Checklist: Things to Know Before Buying a Term Insurance Policy

Buying term insurance isn’t like buying a new phone or upgrading your car. It’s bigger. It’s about answering the question: If something happened to me tomorrow, would my family be okay financially?

And while the idea of term insurance sounds straightforward—you pay premiums, your family gets a payout—it’s not always that simple. The wrong choices can leave your loved ones underinsured, facing claim rejections, or financially shortchanged. That’s why a checklist before buying term insurance isn’t just helpful—it’s absolutely necessary.

Why This Checklist Matters

Everywhere—Reddit, Quora, Twitter, LinkedIn—you’ll find stories of people regretting their term plan choices. Either they went for the cheapest premium and later realized the coverage was too little, or they hid medical details and their family struggled with a rejected claim.

One Redditor wrote:

“I bought a 50L cover at 25, thought it was more than enough. Ten years later, loans, kids, inflation—it’s peanuts now. Don’t make my mistake. Go big on coverage early.”

Another Quora user explained how a relative’s claim was denied because of non-disclosure of smoking habits. Their takeaway? Honesty upfront saves heartbreak later.

The Ultimate Checklist Before Buying Term Insurance

Here’s what you should tick off—line by line—before signing that dotted line.

1. Calculate the Right Coverage (Don’t Underestimate)

A common thumb rule is 10–15× your annual income. But this isn’t enough on its own. Consider:

• Outstanding loans (home, car, education)
  
  

• Future education costs for children (inflation-adjusted)
  
  

• Lifestyle expenses for at least 15–20 years
  
  

• Emergency buffers and medical needs
  
  

This is why many young families find ₹1 crore coverage more realistic than ₹50 lakh. Don’t let low premiums tempt you into going small—your family’s stability depends on it.

2. Choose the Right Policy Tenure

Your policy should last until your financial responsibilities reduce. For most parents, this means until the youngest child is financially independent (usually late 50s to early 60s).

On LinkedIn, financial advisors often recommend:

• If you’re in your 20s/30s → go for a 30–40 year tenure.
  
  

• If you’re already in your 40s → pick a plan that covers until retirement.
  
  

3. Look at Claim Settlement Ratios (CSR)

The CSR is simply the percentage of claims an insurer pays out. A CSR above 95% is a good benchmark. But don’t stop there—dig into reviews on Reddit or Twitter to see how quickly and smoothly claims are processed. After all, numbers on a brochure don’t show customer experiences.

4. Be 100% Honest in Disclosures

This point can’t be stressed enough. Declare smoking, drinking, pre-existing medical conditions, even minor surgeries. Many families on Quora have shared stories of rejected claims because “one small detail was hidden.” Remember: insurers investigate thoroughly before releasing payouts.

5. Pick Add-Ons and Riders Wisely

Riders enhance protection—but only if they’re relevant:

• Critical Illness Rider → Covers big diseases that wipe out savings.
  
  

• Accidental Death Benefit → Boosts payout if death is due to accident.
  
  

• Waiver of Premium Rider → Keeps policy alive if disability prevents you from working.
  
  

But don’t over-stack riders; it only bloats premiums unnecessarily.

6. Compare Premiums—but Don’t Chase the Cheapest

Yes, cost matters. But “cheapest” often means hidden trade-offs: limited riders, lower tenure options, or stricter claim scrutiny. On join.in, advisors point out: “A slightly higher premium for a reliable insurer is worth the peace of mind.”

7. Check Policy Exclusions Carefully

This is where most people trip up. Term policies often exclude:

• Death due to suicide (first year of policy)
  
  

• Death due to undisclosed lifestyle habits (like smoking)
  
  

• War or terrorist activity in some cases
  
  

Know what’s covered—and what isn’t—before committing.

8. Review Every 5 Years

Life changes—marriage, kids, loans, new job. So should your insurance. Many parents on Twitter/X admit they bought a cover in their 20s and never updated it, only to realize later it was “laughably small” compared to current needs.

Check out full checklist here - https://algatesinsurance.in/products/term-insurance-checklist/

Real-Life Scenario: The Power of Getting It Right

Imagine this: You’re 32, earning ₹12 lakh per year, with a young child. You buy a ₹1 crore term plan with a 30-year tenure, add a critical illness rider, and disclose everything honestly.

Ten years later, life throws an unexpected challenge. Your family gets the payout smoothly because every detail was clear from the start. Loans are cleared, your child’s education is secure, and day-to-day expenses continue without disruption.

Now imagine if you’d bought a smaller cover, or skipped disclosures. That safety net could have been full of holes.

Quick Recap of the Checklist

• Calculate realistic coverage
  
  

• Pick tenure wisely
  
  

• Verify CSR & reviews
  
  

• Be 100% honest
  
  

• Add riders only if useful
  
  

• Balance premium with reliability
  
  

• Understand exclusions
  
  

• Review every few years
  
  

This isn’t just financial planning—it’s future-proofing your family’s life.

Final Thoughts

Buying term insurance is one of the most important decisions a parent or breadwinner will ever make. It’s not about the policy—it’s about your family’s tomorrow. The difference between a rushed choice and an informed one could mean whether your loved ones live securely or struggle in uncertainty.

So before you buy, slow down, tick off this checklist, and choose with clarity. If you want a deeper dive into this decision-making process, check out Your Guide to Choosing the Perfect Term Insurance Plan.

Because in the end, insurance isn’t about you—it’s about ensuring the people you love can live without fear, even in your absence.