Before buying a term insurance policy, it's important to assess your coverage needs. You should evaluate several important factors before making a decision. You can also explore the key factors to consider before choosing a term insurance plan.

Consider factors such as your family's living expenses, outstanding loans, and future financial goals to arrive at Mortality Gap. The Sum assured should be sufficient to cover your family's expenses in case of an unfortunate event.

To explain it further, How much cover do I need?

The purpose of term insurance is to ensure a similar lifestyle for dependents in case of the sudden demise of the insured life.

This essentially means that the size of term insurance should be able to replace the income of the insured lives to the extent the income was used to meet expenses and service outstanding liabilities like existing loans. This depends on which life stage you are in and your persona as mentioned above.

The best way to calculate the size of term insurance is to estimate the size, type, and timing of the expenses along with the size of outstanding liabilities and macroeconomic factors like investment returns on various asset classes, inflation rates, tax rates, etc. using the Need-Based Approach

The whole idea is to ensure the Mortality protection gap is identified and the risk is mitigated.

The policy term should be chosen based on your age, retirement age, and financial goals.

How one decides on policy tenure shall primarily depend on selecting any one of the following two approaches and understanding why one need Term insurance

Riders are add-on benefits that can enhance your policy coverage. Waiver of premium on critical illness and disability can be added along with the base term plan.

This rider provides you with a premium holiday from the date or diagnosis of the listed critical illness or should a permanent disability arise due to accident. This ensures that Term insurance covers 3 D's death, diseases, and disablement.

For all other riders such as Accident Death Benefit Rider, Critical illness Rider, etc. it is advisable to evaluate the exact purpose and study the difference between adding it with base Term plan or buy a standalone offering for its comprehensiveness.

Pricing plays a key role as it should justify the value that you derive from the products.

The premium amount should also be affordable and sustainable for the entire policy term. It depends on your age, policy tenure, etc. One should be mindful of the same and consider the needs are also in line with income, budget, and other financial obligations while choosing the plan.

This parameter evaluates the financial strength and stability of the insurance company providing the term insurance policy. It's important to research the Brand reputation, evaluate the financial strength and stability of the insurance company providing the term insurance by studying certain financial ratios such as Solvency ratio, persistency ratio and commission ratio

Source: IRDA Annual report 24-25

Source: Public Disclosure of Individual Insurer Form L-22 (24-25)

Source: Public Disclosure of Individual Insurer Form L-22 (24-25)

This factor helps you evaluate the insurance company's track record when it comes to paying out claims, what is the frequency with which they settle claims, no. of complaints they received per 10,000 claims, etc.

Source: Individual insurer website and Insurance Handbook (Part 1)- INDIVIDUAL DEATH CLAIMS OF LIFE INSURERS - INSURER-WISE (Page 15)

Source : Public Disclosure of Individual Insurer Form L-39

Deaths resulting from natural causes are automatically covered by a term insurance plan.

If an insured person passes away due to a medical illness or a specific disease like kidney failure, these deaths are usually covered by the policy. It's essential to note that coverage for medical illnesses is provided only if they develop after the purchase of the term plan.

Accidental deaths are also comprehensively covered by term insurance policies in India. It doesn't matter where the accident occurs, be it at home, at work, or while on an adventure. So, if an insured person dies in an accident involving fire, vehicles, heavy machinery, electrical shocks, or other such incidents, their family can claim the death benefits.

It is to be noted that death due to the following reasons are excluded from accidental death claims

• Alcohol consumption while driving OR
• Consumption of any type of drugs while driving OR
• Involvement in any criminal or illegal activities
• Death from Natural Calamities or Man-Made Disasters
• Any death resulting from natural calamities like floods, earthquakes, or man-made disasters like terrorism or war is covered under a term insurance policy in India.

If you are an adventure enthusiast and meet with an unfortunate accident while participating in thrilling activities like trekking, paragliding, or scuba diving, your family will receive the term insurance claim.

However, if you've opted for riders alongside your term insurance in India, be aware that these riders may not cover all types of deaths.

For example, while term insurance policies cover deaths due to participation in adventurous activities, the rider you've added may exclude it.

Therefore, it's crucial to meticulously review the policy wordings of both the term insurance policy and the associated riders in the Indian context to understand which types of deaths are covered and excluded by each.

Most term insurance policies exclude coverage for deaths resulting from suicide. Such deaths are generally covered with a one-year exclusion. It's advisable to check with your insurance provider for their specific stance on suicides.

In case of death due to suicide within 12 months from the date of commencement of risks under the plan or the policy's revival date, the beneficiary/nominee of the policyholder shall be eligible for at least 80% of the total basic premium paid by the policyholder till the death date or the surrender value available as on the date of death provided the policy is in force.

After the initial 12-month period, the suicide clause typically no longer applies, and deaths due to suicide are treated the same as any other cause of death under the policy. However, specific terms and conditions can vary between insurance providers, so it's crucial to carefully review the suicide clause in your term insurance policy to understand its exact terms and applicability.

Deaths directly caused by participation in criminal activities are automatically excluded from policy coverage.

If an insured person dies under the influence of alcohol or drugs, whether due to an accident or other causes, this type of death is not covered by the term insurance policy.

When applying for a policy, you are required to disclose any pre-existing medical or health conditions you may have. If you fail to disclose such conditions, and your death subsequently results from these undisclosed pre-existing conditions, your insurer may reject the claim.

When purchasing a life insurance policy, you can designate only your wife and children as beneficiaries, with an MWP mandate that cannot be altered. This mandate is applicable to all policyholders, regardless of religion.

You can decide how to allocate the insurance benefits among your beneficiaries—either equally, by percentage, or in full to a single nominee. This allocation must be finalized at the time of purchasing the policy under the MWP Act and cannot be changed later.

An insurance policy under the MWP Act acts as a trust for your beneficiaries. While setting up a separate trust fund is not necessary, you can appoint a trustee to manage the policy for your beneficiaries. If you choose, you can name your wife as both the trustee and nominee to prevent misuse of the benefits.

The insurance policy under the MWP Act is held under a single title, ensuring that no one other than the chosen nominee(s) can claim the benefits.

Creditors cannot claim the benefits from a policy taken under the MWP Act. Only your designated nominees are entitled to the policy proceeds.

If you have outstanding loans or debts, creditors may have a claim to your insurance benefits, but this does not apply to all policies under the Act. Your nominees will retain exclusive rights to the benefits under MWP policies.

In the event of family disputes within a joint family or Hindu Undivided Family (HUF), the MWP Act ensures that your wife and children receive support from the policy proceeds, even if they do not share in the family's assets. However, the policy benefits under the MWP Act are not considered part of the joint family's assets.