Is there high risk when purchasing a term life insurance plan?

Sunil’s father and uncle had purchased similar term life insurance policies from the same insurer at around the same time. However, when both of them died within the same year, months from each other, the difference in the insurance company’s behaviour was starkly visible. While Sunil’s father had been almost a chain smoker for the last 20 years, since before the policy tenure began, his brother had lived a more sedate lifestyle with lots of exercise and minimum consumption of intoxicants.

When Sunil’s father died, he was forced to undergo several rounds of interviews with the insurance company, until they finally refused to settle his claims stating that the policyholder’s death had resulted from behaviour that had been listed under exclusions to his term insurance policy. However, at the time of his uncle’s death, Sunil’s cousins were able to successfully and quickly claim the death benefit from the insurer, which resulted in easing a lot of the family’s financial burdens.

High risk term life insurance is often blamed for times when insurers do not settle claims as expected by the family of the policyholder, post their death. However, it is important to maintain transparency at all times with the insurance company and agents since this can often spell the difference between claims being settled or not.

It is essential to read through policy documents when they are first issued since this is where the benefits and exclusions are listed. The exclusions, which are documented in fine print, mention all the different instances in which the insurer will not settle claims in case of the policyholder’s death. Since term insurance is a blanket protection for the life of the policyholder, it is important to read through the fine print and understand the exclusions which render your high risk term life insurance policy redundant.

Read on to learn about a few important things you must consider before purchasing a term life insurance cover.

  • Time of Purchase:
    Since term insurance provides a blanket protection for the death of the insured, its premiums are calculated on the basis of several factors including age of the policyholder and their pre-existing medical conditions. Thus, if a person begins investing in a term insurance policy at a young age, their premiums will be cheaper since they have a longer period of time to pay it off.

  • Number of Plans:
    While one term insurance policy is enough for providing cover in case of death, it often does not prove sufficient, especially if the policyholder contracts a terminal or critical disease such as cancer. It is best to invest in an additional cover for such situations, by investing in plans separate from the high risk term life insurance policy.

  • Tenure:
    It is important to decide on the tenure of the term life insurance policy in advance. The tenure can be decided keeping in mind factors such as how long employment period will last or other financial obligations such as children’s education or home loans, vehicle loans, etc.

  • To Purchase Online or Offline:
    These days, with increasing digitisation, it has become possible to purchase high risk term life insurance policies online. Not only are policies considerably cheaper when purchased online, but buying online also enables the policyholder to choose from a variety of options. Browsing online before making a purchase enables the person to browse through the different plans available, their benefits and features as compared to other plans; and then take an informed decision. Opting for an insurance policy online also allows the policyholder to maintain transparency throughout the process. They can fill up their documents themselves, thereby ensuring minimal dependency on the insurer getting personal details right.

  • Deciding on the Insurer:
    Picking an insurer for purchasing a term life insurance policy, which will provide benefits only once the policyholder is dead, can be a daunting task. There are several insurers in the market, who all offer attractive options for potential policyholders. However, it is important to check their credentials and reviews available in the open market, including their claim settlement ratio before choosing to go ahead with a particular insurer.

High risk term life insurance policies can be regulated by choosing add-ons which allow for additional cover, especially against terminal illness or critical illness. The Future Generali Flexi Online Term Plan not only provides nominees with a death benefit of Rs. 1 crore, which can be availed by the policyholder paying premiums starting for as little as Rs. 16; but also ensures an Income Benefit. This enables the insurer to pay a fixed income to the nominees for a period of time post death of the policyholder.

Is there high risk when purchasing a term life insurance plan?
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