9 most asked questions about Term Insurance

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 company’s 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 benefits) such as accidental death benefit, 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 first 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 it’s 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 company’s 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 difficult 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 first 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 company’s proposal form, which a client has to fill 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 Certificate 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 certificate to settle the claims, even a photocopy of the certificate will do. So be alert while filling the form and provide all the information about your previous policies to prevent even a minor problem later on.

9. Can NRI’s 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 financial 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 affiliated 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 .

879 CommentsAdd Comment

  1. Prasad Naik

    Manish, I have couple of life insurance policies and Term insurance Policy , In future incase of my death my Family claim both , Is it possible to get my Claim settled from both of them ?

  2. Swapnil

    Thanks for the information, but one thing is not clear that if we have multiple term plan and investment plan for life cover do your family member will get all the benefits of all the policy (Multiple term plan and multiple investment plan).
    Also I would like to know the place where we can verify this information.
    Thanks in advance….

  3. krishgudd


    I am an IT employee and my wife is not working.Can we take Term Insurance for my wife. As per my knowledge term insurance is only for Working employees. Is there any insurance companies provides term insurance for dependents.

  4. sundaramurthy

    hey my question is …Is it mandatory for an insurance company to settle the claim if the policy holder has regurly paid the prmiums for continuously three years and the death occured after three years??

    • THe claim will be paid irrespective of 3 yrs or not . The only criteria is that one should have not cheated the insurance company by providing some wrong info at the time of buying the policy

      • sundaramurthy

        hey manish,

        thanks for your reply.
        my question is …even if we provide some wrong information like a smoker saying that he is non-smoker, is it mandatory for an insurance company to settle the claim if the death occurs after three or four years.

          • sundaramurthy

            how do they know that i am already a smoker at the time of policy taken. because that i could have developed smoking after i have taken policy. you have answered in your 9 important questions that i need not inform the insurer if i have turned as smoker after taking policy.

            Appreciate your answer

              • sundaramurthy

                1.do the family members need to inform the insurance company before going ahead with funeral process of the insured?
                2. If yes and if the family members dont know about the insurance policies at the time of death and later came to know about the policies then how to claim them by their dependents
                3. If production of original death certificate is sufficient to claim insurance, in this case how does the insurance company know that the insured is a smoker or had some health issue at the time of buying a policy?



    Hi Guys,

    Some really helpful information here. My query is that I am 35 years old and took 1Cr Term Plan from HDFC (Click to Protect) 3 years back at a premium of 14k PA (i was 32 then). Now i wanted to increase my SA and realised that the same 1 Cr. Term Plan from HDFC costs me 13k PA and from Max Life at 11k. I am a little surprised and confused here as due to increase in my age, the premium should have been much higher, isn’t it ?

    In such a case what is advisable, should I stop my old policy and buy a new 2 Cr policy or continue with the old 1 and add another policy of 1Cr..Please advise.



  6. Jitendra

    Hi Manish,
    Thanks for informative article. It’s very important subject & wish people understand it.
    I have a query. When I took the term plan, I was told that maximum cover that I can get depends on my income.
    Is there any condition for taking term plan for house-wife?
    Though she is not earning person, lot of house-hold things including finance are handled by her. And family may not be financially dependent on her but emotionally sure it does.
    Can you please provide details / any conditions applicable for term plan for house-wife?

    • JItendra

      yes, the income matters . Generally a housewife who has no income cant get the term plan or very high cover because no one is financially dependent on her.

  7. Alpesh

    Hi Manish,

    I am planning to buy term insurance, googled a few and finally boiled down to HDFC Extra Life Term Plan (with accidental rider) which provides double the sum assured in case of accidental death.
    The policy term for HDFC extends till 40 years. My age is 28 years. I am planning for 1 cr insurance for 40 years. Should I go with this plan? Or are there better alternatives for the same? Should I consider splitting my term insurance as there’s always a fear of rejection.

    Alpesh Rathod

  8. Harsha

    The Reliance Term Life plan brochure says the following.. What does it mean?

    In the unfortunate event of demise of the Life Assured during the policy term and
    provided the policy is in force as on date of death, the nominee will receive the
    maximum of
    Sum Assured; or
    10 times Annualised Premium; or
    105% of the premiums paid as on date of death, excluding underwriting extra
    premiums, if any
    The policy will be terminated once the Death Benefit is paid.


    – Harsha

  9. Hello,

    I am a 28 year old smoker and a regular drinker ( i am trying to quit ) do I qualify for a term insurance
    a) Should i prefer Term insurance or i)go for accident and health insurance ii) Endowment policy iii) normal Insurnace , if yes then which companies ?
    b)If i take term insurance what are the info i should provide to company and documentation to ensure that if claim is there it can’t be refuted(on grounds of current drinking and smoking grounds)
    c) Taking the health check as per Insurance company and paying the premium installments for term insurance , and i still continue(smoking drinking) will i Get claim incase of death (assignable to any serious disease due to longer addiction)

    • a) Go for Term plan anyways . Health insurance is a seperate product, its not related to term plan. You should any ways go for it. There are many companies you can look at , but one suggestion is HDFC, We have a HDFC agency, incase you are interested, let me know and I will connect you to HDFC Person.

      b) Just make sure you give all the info correctly, what ever is asked

      c) Yes, you will still get it . Just make sure you dont hide any facts


  10. Shivakumar

    I thank the author for not being one sided. LIC plans by default cover the life of policy holder from Terrorism Attack and also from Tsunami/earthquake. LIC was the first to pay for Uttarakhand disaster and Lathur earthquake.

    FRIENDS, open your eyes before it is too late. Don’t make your nominees run from pillar to post for claims.

  11. Amol Magar

    Sir, can term insurance companies put an extra load in intallment for diabetic person,is there mandatory to enter im a diabetic ,I am 29 years old, who will pay the medical exam charges ,in term insurance

  12. Sachin

    Dear Manish Sir,
    Me and my wife both took iLife term plan couple of year back. While filling the form I was not knowing that my father had already taken LIC policy for me and he was paying premium for that . Also I missed to list that policy because I gifted this policy to my wife and I was unaware of that .
    So we missed to disclose these details in the proposal form. So my questions here are 1. If I communicate these LIC policy details to Aviva then will they accept that .
    2. Will there be any problems during claim settlement because of this.

    Request you to guide me in the same regards.


  13. kamalkk

    I’m looking forward to a term plan and online option looks good to me as its a hassle-free process. But I’m still not confident that buying term plan online is a good decision or not. Is there any disadvantage of purchasing term plan online?
    Which is the best company in settling the claim in timely manner with an easy process. I’m a non-smoker, non-drinker and earns around 9lac/A. Also, what is the maximum SA I can opt for with my current financial condition. I do not own any other term plan insurance.
    Any suggestions are welcome? And yaa…this forum is great and people have lot of knowledge. Hoping someone will help me on this. Thanks in advance!

    • When you say “Online term Plan” . All it means is that payment is done online and form is filled online . Nothing else changes . the medicals if any has to happen offline only. So dont think that its very different.

      If you wish, we can help you in HDFC term plan.


  14. Raj Kumar Sharma

    Dear Manish,
    If I take term insurance policy and I die due critical disease then will it cover and my family will get sum assured or not ? Also I am suffering from Hepatitis B. but now DNA is negative.
    Kindly advice.

  15. Hi Manish / Advisor,

    I have seen very lucrative bundled LI, Accidental, Critical cover, Premium waiver offer on Aegon Religare website…

    1) Should I go with this company, is it good in settling claims and trustworthy?
    2) Should I go for a Plain vanilla term policy for easier claim settlement for my nominee on death?…
    or the option 1 kind of policy is good?


  16. vikrant

    Hello Manish,

    Thanks for sourcing all this information and keeping AAM AAdMI aware.

    My quey is, I bought a Birla Sunlife Dream Plan with an Enhanced sum assured of around 50lacs back in 2007. The premium I’m paying is Rs.12800.I was not that informed about the policy that time(I was only 23), but now what I understand its an endowment plan. Is it as good as any Term plan or do I need to buy a pure term plan to suffice my Life insurance cover.


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