What is term insurance policy?
A term insurance policy is something as the name suggests is an insurance policy that is taken up for a certain period of time. It is a security that prepares you for any uncertainty in your future.
According to this policy, in case of the sudden death of the insured person, the entire amount is paid to the nominee of the insured person. The nominee is usually a family member.
That is, the nominee can claim the amount after the death of the insured policy holder during the policy term. You can get the entire lump-sum amount or as lump-sum amount and monthly instalment as per your requirements.
A term insurance plan is perhaps the best decision that you can take to be future ready. Certain companies also cover the partial or complete disability of the insured during the policy term.
One should also make sure to understand the policy terms and conditions. In case of survival of the policy holder beyond the policy period, the coverage at the earlier rate of premium is not guaranteed.
A term insurance policy is needed because we all know that life is rather unpredictable. Any unforeseen or unwanted event can happen at anytime. In case of sudden of the bread earner of the family, who shall be responsible for taking care of your kids, other responsibilities and liabilities. With this policy already in hand, your family shall be saved from the financial embarrassment that might occur due to loss of any financial care taker. This policy shall take care of your liabilities as it provides you huge amount that is covered within or the monthly instalments as per your needs.
Advantages of term insurance policy.
- Offers financial security to your family in your absence.
- Higher sum assured at a lowest premium.
- Facility to buy term insurance online.
- Tax Benefits on the premiums and payouts under Section 80C and 10(10D) of the Income Tax Act, 1961.
- Provides your family the financial security with a pocket-friendly plan.
- Offers a free look period.
- Additional optional riders to increase the base plan coverage.
- Offers lower rates for non-smokers and female lives.
- Flexibility in choosing policy period, premium paying modes, premium frequency, etc.
Features of a term insurance plan
A term insurance plan takes care of a lot of your financial needs in case of death and there are several features to it that you should know about
- Tax Benefits: you can avail the lucrative tax benefits under the section 80C and section 10 D of the income tax Act, 1961. the premiums paid for the critical illness are also liable to deduction under section 80D.
- Policy term: the minimum term of the policy is 5 years with maximum ranging to 25 years to the whole life span of the insured. for single premium payment policies, the term ranges from 5-15 years.
- Plan choice: there are different kinds of term plans available such the single term plan and the joint term plan. The single term insurance provides cover for the single person insured in the plan while a joint term plan provides cover for both the husband and the wife. Most of the plans pay this on the first claim basis. That is the sum shall be paid in case of the death of the either of the two insured people.
- Entry age: the minimum entry age for the term insurance plan is 18 years, while the maximum is 65 years. Also, the premium of the policy increases with time and so does the coverage. Hence, it is important to buy a policy when you are relatively young.
- Maturity Age: a term insurance plan should be able able to provide complete cover. The maturity age of the plan is usually 65-70 years of age. Term insurance plan with higher maturity age require higher premium rates because the risks of illness, diseases and other issues increase with age.
- Death benefits: at the time of death of the insured, the entire amount is paid to the nominee of the beneficiary. However, the amount that is paid to the nominee depends on the plan that was there. Death benefit shall be same if the plan is standard term plan, will decrease if the plan is decreasing term insurance plan and will increase if the plan is increasing term insurance plan.
- Additional riders: additional benefits are also available such as the critical illness, accidental death, disability, accelerated sum assured is also available.
Things to keep in mind while choosing a term insurance plan
- Company Reliability
- Enhanced Cover
- Claim settlement ratio
- Solvency ratio
Types of term insurance plans available
There are different types of plans available in the market which you can choose from such as the following:
- Standard term insurance plan: one of the most common term insurance that needs an annual premium for an annual cover. The insured person gets the coverage against the various risks and illness with a payment of a fixed premium.
- Term Return of Premium (TROP): In the Term Return of Premium (TROP), if the life assured survives till the end of the policy term, the insurance company pays back all the premiums paid.
- Increasing Term Insurance Plan: This plan is similar to the standard term insurance plan with regards to premium payment, and policy term, except, under the Increasing Term Insurance cover with the increasing age, the life cover also increases.
Increasing term plan helps in matching inflation and therefore has been structured accordingly.
The coverage of this type of plan increases up to 1.5 to 2 times the original cover.
- Life Stage Event Term Insurance Plan: In Life Stage Event Term Insurance Plan, on your significant life stage milestone, you can increase the coverage. If opted, your sum assured (coverage) and premium increases with each life’s milestone, first marriage, first child, a second child, etc.
- Joint Life Term Plan: A joint life term insurance covers you and your better half in a single policy. You and your spouse are covered against the risk of unexpected death in one single term insurance policy. You pay a combined premium, and both the individuals are covered under a joint term plan. The term period is fixed at the time of buying a policy, and if during the policy period any of the partners die unexpectedly, the surviving partner being the nominee gets the life cover amount.
- Group Term Insurance: Group term plans are life coverage plans for employees of businesses, companies, or any large group of people associated together, which provides life cover to all the members of the group. Group term insurance plans are same as individual term plan, except they are meant and priced for a group as a whole, and the premium changes every year. As soon as an individual leaves the group, he/she will not be a part of a group term plan.
- Convertible term insurance plan: it is a saving cum insurance plan that allows the insurer to shift to a whole assurance or an endowment plan. However, not every company gives this option while some keeps it as a rider which means that the insurer has to pay extra for this rider.
With all these things, a term insurance plan is well sorted for you. Compare different policies available and then choose. Also keep in mind the premium that you shall have to pay and calculate your premium using the premium calculator and stay secured against any uncertainty.
Here is a list of policies that you can see as offered by various companies. Have a look and buy your term insurance policy now.