1. Term insurance pays a death benefit if covered conditions are met
The policyholder pays premium for life cover during the term. Pure term plans generally focus on protection rather than building an investment corpus.
Tip: Insurance solves a risk-transfer problem.
2. Cover should replace financial obligations
Think about family living costs, loans, child goals and other dependants, then subtract assets already available for those goals.
Tip: Cover need is linked to financial dependence, not salary alone.
3. Not everyone needs the same amount
A person with no dependants and no liabilities may have a different need from a sole earner supporting children and a home loan.
Tip: Do not buy a round number because an ad says so.
4. Disclosure at purchase is critical
Medical history, occupation, smoking and other proposal information should be answered accurately. Misrepresentation can create claim problems.
Note: Do not hide medical or lifestyle information to reduce premium.
5. Quick check
Who generally has the strongest need for term life cover?
Answer: A - Life cover primarily protects people who would face a financial loss if the insured dies.