5 Questions You Need To Ask On Term Plans

By | May 12, 2015

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If you’ve ever sat for hours in front of a Las Vegas slot machine plunking in coin after coin and waiting for those four 7’s to ching-a-ling into view, you know what it’s like to keep paying premiums towards your term plan without ever seeing a penny in return.

Why then do people buy term insurance plans?

Term plans are the simplest among various life insurance options. It is one of the most demanded insurance products both online and offline simply because it’s cheap and consumers are convinced about its benefits.

However, there’s another side to this term insurance story. Claim rejections and premium payment dropouts are happening in many more cases than expected. This is because many insurance buyers seeking term plans are not asking themselves some rudimentary questions before buying.

We give you five such questions.

Do all term plans give lifelong cover?

It’s a myth that term plans offer lifelong coverage. Insurance policies are generally designed to offer protective coverage for a person till he pays the premium and there will be a maximum age limit as specified in every plan. Most insurance plans come with an entry age limit of 60-65 years and offer coverage till 75 years.

However, some companies like LIC, ICICI Prudential, SBI Life and Metlife are offering whole life policies. Most of them provide lifelong coverage as long as you pay the premium. But some, like LIC’s Life Long Term Plan, offer coverage till 80 years only. So, read the fine print before you ink the large print.

Do term plans include personal accident cover?  

Term insurance plans are basic life insurance plans with the lowest premiums and high coverage for the incident of death of the insured. They are designed in such a way that they provide the family with lump sum compensation in case of death of the insured. Most term plans offer the same assured cover irrespective of the cause of the death, except the exclusions (as cases of suicide), as specified in the policy. But many people think that accidental deaths have special consideration under a term plan.

If you wish to get additional cover, such as double sum insured in case of accidental death or permanent total disability, you have to choose a rider. For example, if you are choosing ICICI Pru iProtect Plan, a usual coverage of Rs.50 lakhs for a 35-year-old individual is available at a premium of Rs.7,000, whereas a double protection of accidental cover comes at Rs.9,700.

Is suicide covered under a term plan?

Death by suicide is not usually covered by most term insurance plans. However, some policies cover it after 1-2 years. It all depends upon the policy you choose and its terms and conditions. Apart from death by suicide, death due to any sort of self-inflicted injuries or by voluntary participation in dangerous hobbies are also either not covered or covered with certain conditions under a term insurance plan.

What is the investigation procedure for accidental death?  

Term life insurance plans pay the sum assured in natural, accidental as well as death due to critical illness. They also cover death occurring outside the country. But if a claim arises within the first two years of buying the policy, or if it is death occurring due to unnatural circumstances, like an accident, the company investigates extensively before settling the claim.

Each company has its own investigation procedure and a panel of medical professionals to investigate unnatural death claims. The company seeks information including copy of police FIR in case of accidents or medical report indicating the cause for death by illness, along with a written statement outlining the date, location and circumstances of the accident. The investigation is carried out on the basis on these reports.

What if death occurs due to a lifestyle disease?

In the event of death happening due to any lifestyle disease like smoking or overdose of alcohol etc, the insurance claim can be denied if the insured has concealed the information from the insurer. Smokers, people consuming alcohol, and those having lifestyle diseases like obesity, high blood pressure, etc. are generally categorized in a different risk pool and charged a higher premium as compared to others.

So these pre-existing medical conditions, if any, need to be mentioned in the application form of the insurance, and the policy will be approved after medical tests or at a higher premium. But, concealing the same at the time of buying the insurance and subsequent discovery can lead to claim rejection.

A term insurance policy offers a higher insurance cover at very low premiums, making it ideal for every individual. Depending on our financial scenario and liabilities, you can choose a term ranging from 5-30 years for a term plan.

But, know the claim terms and the claim process before you buy. You don’t want to end up spending hours at the wrong slot machine, do you?

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