Term Insurance

What is Term Insurance?

Term insurance is a type of life insurance policy that provides financial coverage for a specific period of time. During the policy tenure, even if the life assured dies due to any unfortunate event, the beneficiary will be provided financial protection under this policy. For a specific ‘term’ or period of the year, the term insurance plan offers life insurance cover against the fixed premium paid by the insured.

This term insurance plan not only makes you able to avail financial protection but also can offer you to fulfill your future needs such as your child’s marriage, his/her higher education, and so on.

Among all the life insurance policies, a term insurance plan provides the highest life coverage for the minimum paid premiums during the period of the policy. For example, Premium for Rs. 1 Crore Term Insurance cover can be availed as low as Rs. 411 per month. Even some insurance companies offer that the fixed premiums can be paid at once or at regular intervals for the entire policy term or for a limited period. The Premium amount varies on the basis of the type of premium payment method the buyer chooses.

It has to be remembered that if the life insured survives the entire policy period, the coverage at the earlier rate of premiums is not guaranteed after the term insurance policy expires. The insurer has to either go for the extended coverage with the different payment conditions as per the availability with the insurer or forgo the coverage entirely.

Why Should You Buy a Term Plan?

You should always go for a term insurance plan not only to combat the financial uncertainties but also to provide protection to your family in absence of you as life can be unpredictable. There are multiple other reasons to opt for a term insurance plan and the major ones are as follows.

Protection To Your Family – A term insurance plan helps you to meet the monthly expenses of the people who depend on you or the family members, even when you are not around.
Secure Your Children’s Future – This policy also helps you financially at the time of your child’s marriage and higher education and more.
Safeguard Your Valuable Possessions – You can also avail a term insurance policy to buy valuable assets like a house or a car. In case of your unfortunate demise, often the family members find it very difficult to repay the loans. In that situation, the term insurance plan becomes a messiah as the term insurance pay-out can be used for paying off the burdening debts.
Risks Related To Lifestyle – Nowadays, a poor lifestyle is posing a threat to humans as it is inviting the risks of different ailments and diseases. Some term insurance policies not only provide financial protection to the dependents or the dear ones of yours, after the unfortunate death of the insured but also offer critical illness protection for a lifetime. It also pays for the diagnosis of some critical illnesses like cancer or heart attack.
Highly Flexible – Different policy seekers have different requirements according to their necessity. Term insurance plan is highly flexible and one can buy an online or offline term insurance plan according to his convenience and also can change or customize the plan as per his needs.
Massive Coverage, Low Premiums – The term insurance plans offer high coverage at premiums that are affordable to the majority of people. If the policy-seeker buys life insurance plans online, the premium rate becomes even lower due to the absence of agents and mediators.
Riders Benefit – Most term life insurance plans offer some additional benefits, known as riders, along with death cover to the insured. You can choose riders like accidental coverage, critical illness coverage, return of premium, etc. at a little extra premium cost. These riders ensure that you get the maximum benefits of life cover without expending much from your pocket.

Key Features/Benefits of Term Insurance

A term insurance plan is an inseparable insurance policy in everyone’s life as it protects the insured and his family financially, even if after his unfortunate demise and it is specially designed to lower the financial risks in one’s life as well. Here are some major highlights or benefits of this policy.

Safety For Loans and Liabilities – After the unfortunate demise of the insured, his family often finds it difficult to pay off the debts or loans. This term insurance gives your dependents relief from financial liabilities such as loans or any other debts.
Protection Against Critical Illness – Along with the life cover, the term insurance plan also offers coverage for the critical illness. For this, you have to add a small add-on and you can avail yourself of a lump sum amount of payment when any critical illness occurs to you for the first time like kidney failure, cancer, heart attack, and some more. An online term insurance plan also offers financial protection to your family and dependents if you suffer any disability or critical illness.

Let’s have a look at the benefits it provides.

Supplementary income in case of loss of income due to accidental disability or illness.
You can also get a lump sum amount if you are diagnosed with any critical illnesses that are mentioned in the Policy Document.
Additional sum insured is also available in case of the sudden demise of the insured.

High Sum Assured at an Affordable Premium – As compared to other life insurance policies, a term insurance plan is available at such a low premium that it is affordable for the majority of people. Even a regular term insurance plan, including TROP, generally comes with a 105% return on the premium benefit when the policy matures.
Tax Exemptions – Term Insurance plans offer tax benefits on premiums paid up to Rs. 46,800 under Section 80C. New-age Term Plans with critical illness cover also offer additional tax benefits on premiums paid up to Rs.7,800 under Section 80D. You also get tax benefits subject to conditions under Section 10(10D) on the money that your family receives in case of an unfortunate event.
Protection in Case of Disability – Some insurance companies pay your future premiums in case of total and permanent disability. As a result, your life insurance cover continues even if the insured is unable to pay premiums.
Multiple Death Benefits – If the life assured dies unfortunately during the tenure of the term policy, in that scenario, the beneficiary or the nominee receives the total death benefit that is chosen at the time of the commencement of the policy. Depending on the type of term insurance plan, the death benefit may stay the same over the whole tenure of the plan.

Multiple payment options are available with the different insurers for this plan including the lump sum payment, lump-sum payment along with an annuity that might be monthly, quarterly or yearly, or simply annuity that is spread over the agreed number of years.

Survival and Maturity Benefit – The standard term insurance policy does not come with any survival and maturity benefit. Though due to the increasing demand for it, many insurers have come with a TROP (Term Return of Premium) plan that offers maturity and survival benefit. TROP plan returns the premium at the end of the policy tenure if the life assured survives the term period.
Easy To Buy – It is no longer a tedious job to find a proper term insurance plan according to one’s needs as it can be bought online after doing extensive research. It is always advisable to do thorough research before opting for any term policy that can serve all of your requirements.
Long-term Protection – This term policy protects you for a longer period. This remains valid for up to 70 years. With some insurance, it can be extended up to 85 to 100 years of age.
Riders Benefit – One can extend the term insurance plan by choosing for a rider or any other variants that are convenient for the insured, for example, the inclusion of the return of the premium.

Types of Term Insurance Plans

There are different types of term insurance plans that are available with different insurance companies in India. The major types are as follows.

Level/Standard Term Plan – This is the most common type of term insurance plan that is available with almost all the insurance providers in India. For this plan, the sum insured is chosen at the beginning of the policy and it remains constant throughout the tenure of the policy. The lower the age is, the lower the amount of premium has to be paid.
Increasing Term Insurance – With this type of term insurance policy, you can increase your sum assured at specific points in the policy term and the rate of this increase is predetermined. This policy is very much effective to keep up with the rising prices and to ensure that your family or dependents have enough funds to sustain after the inflation. If you can predict the rise in your financial liabilities in the future, this policy is best suited for you. Usually, the tenure of this policy is higher than the other types of term insurance policies.
Decreasing Term Insurance – It is just the opposite of Increasing Term Insurance as the sum insured decreases at a predetermined rate as your age increases. It is for those people whose liabilities decrease and the need for a higher sum assured decrease simultaneously as well with the increasing age.
Return of Premium Term Insurance – It is a new and very popular type of term plan that offers you a savings component, which is generally not offered by others term plans. In the event that you outlive your policy term, all paid premiums till the maturity date are returned to you. It has to be remembered that the return of premium is made only if you haven’t made any claim during the policy term.
Convertible Term Plans – A convertible term insurance plan is a policy that can be converted into another type of insurance plan at a later stage; for example, a whole life plan or an endowment plan. If you expect your financial priorities to change in the coming years, you can opt for this type of term plan. For instance, if you are currently risk-averse, but expect to become more flexible in that regard, you can opt for a term plan that can be converted into a whole life plan.

Group Term Insurance Plan – It is specially designed for businesses, companies, organizations, societies, associations, or large families and offers coverage for all the members of the group. This type of term plan provides all the general benefits of a standard term insurance plan but the overall coverage is generally more in terms of illness or other factors that are excluded under the individual term plans. Most of the group insurance plans are available offline as they are flexible and customized according to the needs of the policy-seeker.
Single Life and Joint Life Term Insurance Plan – A joint term insurance plan is cheaper than two individual term insurance plans and in both cases, the benefits and the features remain more or less the same. This plan is best for the couple with the children as it will secure the child’s future in case of the unfortunate demise of parents.
Offline and Online Term Insurance Plans – The offline term insurance plans are sold in the traditional methods like through an agent or at the branch of the insurance company but the online term plan is sold on the internet. The online term plans are cheaper than the offline ones due to the absence of the agent or middleman. Even some insurers offer a notable discount on the premium amount to be paid if you choose to buy the plan online.