Re-assemble Step 3: How to buy Term Life Insurance

Published: November 19, 2017 at 10:02 am

Last Updated on September 27, 2023 at 5:24 pm

₹e-assemble is a video series covering the basics of money management and goal-based investing for absolute beginners. Step 1 was listing Goals, Dreams and Nightmares. Step 2, laying the foundation of wealth with an emergency fund and in this week, we shall move on to step 3, buying life insurance policy. If you already have such a policy, do check if you completed these tasks: Things to do AFTER you take a term insurance policy! Also, please do share this article with friends who don’t and use the calculators linked to check if your life is cover sufficient.

This week, I wanted to make two short videos, it ended up in three: Part A:   we discuss the basics of a life insurance purchase on the blackboard – what to look for and more importantly, what not to. Part B:  we head over to a term policy comparison portal for selecting a policy using the grand technique of inky, pinky, ponky. Part C: I run through the basics of a life insurance calculator.

Let us first get to the videos. After that, go over a summary and additional resources.

Part A: How to buy Term Life Insurance  – What to look for?

Part B: How to buy Term Life Insurance: Comparing policies

You may need the headphones for this one. I mention my life insurance cover as 44K, that is my health cover premium. My life cover from LIC is 10Y old and costs 36K for 60 Lakhs (loaded due to obesity and BP). Sorry for the mistake.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

Why LIC? Because I am opinionated and pig-headed and mis-trust privates. I only trust LIC because it is a Sarkari dinosaur (slow, but gets there eventually) not because of its high claim settlement ratio. Just like claim settlement ratio, it is psychological garbage. I have to live with it, but cannot thrust it on you.  Everything has a price and in this case, I got to pay more. Thanks to time and inflation, the premium is not so big today, but it was 10Y ago. You can make smarter choices.  At that time Aegon was the only online player and there was no way I going to buy from a new kid on the block.

Would I change my stance now if I could go back in time? We can’t go back in time,  but if we could, yes. With age I have become less stupid in some directions and more stupid in others.

Why am I am not asking you to buy LIC?  As choices go, LIC is not a bad choice though (personal finance and all that sort of thing) but  I am sure you  choose on your own and make a smart choice that you can live with ( I have no issues with mine)

Why have I not changed my policy for something less expensive? Inertia (I hate change) and with age developed an auto-immune condition (Myasthenia Gravis) which meant my premium will not go down!!

Part C: How to buy Term Life Insurance: How much life cover do we need?

How to buy Term Life Insurance: Executive Summary

  1. Find out if your employer offers a group life cover in addition to the usual group base health cover. If yes, make sure it is activated. If they also offer a group super top-up health cover, find out the conditions and the cost. If it is not too expensive opt for it.
  2. Life and health insurance premium payments are an investment for our peace of mind. If we treat them as expenses, we will end up buying bad products
  3. When you browse for products, some features will catch your eye. They are meant to! The more attractive the feature in life insurance and health insurance, the more useless it is! Read policy wordings to find out the real pros and cons.
  4. Do not waste time thinking about claim settlement ratio, solvency ratio etc. They are of no use. Insurance, unlike investment, is a personalized product. Read more: How to choose a term life insurance provider in 30 minutes!
  5. The insurer looks you (the wonderful and unique ‘you’) and offers a policy for ‘you’. That is the premium is a personalized number. Therefore asking others about their experience is useless.
  6. Get a simple term life cover: nominee gets 100% of sum insured in one shot upon death.
  7. Avoid all riders. get an accident policy separately (that would be step 5 in this series)
  8. Avoid premium-back policies. It is a waste  of money
  9. Get a cover only up to age 55 or at beat 60 (longer the duration, more the premium = waste of money)
  10. Avoid policies that offer the lump sum in stages and/or pay a monthly income to the nominee. It is a waste of money.
  11. Read policy wordings again! Look for exclusions. Preferably the only exclusion should be suicide in the first year (or two). Remember, death by accident is also death and will be covered by a life insurance policy (even if the insured breaks the motorcycle act)
  12. Do not take the premiums shown in policy comparison portal too seriously. They are only indicative.
  13. Choose a comparison only to find a list of insurers who offer the product. Opt for a portal that does not insist on a real email and real phone no (this is an old list might still work: Non-intrusive term insurance comparison portals )
  14. Remember: insurance is a contract based on good faith. Be honest while applying and provide all relevant information. Although the onus on proving fraud is on the insurer, they can be pretty good at it and sometimes even deny genuine claims: The Games Life Insurers play! and No insurer will hand life insurance claim amount on a platter!
  15. Remember buying life insurance is the first step to building wealth. If you do not invest right and grow your net worth quickly, the sum insured will lose value due to inflation!
  16. You will have to find the courage and common sense to make a quick choice. If you don’t have this,
  17. Choose an insurer and find out the maximum cover that they will offer you (based on your income and risk profile). If you are a young earner, go for the maximum amount if you can afford the premium. It will come in handy if you get married and have children.
  18. Use this Insurance Calculator for the Young if you unmarried and this Step-by-step guide to plan for your child’s education and marriage if you have children to plan your life cover needs.
  19. Always evaluate your life cover if you get new dependents (wife and children)
  20. Be sure to write down an action plan: how should your family use the sum insured after you are gone.  They may not do it that way, but at least you tried!
  21. Give your family the contact of a fee-only financial planner to manage the sum insured. Otherwise, your friendly neighbourhood sales agent will …

Buy after reading; buy with confidence. A term insurance policy is just the beginning of our wealth building process. Heres hoping  we stay alive long enough to burn the policy document (when the policy matures expires).

You can catch the other videos here: ₹e-Assemble

You Can Be Rich Too with Goal-Based Investing, my first book is now available at a 35% discount for Rs. 258. It comes with nine online calculators. Get it now.

Gamechanger, my second book is now only Rs 149 (25% off).  Get it or gift it to a young earner 

The ultimate guide to travel by Pranav Surya is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step.  Get the pdf for ₹199 (instant download)

Use this form to ask Questions or reg. the robo template ONLY (For comments/opinions, use the form at the bottom)

And I will respond to them in the next few days. I welcome tough questions. Please do not ask for investment advice. Before asking, please search the site if the issue has already been discussed. Thank you.  PLEASE DO NOT POST COMMENTS WITH THIS FORM it is for questions only.

[contact-form][contact-field label=”Name” type=”name” required=”1″][contact-field label=”Email” type=”email” required=”1″][contact-field label=”Ask your question (Got an opinion or comment, use comment box at the bottom of the page. DO NOT post them here)” type=”textarea” required=”1″][/contact-form]

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)