Cover Calculations and Buying Checklists
Term insurance buying checklist: proposal form, medicals, documents and loan-linked cover
What to check before and after buying a term plan in India, from disclosures and medical tests to income proof, nominee, free look and loan-linked policies.
Before you buy a term plan, make sure of four things: the cover and term are calculated, every answer on the proposal form is true and complete (health, tobacco, other policies, income, occupation), the nominee or MWP beneficiaries are right, and the premium will be paid on time by auto-debit. After the policy arrives, read it within the free-look period and check every detail. Most term claims that fail do so because of something that went wrong at the buying stage, not at the claim stage. This checklist walks through each step, including how to handle the loan protection policy a lender may offer with your home loan.
This guide belongs to the cover amount guide. An interactive version is on the term insurance checklist page.
Stage 1: Before you apply
- Cover calculated from expenses, loans and goals using the life cover calculator.
- Policy term ends at or after the age your dependants become independent and loans are repaid.
- Payment term, payment mode and payout option decided; see policy term and payout options.
- At least three quotes compared for the same specification; see the comparison guide.
- Insurer is registered with IRDAI (check the list of life insurers on the IRDAI website) and the agent, broker or website is authorised.
- Riders chosen deliberately, with their yearly cost known.
Stage 2: The proposal form
The proposal form is the contract's foundation. Under Section 45 of the Insurance Act, 1938, during the first three years from issue or revival, an insurer can repudiate a claim for fraud or for misstatement or suppression of a fact that was material to the risk. After three years, the policy cannot be questioned on any ground.
| Question area | What to disclose | Common mistake |
|---|---|---|
| Medical history | Diagnoses, treatments, surgeries, hospital stays, regular medicines, tests with abnormal results | Leaving out "minor" conditions like high blood pressure, thyroid or diabetes on medication |
| Tobacco and alcohol | Any tobacco use, including occasional smoking and chewing tobacco; alcohol quantity | Ticking "non-smoker" because you smoke only socially |
| Family history | Illnesses of parents and siblings as asked | Guessing instead of checking |
| Other insurance | All existing life policies and pending or declined proposals | Not mentioning a policy with another insurer or an employer cover if asked |
| Income and occupation | Accurate income, employer, job type, hazardous duties | Inflating income to get higher cover |
| Travel and residence | Plans to live or work abroad, if asked | Forgetting a planned move |
If an agent or a website fills the form for you, read every answer before you sign or submit. A wrong answer recorded by someone else still counts as yours. Keep a copy of the completed proposal form; insurers send it with the policy or make it available on request.
Stage 3: Medical tests and documents
- Medicals. Many insurers arrange tele-medical or home or diagnostic-centre tests. Do not try to avoid them; a policy issued after tests is harder to dispute later.
- Income proof. Salary slips, Form 16, income tax returns or bank statements, depending on cover and insurer.
- KYC. PAN, Aadhaar or other accepted ID and address proof, and a photograph.
- Bank details for auto-debit and for future payouts.
If the insurer offers cover with a loading (extra premium), an exclusion or a postponement, ask for the reason in writing. A loaded policy issued on true information is worth far more than a cheaper one issued on false answers.
Stage 4: Payment and start of cover
Under Section 64VB of the Insurance Act, 1938, an insurer cannot assume risk until the premium has been received. Cover starts on the date stated in the policy, after the proposal is accepted. Until then you are not covered, so do not cancel an existing policy before the new one is issued.
Stage 5: After the policy arrives
- Read the policy document within the free-look period, which lets you return a policy you do not want and get a refund less permitted deductions. Check the current period in your policy and on the IRDAI website.
- Check name, date of birth, sum assured, policy term, premium, riders and nominee.
- Check that the proposal form copy matches what you declared.
- Note the grace period for your payment mode.
- Set up auto-debit (e-mandate or NACH) and keep the account funded.
- Record the policy on your e-insurance account if you hold one, and tell your family where the documents are.
Loan protection cover vs your own term plan
Lenders often offer a life cover when you take a home loan. Many are single premium group policies whose premium is added to the loan. The cover usually decreases as the loan balance falls and pays the lender first.
Illustrative. A ₹1.2 lakh single premium added to a home loan at 8.5% for 20 years adds about ₹1,041 to the EMI, and you repay about ₹2.5 lakh in total for it. A ₹50 lakh level term plan for the same 20 years might cost a 32-year-old non-smoker around ₹6,000–8,000 a year (illustrative), pays your family directly, and keeps its value after the loan is repaid.
| Lender's loan cover | Your own term plan | |
|---|---|---|
| Who receives the money | Usually the lender, up to the outstanding loan | Your nominee or MWP beneficiaries |
| Cover over time | Often decreasing with the loan | Level for the term |
| If you switch or prepay the loan | Cover may end or need a claim for a refund of unexpired premium | Unaffected |
| Premium | Often single, financed in the loan | Yearly, from your income |
| GST | Group policies are outside the individual exemption | Individual policies are GST-exempt |
You are generally free to choose your own insurer for loan-related cover. If you are told the lender's policy is compulsory, ask for that in writing, and offer to show or assign your own term plan instead.
Red flags at the buying stage
- Being told that "small" health issues do not need to be declared.
- A promise of "guaranteed returns" on a term plan with no maturity benefit, or of a bonus far above what the benefit illustration shows.
- Pressure to buy a savings policy "because term money is wasted".
- Calls claiming to be from IRDAI or an ombudsman offering a policy or refund. IRDAI does not sell insurance; see mis-selling, free look and fake calls.
Frequently asked questions
Is an online term plan as valid as one sold by an agent?
Yes. The contract and IRDAI rules are the same. Online, you fill the form yourself, which removes one source of errors if you answer carefully.
What if I remember an undisclosed condition after the policy is issued?
Write to the insurer at once, giving the details, and ask it to record the information. It may revise the terms. That is far better than the issue surfacing at a claim.
Should I choose an MWP policy?
If you are married and want the money to go only to your wife and children, consider it. See the MWP Act guide.
Sources
- IRDAI — list of registered life insurers, consumer guidance on proposal forms and free look
- India Code — Insurance Act, 1938 (Sections 45 and 64VB)
- Reserve Bank of India — guidance to lenders on loan-related charges and products
