🛡️ Choosing the Right Term Insurance Plan (Simplified Guide for Every Family)
Term insurance is one of the most important financial decisions you’ll ever make.
It doesn’t help you earn returns — but it protects your family financially if something unexpected happens.
Still, many people delay it or choose the wrong plan because of confusion.
This guide will help you choose the right term plan step-by-step — without technical jargon.
1️⃣ Decide the Right Coverage Amount
A simple thumb rule:
✔ Coverage = 15–20 × annual income
Example:
| Annual Income | Recommended Cover |
|---|---|
| ₹5 lakh | ₹75 lakh – ₹1 crore |
| ₹10 lakh | ₹1.5 – ₹2 crore |
| ₹15 lakh | ₹2 – ₹3 crore |
Also consider:
-
Existing loans (home, car, personal loan)
-
Future expenses (kids' education, marriage)
-
Daily living expenses
The goal is simple:
👉 Your family should continue life without financial pressure, even if you're not around.
2️⃣ Choose the Right Policy Duration
Your policy should protect you until major responsibilities are over.
Best option:
✔ Coverage until age 60–65
Avoid very short terms like 10–20 years — your financial responsibility will still exist.
3️⃣ Select a Pure Term Plan (Not Return of Premium)
There are two types:
| Type of Plan | Premium | Benefit |
|---|---|---|
| Pure Term Plan | Low | Only death benefit |
| Return of Premium (ROP) | High | Returns premium if no claim |
Return of premium sounds attractive — but you pay much more for a small return.
👉 Term insurance is protection, not investment.
4️⃣ Check Company Claim & Financial Strength
Key indicators:
| Factor | Ideal Value |
|---|---|
| ✔ Claim Settlement Ratio | Above 95% |
| ✔ Solvency Ratio | Above 1.5 |
These numbers indicate reliability and ability to pay claims.
5️⃣ Add Only Useful Riders
Riders improve your coverage — but choose only what matters.
Recommended riders:
| Rider | Why |
|---|---|
| ✔ Critical Illness Rider | Pays lump sum for expensive illnesses |
| ✔ Waiver of Premium Rider | Future premiums waived if disability occurs |
Optional:
-
Accidental Death Benefit Rider (only if your work involves risk)
6️⃣ Prefer Plans With Medical Tests
“No medical test” offers may seem easy — but:
🚫 premiums are usually higher
🚫 claim rejection risk is higher
Medical tests = transparency + better protection.
7️⃣ Be 100% Honest While Filling Details
Share accurate:
-
Health history
-
Lifestyle (smoking, alcohol)
-
Existing insurance
Non-disclosure may lead to claim rejection later, even after many years.
8️⃣ Update Nominee Information
Your nominee should be:
-
Spouse
-
Parent
-
Adult children
If nominee is a minor → add an appointee/guardian.
✅ Quick Term Plan Checklist
| Requirement | Status |
|---|---|
| Coverage = 15–20× income | ✔ |
| Term until age 60–65 | ✔ |
| CSR > 95% | ✔ |
| Solvency ratio > 1.5 | ✔ |
| Useful riders added | ✔ |
| Medical test done | ✔ |
| Nominee updated | ✔ |
🏁 Final Thoughts
A term insurance plan is not for saving — it's for protecting dreams.
You’re not buying a policy.
👉 You’re buying peace of mind for your family.
Compare carefully, choose wisely, and review once every few years.
📌 Coming Next on FinPath India:
➡️ Best Term Insurance Companies in India (Based on Data, Not Marketing)
➡️ How Much Term Insurance Do YOU Need?
Stay connected — simple finance begins here.
💙 FinPath India — Making Finance Easy for Every Family
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