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Term Life Insurance pays the beneficiary a lump sum amount during the policy term if any contingency happens. Such policies help you to secure your family future by opting for a higher sum insured at a relatively lower premium.
Term Life Insurance pays the nominee a large cover amount in case the policyholder passes away during the active policy term. Term insurance is quite an effective way to financially protect your family in your absence. You get a very high covered amount at a relatively cheaper premium if you start early.
Let’s explain it this way:
A term life plan is an insurance with a death benefit that is availed only for a certain fixed number of years. So if you purchase a term life insurance plan of Rs. 1 crore for 20 years, and nominate your wife as a ‘beneficiary’, your wife will receive the sum assured amount [of Rs. 1 crore] in case something unfortunate happens. This term insurance plan will ensure that your family is well taken care in unfortunate circumstances.
Sounds promising, right?
But what about the fixed period clause?
Here’s the answer:
Like the name suggests, it’s a ‘Term life insurance’ plan, which means it covers you for a certain term. In the above example, you took a policy for 20 years. This means that the insurance coverage is valid for 20 years only, provided you are paying an annual premium. After 20 years, if you still intend to cover your family under a death benefit plan, you’d have to buy a new term life insurance policy. And no, you won’t be paid the sum assured or any benefit at the end of the term.
This is the reason why the premium for a term life insurance is much less than the premium for a regular life insurance plan.
You might not feel the necessity to buy insurance, but what about your family? Can you say that your family won’t need it too? Buy term life insurance while you and your family lead a stress-free life.
We have different ways to plan for different days.
Why do you need Term Life Insurance?
Term Life Insurance can be important for us in many ways, here is an one eample:
Our friend Rahul had an untimely accidental death. He peacefully left the world, leaving behind his spouse, 2 beautiful kids and a few financial liabilities. But, one wise thing that he did was buying a term life insurance plan.
Let’s see the how the term plan coped up with Rahul’s family at this critical stage of life.
Family availed a lump-sum amount.
However, there are also certain riders available which take care of your family if you survive some injuries during the accident or had to fight a critical illness. If such was the case, your family would have received the below mentioned compensation from the term plan that you invest in:
Term life insurance is one of the most traditional forms of insurance. To understand how it functions, read the below mentioned steps:
Purchase a policy: You don’t have to keep thousands of rupees aside from your savings every year to invest in a good term plan. For instance, if you are a non-smoking 30-year-old woman, your annual premium would be somewhere close to Rs. 8,000 to Rs. 10,000 annually for a sum assured of up to Rs.1 crore. But, remember, the premium would differ basis different insurer and the type of plan.
Pay premiums on time: You only need to make sure that you make the payments of the premium on time at a frequency chosen by you at the time of purchasing the policy. The premiums can be paid monthly, quarterly, half-yearly or annually.
The main motive of term plans is to provide life cover. Only on death of the policyholder, a nominee or beneficiary of the policy receives the sum assured.
The simple funda of term insurance plans is that they are pure protection plans. You pay the premium regularly as per the frequency chosen and your family gets the sum assured in case something happens to you.
A term life insurance plan offers a death benefit in the form of a large amount as compensation, which your nominee can get only after a pre-specified number of years. For example, if you buy a term insurance policy with a cover of 1 Cr & a 20 year term, & something happens to you during the policy term, your wife or nominee will get the death benefit amount. However, if you survive the 20 year term, you don’t get anything.
Disclaimer: There are some plans that offer your premium amount back in case you survive. Check with your insurer for details.
Term insurance covers you for a certain term. In the above example, you took a policy for 20 years. This means that the insurance coverage is valid for 20 years only, provided you are paying an annual premium. After 20 years, if you still intend to cover your family under a death benefit plan, you’d have to buy a new term life insurance policy. And no, you won’t be paid the sum assured or any benefit at the end of the term.
There are different types of term insurance plans. Before you finalize on a particular term plan, analyze and understand your needs. If need be, get in touch with an online broking portal like Coverfox.com for their unbiased advice. Mentioned below are the different types of Term Life Insurance plans:
1. Standard Life Term Insurance Plan:
The most common and regular type of term plans in India is the standard life term insurance plan. Here, the life cover and the premiums that you opt for remains unchanged or constant throughout the entire tenure of the policy. The most common terms available are 10, 15, 20
2. Decreasing Term Insurance:
Decreasing Term Insurance cover is designed in such a way that the cover & premium decreases over the tenure of the policy. Such plans are usually designed for banks & financial institutes who cover the risk against mortgage or liabilities or home loans. Here, in case any eventuality happens, the term plan ensures that the bank or financial institute gets back the money.
3. Increasing Term Insurance:
This plan is exactly opposite than the decreasing term insurance. Here, as your age increases, the life cover too increases. Inflation plays an important role in everyone’s life. This plan is designed keeping inflation in mind. The fear of remaining underinsured would ease by opting for the increasing term insurance plan. Your life cover increases at a predetermined rate in this plan.
4. Return of Premium Term Insurance:
In this type of term insurance, the insurance company pays back the premium paid by you at the end of the policy period, only if you survive. For example, if you pay Rs.5, 000 p.a. for 25 years for a cover of Rs.50 lakhs, you would get an amount of Rs.1, 25,000 (exclusive of service tax) only if you survive the policy period. The drawback of such type of policies is that their premiums are quite higher than the normal term plans.
As we just saw, there are different types of term insurance plans with different terms and conditions, different features and sum assured costs. Choosing the right plan as per your requirement and budget is, however, a challenge. Keep the below points in mind before you finalize on a term life insurance plan.
|Sr. No.||Plan||Settlement Ratio (2020-2021)||Sum Assured||Annual Premium (Sample in INR)|
|1||Edelweiss Tokio Total Protect Plus||97.01%||25 Lakhs to No Limit||4,902|
|2||Kotak e-Term Plan||98.50%||25 Lakhs to No Limit||5,250|
|3||Bajaj Allianz Smart Protect Goal||98.48%||50 Lakhs to 10 Cr||7,348|
|4||SBI e-Shield Next||93.09%||50 Lakhs to Unlimited||7,519|
|5||Aditya Birla Life Shield Plan||98.04%||50 Lakhs to Unlimited||5,591|
|6||Tata AIA Life Insurance Sampoorna Raksha Supreme||98.02%||50 Lakhs to No Limit||6,844|
|7||Max Life Smart Secure Plus Plan||99.35%||25 Lakhs to 3.5 Cr||6,095|
|8||PNB MetLife Mera Term Plan Plus||98.17%||25 Lakhs to 2 Cr||6,490|
|9||ICICI Pru iProtect Smart||97.90%||50 Lakhs to Unlimited||8,021|
|10||HDFC Life Click 2 Protect Life||98.01%||50 Lakhs to Unlimited||7,185|
Maturity benefits in a term insurance policy are only provided to the nominee in case of the policyholder’s death during the active policy term. If the policyholder survives, no maturity benefit is provided.
You get a break-in period which can be anywhere between 15 days to 1 month. Even if you don’t pay the premium during this period, your policy gets terminated.
In such a case the policyholder’s legal heir or the legal heirs or the representatives or succession certificate holders get the maturity benefit.
There’s no limit to this. However, one needs to communicate about this to the insurer in writing every single time you change the nominee.
All types of deaths are covered except for suicides. Suicides aren’t covered in the policy’s first year.