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Term Insurance

Secure your family's financial health and future.
Buy Confidently

With 25 insurers and 100+ products to choose from, Coverfox works actively to find a plan that is ideal for you—basically, the best one, the right one. From providing you with all the right information to offering unbiased comparisons, we do it all. Hey, you don't even need to engage with the insurer yourself.

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Things you must know about Term Insurance Plans

Term Life keyword

Some may say that Death is the next greatest adventure, but still it's an adventure one usually experiences alone. In such a case, the least we can do is ensure that our loved ones are left financially secure. That's where the idea of a term insurance plan comes in, so that worries about your family's future don't.

LUMP SUM BENEFIT OPTION

The sum assured is paid out in one whole 'lump sum' to the nominee of the policy.

INCOME BENEFIT OPTION

A percentage of the assured sum is paid in monthly instalments from the first month of the death.

Why Term Insurance Plan is Necessary?

Life is too unpredictable and uncertainties can rip you off emotionally, financially and physically too. This is because no one has control over one’s death, neither, can anyone predict it. Death of the breadwinner of the family can cause disastrous turbulence in the family member’s life.

To find solutions for these problems, term insurance plays a vital role in your life. Moreover, term plans are an excellent way to build a financial safety net and are the most simplest and affordable type of life insurance. It will help your family to settle your loans and pay-off certain requirements in your absence. The death benefits are paid to the beneficiary or the nominee only upon the insured’s death. Therefore, in simple words, the death benefits are zero if the insured dies after the policy is expired.

How Does a Term Insurance Plan Work?

The premiums that you pay annually towards your term insurance policy are purely decided on factors like your health, age, death benefits of the policy, the duration of the policy period, etc. Needless to say, that the premium remains unchanged throughout the term of your policy. And the good news is you don’t have to invest a huge amount for the premiums every year. The premiums hardly work up to Rs. 10,000 p.a. approximately.

The moment you start paying your premiums regularly, the insurance companies also start deducting its expenses, cost of the death benefit and the taxes on the premiums.

The cash value buildup for term insurance is zero. Therefore, the values of the pure insurance coverage or the death benefits also remain unchanged throughout the policy period.

If you pass away during the policy period, then the insurance company pays the death benefit to your nominee or the beneficiary as mentioned in the term insurance policy.

However, if you outlive the policy beyond the policy period, the coverage becomes zero and neither you nor your nominee gets any benefit from the insurance company. You may renew the term insurance, but definitely at a higher premium due to increasing age.

Benefits of Buying Term Insurance Policy

  • Financial Security: Benefit to the nominee for a secure financial future

  • Low premium: An attractive premium for a higher sum assured

  • Smoker’s included: Even those with tobacco-chewing and smoking habits can opt for term plan. No one discriminates or judges that way.

  • Tax Exemption: The premium paid is also exempted from taxation up to a maximum of Rs.1.50 lakh under Section 80C of the Income Tax Act, 1961.

  • Higher sum assured for lower premiums: The premiums charged are inexpensive and the sum assured offered is high.

  • Choice of plan: The term plan can be bought as per your choice by comparing quotes, benefits and features of different insurers

  • Death Benefit: The beneficiary receives a lump sum amount on the demise of the policyholder incase death during the policy period.

Types of Term Insurance Policy

It is very important to analyze your needs before you finalize on a term insurance plan. This is because there are so many different types of term plans available in the market. You can get in touch with Coverfox.com for our unbiased advice and quick resolutions for your financial planning. Below are the different types of term insurance plans available:

Standard Life Term Insurance Plan

Standard Life Term Insurance plan is the most commonly found types of term plan made available in India. The life cover, as well as the premiums you pay annually does not change during the entire policy period. The most common terms available are 10, 15, 20 and 30 years. This is one of the most regular types of term insurance available in the market.

Decreasing Term Insurance

Decreasing Term Insurance cover is being structured in such a way that the cover as well the premium keeps reducing as when the tenure of the policy decreases. Mostly, banks and financial institutions covering major risks against housing loan, mortgage or liabilities etc. opt for this type of term plan. During any uncertainty, the insurance companies ensure that the funds are paid back to the bank or financial institutions.

Increasing Term Insurance

Increasing Term Insurance cover is equally opposite to the Decreasing Term Insurance. Here, with the increasing age, the life cover also tends to increase. This type of a term plan is usually dependent upon inflation and therefore has been structured keeping inflation in mind. You can lower your stress of remaining underinsured by purchasing this type of term plan. Your life cover increases at a predetermined rate in this plan.

Return of Premium Term Insurance

Return of Premium Term Insurance is another type of term insurance wherein the insurer pays back all the premiums paid by you every year on the expiry of the insurance policy. But again, to reap this benefit, you need to survive too. For example, if you pay Rs. 7,000 p.a. for 25 years for a cover of Rs.50 lakhs, you would get an amount of Rs. 1,75,000 (exclusive of service tax) only if you survive the policy period. The premiums here are usually higher than the other types of term plans.

Income Benefit Term Insurance

Income benefit plans are the ones where the insurance company promises to pay the beneficiary certain amount in lump sum and certain amount monthly for a fixed number of years. This plan assures the beneficiary or the nominee of the term plan for a regular flow of the income in the absence of the insured. Some insurance companies offer to increase the percentage of the monthly income.

How to Choose a Term Insurance Plan

Long Term Saving

Term insurance helps you for saving and building your wealth. It is a systematic way to safeguard you financially and take care of your future plans like a child’s education or marriage etc. Therefore, you get the dual benefits of Savings as well as Protection.

Life Stage Specific Planning

Term insurance offers plans customized for different stages of life. Every family has certain goals for which a lot of planning is required. These goals may include planning for your kid’s education, buying a house, planning funds for your retirement etc.

Life Cover

The primary and the most important advantage of a term insurance policy is to provide a life cover. The insurance company is liable to pay the life cover to your nominee in case of any unfortunate event.

Tax Saving

The Income Tax Act, 1961, helps you save tax if you opt for a life insurance plan. The premiums that you pay for your term insurance plan gets you

  • A tax exemption under Section 80C, 80CC, 80CCE up to Rs. 1.5 lakh
  • Under Section 80D, tax exemption for Self, Spouse and dependent children Up to Rs. 25,000; for parents (Additional) up to Rs. 25,000 and Senior Citizen Parents up to Rs. 30,000
  • Under Section 10 (10D) for amounts received under term insurance

Key Features of Term Plans

Term plans are structured in a specific way to protect your family from the financial crunches that may arise once you are gone. The below are some of the key features of a term insurance plan:

  • Policy term: So, the good news is that you have a choice to choose your policy term. For example, for a regular term plan, the minimum term is 5 years while the maximum may vary up to 25 years. Whereas the policy term would range from 5 to 15 years for policies with a single premium payment. It is advisable to opt for a longer term policy since the premium remains unchanged for the entire policy term.

  • Entry & exit age: The minimum entry age to qualify for a term plan is 18 years while the maximum age (exit age) is 65 years. You can also opt for riders that may enhance your term plan. It is advisable to buy a term plan at an early age since the premium tends to increase with growing age.

  • Plan choice: You have full leverage to choose the plan you wish for. For example, if you are the only breadwinner of the family, then you opt for a single life basis term plan. However, if you wish to cover your spouse too, then you may opt for a joint life basis term plan. Most of the insurers offer term plan on the first claim basis. Which means, the beneficiary would get the death benefit on the demise of either of the two insured.

  • Tax benefit: The premium paid is also exempted from taxation up to a maximum of Rs.1 lakh under Section 80C of the Income Tax Act, 1961. Not only this, you can also avail tax benefits under Section 80D against the premiums paid for critical illness benefit.

  • Death Benefit: During an uncertain event like death of the insured, the insurance company would pay a lump sum amount, a monthly payout or a combination of both to the beneficiary or the nominee as assigned during the commencement of the term plan. This amount is termed as the death benefit.

  • Additional riders: Additional paid benefits like critical illness rider, hospital cash rider, waiver of premium rider, accidental death benefit rider, total and permanent disability benefit riders etc. can be bought by paying an extra amount. These riders are add-ons that may enhance your term plan. However, it is advisable to opt for riders after analyzing your requirement.

Term Plans Available in India

PlanEntry Age (Min/Max)Claim Settlement Ratio (2015-16)
Bajaj Allianz iSecure Online Term Plan18/60 years91.30%
Aegon Life iTerm Insurance Plan18/65 years95.31%
ICICI Pru iProtect Smart Term Plan18/65years96.20%
Canara HSBC OBC eSmart Term Plan18/70 years92.99%
Kotak Preferred Term Plan18/65 years89.09%
LIC eTerm Plan18/65 years98.33%
PNB MetLife Mera Term Plan18/65 years85.36%
Max Life Super Term Plan18/60 years96.95%
SBI Life eShield Term Insurance Plan18/65 years93.39%

Term Insurance Plan Exclusions

Like any other insurance, term insurance has its limitations for specific circumstances. Mentioned here are some common exclusions that a term insurance would not cover.

  • Suicide: This is one of the common exclusions that most of the insurer’s would not cover. The dependents would not get any compensation if the insured commits suicide in the first year of the policy. But, suicide won’t be compensated at all in a group insurance policy.

  • Dangerous activities: Death due to race car driving, SCUBA diving, rock climbing, etc. are not covered under a term plan. In simple terms, if you were involved with these dangerous activities, then your beneficiary would not get any compensation during any uncertainties.

  • Act of war: Any death occurred due to acts of war or due to natural calamities like drought, floods, earthquake, etc. are not covered under a term plan.

  • Drugs abuse or alcoholism: Any death occurred due to consumption of alcohol or drugs is not covered under a term plan. The insurance company would not be liable for any compensation to the dependents.

Claim Process

In case of any uncertainties or unforeseen circumstances, the dependents as allocated by the policyholder during the policy commencement are required to file a claim. This process is simple as compared to other insurances.

Below is the claim process explained in brief:

  • Registering the claim with the insurer: The dependents of the policyholder need to intimate the insurance company about the claim. They can either visit the insurance company or contact as declared in the insurance policy document.

  • Submission of policy documents: Documents such as death certificate, original term insurance policy, proof of claim, history of medical documents etc. as per the insurance company’s requirement. The insurance company may ask for additional documents too, if need be.

  • Final decision: On successful submission of the documents and verification by the insurance company, the claim will either be selected or rejected.

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Expert Advice

Expert advice and an informed, unbiased opinion that clears the confusion and helps you buy that perfect plan for you. Can it get any easier?
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FAQs on Term Insurance

What is the right age to buy a Term plan?

  • There really is no right age for making an investment when it comes to Term Insurance. Like any other insurance plan, the earlier you opt for it, the better. If you do manage to buy the plan at an early age:
  • The premiums will be relatively lower. Now that's a win-win situation!
  • Your liabilities are at a low, hence you might not require to insure a big sum, which will eventually result in lesser premiums.
  • As health risks largely depend on the age, getting covered is easier and hassle-free. Who doesn't like that?

What are the things you need to know when you are investing in a Term Insurance plan?

  • You take a term insurance plan with the sole purpose of ensuring that your family members are adequately supported in case of your death. In such a sensitive case, you must always weigh your options on all possible parameters:
  • Coverage: Be sure that the coverage being offered will be sufficient for your family or the nominated person. Never ever compromise on it for the sake of a lower premium.
  • Claim Settlement Ratio: The insurer's claim settlement ratio and market reputation will ensure that your claims are honored when needed, so always keep that in mind.
  • Inflation: Keeping inflation in mind, always consider how sufficient the coverage amount will be in the future.
  • Add-on feature: Always supplement your term insurance plan with suitable riders for the most comprehensive coverage.

In an unfortunate event of your death, how can your nominee claim your Term plan?

  • If you have invested in a Term Plan, it is advisable to keep your nominee aware of the situation so that if and when the time comes, he/she can claim the policy for which you have been shelling premium every year. To make the claim, the following steps need to be taken:
  • Every insurance company has a pre-set procedure defined for making a claim. Hence, following your death (and yeah, even though it sounds scary!), your nominee has to intimate the insurance company of the same.
  • All necessary documents including Claim Form, Death Certificate, original policy documents, hospital and medical records and bank account details of the nominee, etc. are to be submitted to the insurance company for further processing.
  • Always prefer to communicate with the insurance company through written medium like an email to maintain a track of your conversation. You never know when it might come in handy (though we hope it doesn't).
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