Level Term Insurance
Term life insurance has been gaining significant traction in recent times, especially after the Coronavirus wreaked havoc in India and across the globe. While looking for suitable term plans, it will benefit you to first understand the types of Term Insurance offered. This article specifically discusses Level Term Insurance - the most straightforward and affordable option among other variants.
What is Level Term Insurance?
A Level Term Insurance Plan guarantees fixed premiums for the coverage amount decided at policy inception. This essentially means that the Sum Assured under the policy and the premium payable against it remains constant throughout the tenure of the policy. It is a pure risk cover and upon the death of the policyholder, the beneficiaries are entitled to receive the death benefit, without any deductions (such as in the case of Decreasing Term Insurance) or increments (as in the case of Increasing Term Insurance).
Features of Level Term Insurance
- Premium amount is fixed throughout the policy term.
- Sum Assured remains constant.
- Death benefit is payable if it occurs within the policy term.
- There is no maturity benefit.
- Policy period can range up to 10, 20, or 30 years.
- Tax benefits under Sections 80C and 10(10D).
Term Insurance Companies
Check and compare plans from 21 IRDAI-approved term insurance providers before purchasing a term plan.
How Does Level Term Insurance Work?
Level Term Plans are standard term covers that charge a fixed premium to insure you for a specific period of time. The premium amount is decided by Insurance Providers on the basis of factors such as age, annual income, medical health, among other needs and liabilities.
The working of a Level Term Insurance Plan is like any other. The following pointers should guide you through the process.
- Decide the coverage amount (Sum Assured), policy term, and death benefit payout option.
- Pay premiums on a monthly, quarterly, half-yearly, or annual basis.
- On your unfortunate demise, death benefit is paid out to the beneficiaries as a lump sum amount or in installments.
- In the event that you survive maturity, the insurer is not liable to pay any benefits, unless you chose the ‘Return on Premium’ option at policy inception.
As an example, let’s consider Aryan who bought a level term insurance policy for a Sum Assured of Rs. 20 Lakhs. He chooses a policy tenure of 30 years and pays the corresponding premium amount on a monthly basis. Now, in the event that Aryan dies under unfortunate circumstances, Aryan’s mother who is the primary beneficiary is required to intimate the Insurance Provider about it and raise a claim. Upon successful verification of the claim, the Insurance Company is liable to send the death benefit of Rs. 20 Lakhs to Aryan’s mother.
Why should you choose Level Term Insurance?
The benefits offered by Level Term Insurance are manifold. In addition to being affordable for the general public, it is simple to understand and there are no hidden costs or surcharges involved. The following pointers highlight the various benefits of such insurance plans.
- Assured Financial Protection
Your dependents can use the money from level term life insurance to pay for any financial commitments. A level term life insurance payout can assist your loved ones and family members in covering any ongoing bills, existing college fees, loans/mortgage payments, or any other financial obligations you may have.
- Constant Premium Amount
The policy's premium does not alter. The life insurance company is prohibited by law from increasing your premium during the term of your policy. Even if you suffer a substantial change in health, the insurance company is required to protect you for the amount agreed upon until the policy matures. People prefer such policies because it helps them in adhering to a budget. With fixed premiums, the Life Assured knows what (s)he has to pay every month, quarter, or year.
- Tax benefits For the Insured
Policyholders of Level Term Insurance can enjoy tax benefits under sections 80C and 10(10D) of the Income Tax Act, 1961. Further, the death benefit received by the beneficiaries is tax-free.
- Affordable and Easy-to-Understand
Buying a term insurance is extremely cost-effective and does not create a hole in the pocket of the individual. Buying a best term plan is no more a tedious task rather one can easily buy an online term plan on the premise of their requirements.
- Enhanced Protection Through Riders
Additional optional benefits such as critical illness and accidental death/ disability or Accelerated Sum Assured are also available under the term insurance policy. The benefits can be added to the term plan by paying an additional premium amount. Examples of additional riders are Critical Illness Rider, Waiver of Premium Rider, Accidental Death, and Permanent/partial disability and dismemberment rider.
Benefits of Renewing the Term Insurance Policy Online
| Factors | Level Term Insurance | Decreasing Term Insurance | Increasing Level Term |
| Sum Assured | Sum Assured remains constant throughout the policy term | Sum Assured decreases over time | Sum Assured increases at regular intervals |
| Who should buy it? | Ideal for those looking for a regular source of income after the Life Assured’s death | Ideal for those who wish to cover debts/mortgages or expect their financial obligations to decrease with time | Ideal for those who expect financial responsibilities to increase with time |
Are there any cons of buying Level Term Insurance?
The cons of buying level term insurance can be majorly two-fold. First, if you outlive the policy tenure, you do not get any benefits. Secondly, you age considerably by the end of the policy period, which subsequently increases the possibilities of medical conditions. Therefore, any plan that you buy after, will incur higher premiums to offset the risks associated with your health.
Conclusion
Level Term Life Insurance is the simplest and most cost-effective form of Term Life Insurance policy. You can choose the policy tenure of 5,10,20, or 30 years according to the needs and financial goals. So, always opt for a plan with longer policy tenure to avail the maximum coverage. You may assure higher coverage for your loved ones with level term life insurance if you take the right approach and stick to your budget.
