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All you should know about Term Insurance (Life Insurance) before buying

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drjpatwa
So first understand concept of Term plan & who need it. Term Plan is basically Life Insurance of person. So, when person dies due to any reason (Natural, accident, murder, Suicide – From 2nd year onwards) insurance company will pay Sum Insured amount you have taken for to your nominee. Plain Term Plan defers from money back & other traditional products of LIC in the way that Term plan is like your vehicle Insurance premium. If anything doesn’t happen to u, ur premium goes for wastage for that year. (But it’s good, isn’t it? ) If the family members (Like Spouse, children, parents) are Financially Dependent on earning person, then only Term Plan is required. So, that your dependents don’t have to struggle financially at extreme level. Also when you have liability like home loan, personal loan etc., then also you should have term plan. Particularly for home loan it is very important because ur family might end up losing home also, if they can’t repay next EMI in ur absence. However, some banks already do insurance for it while taking loan. So do check that also. Don’t just take is because either agent is forcing for it or for earning purpose!!! So, what if husband & wife both are earning handsome amount, in such case do they need to take Term plan? – Answer depends own probability here. Because either of mother or father dies pre-maturely, earning of spouse is enough for children growing & other needs. But rare probability (I hope, this doesn’t happen with anyone) where both husband & wife dies due to accident & child is left alive. So, it depends on individual in such case, whether to take term plan or not. Points to remember while taking Term plan 1) Entry Age Better you enter at early age because unlike health Insurance, here premium fixes at same rate till end (Unless any changes in government tax). So at young age premium will be low compare to later age. So, once you are married & spouse it dependent on u, u should go for it without delay. 2) Cover Upto which age This is most debatable point among insurance provider also. It means suppose you are currently of 30 years age. You want to have your term insurance upto which age 60, 70, 80, 85 or upto 100 years? Its human mentality that we don’t want to waste our paid premium amount, so majority people thinking that anyhow we are going to live avg. 70-75 years. So, better to take minimum cover upto 80 or 85 years of age. But just think at age of 85 years, ur son will be around 55 years & ur grandson will be around 25 years. Now read concept of Term Plan above. Shocked !!! Your child must be not dependent on you at 55, may be you are planning for his retirement? (It’s good to think that long but better you think of ur retirement financial planning first & then if u have extra bucks then no harm in it) & those who are taking 100 years plan, they are basically taking plan for 4th Generation (Ur grandson’s children will be dependent in that case) - GOD save them !!! So, think before choosing plan. As u choose cover upto higher age, ur premium also rises sharply because of higher risk. Calculate how much extra u r paying for choosing higher age amount & take wise decision. I would say don’t go for more than 70 to max. 80 years (Ideally it should be till 60-65 yrs.). Still it’s individual choice. 3) Paying Tenure Here also u have options to choose from monthly, yearly, single time, 5 years, 10 years etc. 1st decide your approximate retirement age. If u r choosing coverage of anything above that age, then better to choose short paying tenure else u will be paying premium at the age of 80 years from ur retirement savings. Also company gives hepty discount if u chooses to pay early for obvious reasons. 4) Sum Insured People saying SI should be 10 times of annual income. So, if ur per annum salary is 10 lac, better to go for 1 cr. SI. But, that u can decide base on ur need & other investment & liabilities. Some people split into 2 companies (like 50 lac in 1 company & another 50 lac in 2nd company) but that will be costly affair, rather than buying 1 cr. From single company. So, I won’t advise splitting of SI in multiple companies (Some does this in anticipation that if 1 company doesn’t honor atleast 2nd chance is there to get from other company) or in same company in multiple tranches (Unless ur salary goes much higher & u want to match SI with it). 5) Which Company to choose Go for well-known brand which can sustain financially for decades. Don’t just go for any company just because it is cheap. You can go for LIC, Hdfc, Tata, Icici, Max, SBI, Bajaj (Bajaj is New player in term insurance business, but well-known brand image) 6) Claim settlement Ratio CSR is Out of total claims received by company in a given year, how much they honored. So, if CSR is 99% then they rejected 1% of total claims. (So, for LIC this 1% will be huge number for other private players it will be small comparatively.) Also CSR data includes all policies like ULIP, Money back plan etc. & not specific of pure Term plan. Also try to check with IRDA report, how many claims are settle within 30 days, how many claims are pending for 1-3 month, 3-6 month, >6 months. 7) Riders / Add-on Here comes tricky part. There are many add-ons which companies offer like a) Terminal Illness – This rider usually comes as free. It means that if u are diagnosed with certain specified Terminal Illness & if doctor gives in writing that u won’t live more than 6 months then company will give u money before ur death. Being a doctor I know that no doctor will give u in writing that patient won’t live more than 6 months. So, practically no use of this rider. b) Critical Illness - This is chargeable rider. It means that if u are diagnosed with certain specified Critical Illness (List differs from company to company& also they mention severity of disease – do check that also. E.G. Just diagnosed with cancer won’t give u money, it should be of minimum severity like grade 3, 4 etc.) then company will give u money before ur death. c) Accidental Rider – Chargeable. At younger age, higher chance of accidental death. So, many consider this rider. So, suppose u have taken 50 Lac SI Term plan with accidental rider of 25 Lac – ur family will get 75 Lacs in case of accidental death while for other death they will get 50 Lac. Keep in mind that in vehicle insurance, we are taking 15 Lacs mandatory PA OWNER cover (Personal accident). So, consider that also before paying extra for this rider. d) Disability Rider – In case u become disable, all ur further premiums are waive off & still ur policy continues. Personally I would prefer plain Vanilla Term plan without any riders. However if u want to take any of it, do read wordings. All hidden T&C lies here. 8) Pay out option Whether you want, ur family to have all amount as lump sum, monthly income or combination of both at pay out. Every option has pros & Cons. Decide it base on your family’s financial management skill & need. 9) Medical tests Each company has different criteria to undergo customer for medical examination before issuing policy. Like age, SI etc. If you are diagnosed with Diabetes, high chances are there that company will apply loading on premium (Charge u higher) which varies from 10-50% or even they can decline. In case of Hypertension, they usually issue policy with some loading or without loading also. (People are smart enough to take BP medicine before going for examination) So, better to take it at early age before disease enters in ur body. 10) Why claim reject Most important question people ask. If they are covering every type of death payable (Even Suicide !!) under Term plan then why claim rejects? Because of following reasons - False general information (Name, age, salary, other details) - False Habit Information (Smoking habit – hardly any smoker says yes while taking it. Hint – Our family members are innocent. If after our demise company agent comes to home for inquiry, wife might speaks out “maine kitna mana kiya tha par fir bhi kabhi kabhi Cigarette pite the” & they found out very good reason to reject. So, Train ur wife from right now. - False Medical Information – Never never hide any disease with them. Some people try to act smarter that my disease won’t be detected in their medical tests. So, better to hide it. But they will find out by various ways & reject it. This is the major reason for claim rejection - Fraud - Delay in filling claim - Some people try to convert natural death into accident death so that they get higher SI bcoz of accidental rider - Death due to war, Terrorist attack, involving in risky activity like scuba diving etc. My view – You take any company’s insurance (Including LIC which is considered as most generous to settle claim), if claim comes within 1st 3 years (Particularly in 1st year) they will consider it as suspicious & will be more vigilant while passing such claim. They will inquire at ur job place, ur neighbourer, past hospital admission to find out something is fishy or not. Once 3 years are passed & u have done nothing wrong like above list then no need to worry regarding claim. It will get pass easily even in less CSR company. 11) Buying Online vs. Offline Unlike health insurance where rates are same online or offline, here in term insurance some company provides same rate for online & offline (Like Tata), while some company provides discount for online purchase (Like Bajaj, Max etc.). So, better to compare both rates before buying policy. If rate is same, better to take it offline from agent who can help at the time of settlement & might provide u some cashback from his commission. If rate is lower in online, better to go for online purchase as it saves cost. My preference companies: Hdfc, Tata, Icici, Max, Bajaj (currently cheapest among well-known brand), LIC (best but higher premium) *Disclaimer: I am doctor by profession but having interest & knowledge in finance. I have taken sub-agency of Insurance business. If you missed my other thread regarding Health Insurance, you can check it here - https://www.desidime.com/forums/dost-and-dimes/... h1. Edit: Those who r worrying extremely about claim rejection should read about Section 45 of Insurance Act - This act has empowered customer immensely. It says that company has no right to reject claim after 3 years even if fraud is detected. Read more about it on https://www.upwardly.in/blog/life-insurance-cla... https://economictimes.indiatimes.com/wealth/ins... https://www.personalfinanceplan.in/life-insuran...
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We are not SEBI/IRDA registered. The information provided herein is for education purposes only. We will not be responsible for any of your profit/loss with this channel's suggestions. Consult your financial advisor before making any decisions.

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Deal Subedar Deal Subedar
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I had Applied for Lic tech term plan and in mail they said without commitment we are postponing my term plan and dedcuting Lab test fees and will pay rest . They are denying . I think they denying on fact of Corona virus going on . So they want to play smart ! . Can I go for Irdai because they denied me for wrong reason ? Or should I mail or call to confirm what is reason ? How they want to postponed without a reason .?

Beacon Beacon
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Company has sole right whom to give policy & whom to reject. Usually other private players refund full amount (Including Gst & test charges). So, u can ask for full refund.

For policy issue decision I don’t think IRDA will interfere. But still u can try…

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Deal Subedar Deal Subedar
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VU for valuable information

Deal Subedar Deal Subedar
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nice

Deal Lieutenant Deal Lieutenant
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Very nice info. VU + KG

Pro Community Angel Pro Community Angel
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Vu + kg for your efforts

Deal Lieutenant Deal Lieutenant
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I have ‘Max Life Online Term Plan Plus’ since last 4 years. I am paying almost 13k premium per year for 1.5 cr cover.

Helpful Helpful
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nominee kisko bana rakha hai jijaji grinning grinning

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Benevolent Benevolent
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Excellent post, thanks for taking out time and posting in detail. Karma given!

Deal Newbie Deal Newbie
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I have 85 lakh term insurance from LIC
35 Lakh in traditional term plan & 50 lakh in tech term of Lic

Deal Subedar Deal Subedar
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Nice post

Deal Cadet Deal Cadet
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I believe ICICI term plan with critical illness rider is very good. Crtical illness is paid on detection of listed illness with no survival clause. Ideally 70 years of policy would be good. Given the cost of medical facility, critical illness rider should be 35L-50L.

Deal Cadet Deal Cadet
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I am in this sector for past 15 years. NEVER ever opt for a private company while buying any insurance. God forbid, if you truly need a real substantial claim, you will repent immensely. Also, when you really need to renew insurance, you will face significant challenges in case of earlier claims, forget 70 years. It will defeat the whole purpose.

Please go for PSUs only – National Insurance Company, United India etc. For Life, LIC.

Deal Lieutenant Deal Lieutenant
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Are all the insurers ask for medical test at start of term plan ? I have googled and found companies that provide without medical. @drjpatwa
Also I went ahead took Bajaj Allianz term life for my wife but I got a call from an their employee saying it not not be fulfilled as she is self employed and has below 5L income. Still have medical tests in couple of days .
If they reject, what private companies are providing term insurance without medical ? Please name a few.

Beacon Beacon
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Currently because of lockdown, if u go for offline purchase Bajaj Allianz is doing upto 50 lac SI & Tata is doing upto 1-1.5 cr. SI without medical.

But it might vary for online purchase. So do check that…

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Deal Subedar Deal Subedar
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Based on the input from the Dimer who made this post, which says :
My preference companies: Hdfc, Tata, Icici, Max, Bajaj (currently cheapest among well-known brand), LIC (best but higher premium)

When we don’t compromise on our Health and standard of living, why should we compromise on Quality when it comes to Life Insurance?
No doubt one should prefer LIC of India as they are best in the field for claim settlements. Atleast one has the best assurance of getting claim settled for his family.

PS: Not saying because I am an LIC agent, I am saying based on the market outside and how private players are fooling around. I have multiple examples where many are duped and now their family and relatives come to me for converting there policy from Private to LIC of India.

Deal Cadet Deal Cadet
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Please provide some examples how private company are duping people so that everyone should know what you want to say
And i personally Have taken Tata aia policy in 20 March policy issued on 15 april without medicals so that i and all can know the difference by the way  
i am working  in general insurance company  since 13 years.

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Deal Cadet Deal Cadet
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I am 25 years old an I am planning to buy term insurance of 1.5 cr to 2cr.

My preference based on my research are ICICI, MAX and TATA AIG or LIC.

I didn’t prefer LIC coz it is giving upto max 40 years term. Considering my age LIC term plan will cover till 65 years of age.
As per historic data average life of Indian male is 70 years to 75 years. And this very reason I don’t want to go for LIC.

So I am considering ICICI, MAX or TATA. If any expert then pls throw some light on which is better.

Deal Lieutenant Deal Lieutenant
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By the time we attain 65, none of our family members will be dependent on us

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Firestorm Firestorm
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If you are a smoker and have quit some time back should you state that you are a smoker?

Deal Cadet Deal Cadet
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thy clearly ask you if u have smoked in last 2 years??
but trchnically if u havent smoked since 3 months.. u r good as non smoker in lab results..

Deal Subedar Deal Subedar
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VU

Deal Lieutenant Deal Lieutenant
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is there any plan available which gives money back if you survive till the maturity of term plan ??

Generous Generous
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I think all gives, right ??
@Darknet_India

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Deal Cadet Deal Cadet
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Dear Dimers take term plan of any company Lic,tata,hdfc,sbi etc But dont take riders(for example critical illness and accidental death and accidental disablity rider Etc) from life insurance company as Mostly they charge you very high premium,less coverage ,and no, Cumulative bonus and no life long renewal option for example if you opt term plan for 70 to 80 years riders will be covered only till 65 in most company SBI general insurance is offering lowest premium of 1200 to 1500 for 50 lakhs cover(Option choosen rest of india)
Table A Normal premium of other company is around 2500 to 3000 rs.

Table A – Accidental death Tablehttps://cdn0.desidime.com/attachments/photos/618985/original/Screenshot_20200529-082409.png?1590722553B – Accidental death + Permanent Total Disability (PTD)
Table C – Accidental death + Permanent Total Disability (PTD) + Permanent Partial Disability (PPD)
Table D – Accidental death + Permanent Total Disability (PTD)+ Permanent Partial Disability (PPD) + Temporary Total Disability (TTD)

Deal Subedar Deal Subedar
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all policy rate will increase from June 1st ??

Blaze Blaze
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good

Deal Cadet Deal Cadet
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@drjpatwa can clam be rejected after death so will insurance company refund the total paying tenture amount given till that date?

Deal Lieutenant Deal Lieutenant
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@drjpatwa sir, what about liquor and smoking affect on term insurance? I beleive most of people declare non-liquor and non-smoker while taking term insurance. How does those are treated by company at time of disbursement?
Also anyone has practical cases you have seen around you ? Where claims has been denied or approved because or ignoring this.

Beacon Beacon
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I already hinted some part of it in my main post.

As I said, first 3 years are crucial. If claim arise in that time, they will try dig out all hidden facts.

If later then try to keep it simple – no record on hospital case paper nor family member should declare it that kabhi kabhi lete the.

Baki problem nhi hoga. Unless person is extreme bevda or chain smoker…

Beacon Beacon
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Those who r worrying extremely about claim rejection should read about Section 45 of Insurance Act – This act has empowered customer immensely. It says that company has no right to reject claim after 3 years even if fraud is detected. Read more about it on

https://www.upwardly.in/blog/life-insurance-cla...

https://economictimes.indiatimes.com/wealth/ins...

https://www.personalfinanceplan.in/life-insuran...

@admin @bumblefoot @anthrax.ut Any way to edit 1st post of this thread? looks like people are extremely scared (Or some people Have created such environment) about claim settlement. For Them above information is very vital & better to add it in 1st post itself.

Deal Subedar Deal Subedar
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If anyone willing for Bharti Axa term insurancen plan …do let me know. Can provide good discount on first premium.
There are some plans where you need to pay only for 10 year for fulll life coverage till 75.

Beacon Beacon
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I knew that some people will come here to defend LIC at extreme level. That’s why I already placed its name in preferred list, however LIC is never my personal preferred company.

Like my other thread on health insurance, here again, I don’t want to repeat one to one argument with anyone. Else I can write a lot about LIC, why not to choose it…

Helpful Helpful
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Very helpful post.
Your post is for information. Please elaborate the reasons not to go for LIC.
Critics will be there but you can opt to not answer or argue.
Now that u hv motivated people to take insurance, it becomes more important to tell us about LIC.
It will help many in making the decision.

I’m a doctor too and also had AML in 2012. Now no routine blood test can show it. Do u recommend any good policy for me. Age 34.

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Deal Cadet Deal Cadet
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Firstly, thank you OP for this post. VU. Secondly, I have a query. Do term insurance premiums fluctuate both ways depending upon world situation? I mean can they decrease in future just as they’re about to increase now?

Beacon Beacon
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Welcome.

Very Less possibility as per me. However others can comment on it if they have any such past experience…

Deal Cadet Deal Cadet
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Anyone looking. For a policy in mumbai pm Me, know for Tata aia or star health.
Thanks

Deal Cadet Deal Cadet
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Is Bajaj Allianz good in term insurance? It is new in this and I think that’s why offering lowest premium. If anyone can provide IRDA data of last year 2019-20 then it would be great.

Post Tycoon Post Tycoon
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You can go with bajaj, all companies raised premium in last 2 to 3 months.

Bajaj also will do that soon

Deal Newbie Deal Newbie
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Thank you so much ,very helpfull

replyuser
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