Why: Concealment of facts may lead to claim repudiation later, even after years of paying premiums. Term insurance relies on the principle of utmost good faith.
3. Compare Plans from Multiple Insurers
- Evaluate different insurers on premium rates, claim settlement ratio, solvency ratio, and policy features.
- Use IRDAI’s annual report or verified comparison portals to make an informed choice.
Why: Term insurance is a long-term commitment; selecting a stable and reputed insurer ensures peace of mind.
4. Understand the Policy Terms and Riders
- Read the policy brochure and key benefit illustration before signing.
- Riders such as Accidental Death Benefit, Critical Illness Cover, and Waiver of Premium can add value at nominal cost.
- Avoid unnecessary riders that don’t suit your life goals.
Why: Knowing inclusions, exclusions, and waiting periods helps avoid future disputes.
5. Choose the Right Policy Duration
- Ideally, cover yourself till your planned retirement age or till your major financial liabilities (like loans) end.
- Don’t take overly short terms just to save premiums.
Why: A longer policy ensures your family remains protected during your most financially active years.
6. Review Claim Settlement and Service Reputation
- Always check the Claim Settlement Ratio (CSR) — a higher ratio (>95%) indicates efficient claim servicing.
- Look at customer reviews, grievance redressal timelines, and digital servicing facilities.
Why: In emergencies, smooth claim processing is more important than small premium savings.
7. Opt for Online Purchase When Possible
- Online plans are cheaper (5–20% lower) as they eliminate intermediary commissions.
- You can directly customize, compare, and apply through the insurer’s website.
Why: Online policies offer transparency, control, and documented proof of disclosures.
8. Nominate Wisely and Keep Records Updated
- Nominate your spouse, parent, or legal heir. Update nomination if family circumstances change.
- Keep a copy of the policy document and payment receipts in a safe, accessible place.
Why: Wrong or outdated nominations cause claim settlement delays or disputes.
Don’ts (Things to Avoid)
1. Don’t Buy on Premium Alone
- The cheapest policy isn’t always the best. Look beyond price — evaluate insurer reputation, claim service, and flexibility.
Why: A slightly higher premium with a reliable insurer is better than a low-cost plan with poor service.
2. Don’t Delay Buying
- Premiums increase with age and medical risks. Every year of delay can raise premiums by 8–10%.
- Health conditions developing later can lead to rejection or loading (higher premiums).
Why: The earlier you buy, the cheaper and easier it is to get approval.
3. Don’t Hide or Understate Health Information
- Many applicants hide smoking, drinking, or minor ailments.
- Insurers verify through medical tests and health declarations.
Why: Any misstatement can invalidate the policy, even after long-term payments.
4. Don’t Forget to Review the Policy Periodically
- Revisit coverage every few years or after major life events (marriage, childbirth, loans).
- Increase cover via top-ups or new policies if your responsibilities grow.
Why: Insurance should evolve with your financial obligations.
5. Don’t Mix Investment with Protection
- Term insurance is pure protection — don’t confuse it with ULIPs or endowment plans.
- For wealth creation, use mutual funds or separate investment products.
Why: Keep protection and investment goals distinct for clarity and efficiency.
6. Don’t Ignore Exclusions or Waiting Periods
- Term plans may exclude suicide (first year) or death due to participation in hazardous activities.
- Check these clauses thoroughly.
Why: Awareness prevents unpleasant surprises during claim time.
7. Don’t Rely on Verbal Promises by Agents
- Always verify features and benefits in writing from the official insurer website or policy brochure.
Why: Only written terms in the policy document are legally binding.
Conclusion
Buying a term insurance policy is one of the most responsible financial decisions you’ll make. It safeguards your family’s dreams and secures their future when you’re not around.
Follow the Do’s — assess your needs, disclose facts honestly, read the fine print, and choose a trusted insurer. Avoid the Don’ts — rushing into decisions, hiding information, or buying purely on price.
With the right approach, a term plan can truly become your family’s financial shield, offering peace of mind and lasting protection.
