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9 most asked questions about Term Insurance

MANISH CHAUHAN 1,000 COMMENTS
How does claim settlement work in case you have more than one term insurance policy? Does term
insurance provide cover outside India? What if I suffer from some major illness or start smoking after
buying a term insurance policy? How easy is it to get a claim from a private insurance company as
compared to the state-owned Life Insurance Corporation of India (LIC)? I am sure you must be concerned
about all these questions if you have a term insurance policy or planning to buy one.
Today, I will answer some of the most asked questions, which an individual has in his mind, about term
insurance. These questions if left unanswered would not only lead to fear, but may also delay one from
taking the right decision. Please note: The following questions and answers are only for term insurance
policy and are generally true for any companys term plan. However, very rarely these questions and
answers may differ across insurers.

1. Do Term Insurance pay in case of Accidental Death ?

Yes, term insurance pays in case of an accidental death. The sum assured or cover taken under the term
plan will pay the claim if the death has occurred due to any reason, be it natural or accidental death, or
death due to some illness. There are certain riders (additional bene ts) such as accidental death bene t,
permanent disability rider and critical illness rider. By buying/adding these riders to the policy, a
policyholder can ensure that his nominee will get an amount over and above the basic sum assured (due to
any of the rider-related incidents).

2. Does Life Insurance covers death outside India ?

Yes, term plans cover death outside India provided the policyholder has updated this fact with the
insurance company. He needs to mention that he now lives outside India. Just like change of phone number,

address or nominee, there is a facility in the policy service form where the policyholder has to mention that
he is going abroad. However, if he is going to a country that is marked as unsafe like Pakistan, Burma,
Somalia etc, then the company will decline this facility. Otherwise, this cover will be valid in other countries
like US or UK.

3. To what extent Pvt Insurance companies investigates death

compared to LIC ?
There is a difference between early claim and normal claim. If a claim arises within the rst two years of
buying the policy (This period varies from company to company), the company investigates extensively
before settling the claim. You can very well understand if someone has a cover of Rs 50 lakh by paying Rs
7,000 annually (And he has taken this policy on monthly basis, i.e. paying around Rs 600 monthly), then the
company is at a great risk. Hence, the company will doubly check everything to settle the claim. In normal
claim, premiums are paid regularly and the policy is in force for a long period, say 12 to 15 years. In these
cases, there are not much issues in getting a claim, be it LIC or any private company.

4. If I buy a term insurance policy today, can its premium change in the
future?
Unless and otherwise its mentioned in the policy document. Premium of a term insurance remains the
same throughout the term of the policy provided everything remains the same with the policyholder. That
is, the policyholder has not developed any illness or any smoking/drinking habit. On declaring any such
thing, company might apply loading and thus the premium amount changes.

5. What if a person becomes a smoker after some years of taking the

policies ?
If the policyholder has developed any habit, like drinking or smoking, after buying the policy, he generally
does not have to disclose this fact to the company at all, unless its clearly mentioned in the policy
document

6. What if a person was a smoker long back but not at the time of taking
the policy ?
Depends on the policy, but just for example, the Kotak Life Insurance proposal form mentions that the
client has to declare whether he was a smoker or drinker earlier also even if he has left that habit long ago.
Please see page 4, question 10.3 of this document . However, I am not sure about other companies. Also, it
depends on the company whom they consider as a non-smoker at the time of issuing a policy. For example:
Max New York Life Insurance, for its Platinum Protect (term insurance), considers people, who have left
smoking more than three years ago, as non-smokers. So please check the companys rule

7. What kind of deaths are not covered in term insurance?

Some important facts, which most of the people are unaware of, are that most companies exclude Death

due to Terrorist Attack. Although such claims are settled on humanitarian grounds later on when the
nominee approaches Insurance Regulatory and Development Authority (IRDA) but such exclusion is there
in most companies. Other important fact, which public at large is unaware of, is that insurance companies
do not cover death due to war or natural disaster like earthquake/tsunami. Because in these cases, death
toll is high and the claim to be settled runs in crores of rupees which is dif cult to settle by the company all
of a sudden. Therefore, these facts should also be kept in mind while buying a term insurance.

8. How to take care of claim settlement in case of more than two

policies?
The very rst thing, in these cases, is to declare in the proposal form that you already have a policy from an
XYZ company. (There is a column in every companys proposal form, which a client has to ll if he has an
insurance policy from the same company or any other company). Once such information is provided, then
at the time of claim, the usual practice is to submit the Death Certi cate to the insurance company with
whom the policy is running for the longest period. Other companies are then informed of the procedure
due and an acknowledgment from the FIRST company is provided to them which is accepted by other
companies.
Moreover, of late, it has been reported that generally insurance companies do not ask for an original death
certi cate to settle the claims, even a photocopy of the certi cate will do. So be alert while lling the form
and provide all the information about your previous policies to prevent even a minor problem later on.

9. Can NRIs buy Term Insurance ?

They can, but there is a catch. As a general rule, A person has to be resident in india to take up insurance
policy from an Indian Company, reason being the documents required by the company like Address
proof/age proof are to be for some place in India. Moreover, if the Sum assured required is more than 50
lakhs or so, customer is required to submit his nancial papers such as last 3 years ITR or Form-16 which
again should be done in India only. Last thing, medical tests would be done at some medical center af liated
to the insurance company near the address of the client which again should be in India. So these are reason
why insurance might have been declined to some NRI.
So one way which might work is this , If a NRI wants to take Insurance, then on his/her next visit to India he
should submit his proof of residence, age, last 3 years ITR etc and get his medical done at his Indian
address. this way he can get his policy issued very easily. However, there is no need to complicate it and
incase you are out in some country and plan to be there for next couple of years , the best thing would be to
take term insurance from your country of residence and later when you come back to India , you can buy
term insurance that time.
Comments Do you have any other doubts in Term Insurance which are not covered here? Which one out of
the above 9 did surprise you most ?
The inputs are provided by Dhawal Sharma, who is an agent for Kotak and Max Bupa .

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1,000 Comments

Add Comment

Raghav
August 13, 2016 at 7:55 pm

Hi Manish,
I think this is 1000th comment of the post. Congrats and Thank you for helping people
like me with their nancial decisions.
I am working in Public Sector. I have 25L LIC Of ine Term Plan which was through an
agent. I am not sure what agent has written in the form. I also have 5L Postal Insurance
(Endowment). I want to get rid of both policies but should take at least 50L Term Plan
before that. I have been analyzing Online Term Plans. I was stuck between ICICI,
HDFC & Max Life. I came to know that HDFC & Max are going to be merged. I also see
fall in HDFC Claim settlement ratio etc.
Meanwhile, my father & colleagues are suggesting me to take LIC Policy as it is a Govt.
undertaking. I am also concerned with Terror Attacks, War, Natural Disasters etc.
Below are my queries:
1) Does Private Insurance companies cover Terror Attacks, War, Natural Disasters etc.
Most of them not mentioned anything about these in Exclusion List.
2) One of the Bloggers mentioned that there is chance of scam like Sathyam in case
of Private Insurance companies even though they are governed by IRDA. (I think he is
not against any Private rm)
3) Is it safe to take One Term Plan from LIC and other from Private.
4) HDFC or Max Life, which one do you suggest keeping Merger in view.
Please understand I am more concerned about my family as I am the only person
earning.
Thanks & Regards,
Raghav
Reply

PankajSinha
August 2, 2016 at 10:18 pm

Hi Manish,
Thanks for such a nice article.
I have bought one ICICI Pru term insurance policy in July 2016. While purchasing it i
had mentioned that i am a smoker and also consume alcohal which they had lled in
their application form and i also do have a soft copy of that.But in the bond paper they
havent mentioned anything on that and they have neither conducted any medical test.
When i called them and asked to understad the reason then they said that since i had
already mentioned about my consumption of tobacco/ alcohal and my age is also
under 30 so medical test was not required here. But i am just thinking that will it cause
any issue when actual need will come ? Can you please tell me whether i should be
worried about it or not ?
Regards,
Pankaj SInha
Reply

Manish Chauhan
August 11, 2016 at 1:18 pm

They must have mentioned that in the main agreement paper which has
come. Ask them to include that
Reply

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