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Terms and Conditions of Term Insurance

Joan Mathews Joan Mathews 03 February 2020

Looking to secure your loved ones with a term insurance plan? Read this article to know some of the common terms and conditions associated with term insurance.

Terms and Conditions of Term Insurance

Availing a term insurance policy is one of the most affordable means to creating financial security for your family in the event you are no more. Term insurance is a type of life insurance product that provides financial protection for a defined period of time. If the life assured passes away during the policy period, then death benefits are payable to the nominee. Since term insurance is a pure-risk coverage plan, its premiums are lower when compared with other life insurance plans. There are no survival or maturity benefits once the policy period expires. However, some plans offer to return the premiums paid by the life assured if he or she outlives the policy term.

Now, before purchasing a term insurance plan, it is important to note down the terms and conditions associated with them. Here is a look at some of the common terms and conditions surrounding term insurance policies:

Suicide Clause - In the event of the life assured’s death due to suicide within 12 months from the date of risk commencement of the policy or from the date of the policy’s revival, as applicable, the nominee shall receive at least 80% of the total premiums paid, till the date of demise or the surrender value available as on the date of death, whichever is greater, provided the policy is active.

Free-look Period - If the policyholder is not satisfied with any of the policy’s conditions, he or she can return the policy, mentioning the reasons thereof, within 15 days from the date of receipt of the policy. For term insurance policies purchased through distance marketing, the free-look period applicable is 30 days. The insurer will refund the premium, subject to deduction of the proportionate risk premium for the period on cover, the costs incurred on medical examination, if any, and stamp duty.

Grace Period - This is a defined time period following premium due date during which the premium payment can be paid without the insurance policy lapsing. The grace period applicable is generally 30 days for yearly, half yearly and quarterly premium payment frequencies and 30 days for monthly premium frequency. If premiums are not paid before the end of grace period, the term insurance cover will lapse.

Exclusions under Accidental Death - The insurance company pays full compensation in case of accidental death. However, there are certain exclusions applicable. If the accidental death of the life assured happens as a result of the below reasons, the insurer may not provide any compensation.

  • Driving under the influence of alcohol or drugs
  • Participation in an illegal activity with criminal intent
  • Participation in hazardous activities or extreme sports

Compare Rates with Term Insurance Calculator

Once an individual has familiarized himself or herself with the terms and conditions of term insurance, the next step is to compare the premium rates offered by different companies. The premiums will depend on the life assured’s age, sum assured, policy duration, medical history, etc. and differ from one provider to another. Through a term insurance calculator, the individual will be able to ascertain which plan would suit his or her needs the best.

Joan Mathews
Written by Joan Mathews
Joan has over 4 years of experience writing for the BFSI industry. She enjoys watching mystery TV series, listening to 80s classics and spending time with her furbabies.