Things to Consider Before Buying a Term Insurance Policy

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A salaried person who has dependents must have insurance coverage to compensate for financial loss in the event of death. The term insurance policy provides insurance coverage for the duration specified in the policy. These are some important considerations before finalizing a plan.

Coverage amount

Coming up with the amount of life cover needed is the most important task. Many online tools and calculators are available to help you. These calculators take into account age, lifestyle, number of dependents, outstanding loans, average monthly expenses and inflation rate to arrive at the amount. One can also take the help of an independent financial advisor for the same.

Insurance period

The insurance period is the next important choice to make. When the policy is purchased at an early age, it is advisable to choose the maximum period of insurance available. This guarantees a relatively low premium for the entire duration of the policy.

5 types of term insurance policies

What is a term plan?

A term plan is a life insurance policy that pays the beneficiary the sum insured upon the death of the insured. The policyholder receives nothing if they survive the term of the policy. The term plan is a pure life insurance product where a high amount of insurance coverage is offered at the lowest premium and therefore offers the highest protection at the lowest cost. Here are five types of term plans along with the insurance premium calculations in the respective cases.


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One can buy policies through agents or from the company. Alternatively, one can access the websites of insurance aggregators that provide comparable quotes for the same coverage amount and duration. The premium offered by aggregators or direct platforms is usually lower.

Choose company

It is important to consider factors such as the age of the insurance company, customer reviews, claims settlement rate and its financial strength. In addition, greater importance should also be given to the company’s customer orientation, in terms of sales, service and payment options.

Points to note

  • It is not necessary to purchase an insurance policy for a period that exceeds the person’s retirement age, as most dependents would then have become financially independent.
  • An insurance policy purchased at an early age has a relatively lower premium than a policy purchased later

(Content on this page is courtesy of the Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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