Features of Term Insurance

Term Insurance: Overview

People are often confused about what term insurance is. In simple terms, term insurance is a type of life insurance policy that offers financial coverage to your loved ones in case of your unfortunate demise during the policy tenure. It is the simplest form of life insurance available at affordable premiums. Term life insurance offers a range of benefits, including:

• Death benefits for the family in case of the policyholder’s demise.
• Cheaper premiums compared to other life insurance products.
• Option to choose a high sum assured.
• Tax benefits on premiums paid.
• Multiple death benefit payout options.
• Rider options to choose from.
• Flexible payment options.

There are various term plans available in the market, but you should choose the one that best suits your requirements. After reading this article, you will have a complete idea of how to choose the right term plan for yourself.

Why Do You Need a Term Insurance Policy?

There are various reasons to buy a term insurance plan, as life is uncertain. Let’s understand the need for a term insurance policy.

• To Secure Your Loved Ones

  Term insurance is considered one of the best investments you can make for your loved ones, as it protects them financially even when you are not with them.

• Secure Your Assets Even After You Pass Away

  If you have a loan or liability, it can add financial burden to your family in case of your unfortunate demise. Having term insurance ensures that your assets are secured and your liabilities do not burden your family.

• To Get a Policy Tenure of Your Choice

  Term plans offer both short-term and long-term protection, ranging from 5 to 40 years, and in some plans, even up to 99 years. You can choose the coverage options as per your requirements.

• To Get Coverage for Critical and Terminal Illnesses

  Various term insurance policies cover critical and terminal illnesses through riders or as in-built benefits. You can get coverage for illnesses such as cancer, heart attack, stroke, kidney failure, and more.

• To Get High Life Coverage

  Term insurance plans offer coverage from as low as Rs. 50,000 up to 5 crores. Some comprehensive term plans also come with no upper limit on the sum assured. This means you have a high chance of getting a substantial sum assured with your term plan at affordable premiums.

Riders That Come With Term Insurance Policies

Here are some common rider options you can choose with your term plan:

Types of Term Insurance Plans

There are several categories of term insurance plans available in the market. Let’s understand each one:

Key Features of Term Life Insurance

Life is uncertain, continuously surrounded by multiple risks, diseases, accidents, or death. In such scenarios, term insurance provides crucial financial aid when these events occur. Let’s look at the key features of term insurance to understand it better.

1. Affordable Premiums

   Term insurance policies come with affordable premium prices compared to other insurance policies.

2. Low Entry Age

   The entry age for purchasing term life insurance is typically 18 years. Most insurers also ask for income proof when buying a term insurance policy. Buying term insurance at a younger age helps you pay lower premiums for a higher sum assured.

3. Flexible Policy Term

   The policy term is defined as the total number of years during which the policyholder is covered. In any unfortunate event that occurs during this period, the nominee will receive the sum assured. You can choose the policy term as per your requirements.

4. Return of Premiums Paid

   If the policyholder survives the full policy term, under TROP plans, they can get all the paid premiums back upon completion of the policy term.

5. Flexibility in Premium Payments

   Term insurance offers customers flexibility in paying premiums. Customers can choose annual, half-yearly, quarterly, or monthly payment options according to their convenience.

6. Tax Benefits on Premiums Paid

   Customers can opt for tax benefits under Sections 80C (maximum ₹1.5 lakh) and 80D (maximum ₹50,000) of the Income Tax Act, 1961.

Additional Benefits of Term Insurance

1. Option to Increase Death Benefits

   Some term plans, such as HDFC Click 2 Protect Super, offer the option to increase death benefits up to a certain percentage.

2. Additional Cover for Spouse

   Term plans, such as HDFC Click 2 Protect, provide policyholders with an option to cover their spouse under the same plan.

3. Pay for a Limited Time While Enjoying Coverage for a Long Time

   Various term plans, such as HDFC Life Click 2 Protect Elite, provide an option to pay premiums for a shorter duration while offering coverage for a long time.

4. Multiple Death Benefit Payout Options

   Some term plans, such as ICICI Pru iProtect Smart Term Plan, offer multiple death benefit payout options, including income, lump sum, lump sum plus income, and increasing income.

5. Option to Increase the Sum Assured Through Top-ups

   Various term plans, such as Tata AIA Sampoorna Raksha Supreme, offer an option to increase the sum assured through a top-up facility.

How Does Term Insurance Work?

Problem

Mr. Ranbeer, a non-smoker, was looking for a plan that would cover his family financially even after his demise, so they would not face any problems.

Solution

He visited PolicyX.com on one of his friend’s recommendations. He provided his information and chose the Max Life Smart Total Elite Protection Plan. Let’s see how this plan works for him with a simple premium illustration table.

Takeaway

In the case of Mr. Ranbeer’s demise during the policy tenure, his family would receive death benefits of Rs 1 crore.

Who Should Buy a Term Plan?

• Someone with Ongoing Loans/Liabilities

  You should purchase a term plan if you have ongoing debts, so they do not burden your loved ones in case of your unfortunate demise.

• Someone with Responsibilities (Child Education, Marriage)

  If you have responsibilities like your child’s education or marriage, you should consider buying a term plan.

• Someone with No Savings

  An individual with no savings should buy a term plan so that their family does not suffer financially in case of their unfortunate demise.

• Earning Member of the Family or Someone with Dependents

  If you are the sole breadwinner of the family or have dependents, you must buy a term plan to cover them financially in your absence.

How to Choose the Right Term Insurance Coverage?

Before buying a term insurance plan, make sure you have decided how much coverage you need. Ideally, your term life cover should be 15 to 20 times your annual income.

Here is a list of factors you should consider before calculating your ideal term insurance coverage amount:

• Analyze Your Monthly Expenses

  The first step before deciding on life cover is to analyze your monthly expenses and study the inflation rate. A suitable life cover can provide financial support to your family in your absence without compromising their cost of living.

• Calculate Your Financial Liabilities

  Consider your major liabilities like debts, loans, your children’s education, marriage, home loans, and business loans. Your term insurance coverage should be sufficient to cover these.

• Age

  A ₹50 lakh term plan might be suitable for a 20-year-old, while a ₹1 Crore term plan might be more appropriate for a 30-year-old married person. Since responsibilities increase with different phases of life, ensure you choose the right life cover to meet your expenses during challenging times.

• Tenure of Your Plan

  Term insurance provides coverage for a particular term. You should plan accordingly after analyzing your liabilities, such as child education and marriage. Ensure these events are covered within your chosen policy term.

• Cost of Premiums

  The cost of premiums plays a very important role in your budget. It should not be so high that it compromises other expenses, nor so low that it results in a reduced life cover amount. Therefore, you must analyze and budget for premium amounts carefully.

Key Takeaways

• Buying a term plan at a younger age is advised, as your premiums are considerably lower.
• Ensure the term plan you purchase fits your budget and does not add any financial burden.
• Choose your add-ons wisely, as each one comes with an additional cost.
• Compare various plans before making a choice.
• Choose the right policy tenure to ensure you are covered when you need your insurance policy the most.

How to Buy Term Insurance?

You can buy term insurance from PolicyX.com, the insurer’s website, their nearest branch office, or any other agent. Let’s look at the buying process for term insurance:

Buying from PolicyX.com

• Fill out the form at the top of this page with the necessary details.
• Select your income and city. Click on 'Proceed'.
• Update your education and occupation details.
• Choose your preferred plan and click on 'Buy this plan'.
• Select the policy term, premium period, and riders (if required), then proceed to pay.

Once the payment is made, you will receive a confirmation at your registered email address.

Buying from the Insurer’s Website

You can visit the official website of the insurer and buy the plan you want by paying the premiums.

Buying from the Insurer’s Branch Office

You can visit the branch office of the insurer from whom you wish to buy the insurance.

Conclusion

A term plan provides a financial safety net for your loved ones even when you are not with them. It is advisable to buy a term plan at a younger age, as premiums are comparatively lower. Choose the right policy tenure, sum assured, and add-ons to avoid any hassles.

If you are still confused about which term plan is right for you, contact us at PolicyX.com. One of our insurance representatives will contact you shortly and help you choose a plan that best fits your requirements.