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Term Plan

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What Is A Term Insurance Plan?

Term plans are pure protection plans. If an unfortunate event of death occurs to the policyholder during the policy term the nominee receives a sum assured also known as death benefit.

This type of insurance policies offer the highest life cover for the lowest premium amount. When you buy a term insurance plan in India, your family is provided with the insurance money only after your demise and not on the maturity of the term. Hence, you can opt for a more extended life cover when buying term plans in India.
In term insurance, a fixed premium has to be paid at regular intervals, These premiums can be paid as Single Premium or Regular premiums, as per the policy you have selected.

benefits of a term plan

01

LONGER PROTECTION

Provides Longer Protection. One

Can choose up to the age to of 80.

02

HIGH COVERAGE

Provides high coverage at

affordable premium rates.

03

FINANCIAL STABILITY

Secure your family’s future by providing financial stability in your absence.

04

TAX BENEFIT

Save tax u/s 80C and section 10

(10D) of Income Tax Ac.

05

CRITICAL ILLNESS COVER

Cover yourself against 35 critical

Illnesses

06

LUMPSUM AMOUNT

Provides a lumpsum amount on

The diagnosis of a critical illness

07

ADDITIONAL RIDERS

You can add riders for enhanced
protection

08

PEACE OF MIND

Comprehensive protection that gives complete peace of mind

Financial Stability absence : While you strive hard to fulfill all your family’s needs at present, you wouldn’t want them to compromise or face financial difficulties in your absence. With a family, comes many responsibilities of both present and future. If you are the only breadwinner of the family with a regular source of income, it becomes your sole responsibility to provide for your family and see to it that there are taken care of after your demise.

Your Family depends on you : The term insurance money can be used to meet your family’s monthly expenses and important goals like your child’s education, marriage, etc. and liabilities in your absence.

Your assets need protection : You may take loans for assets like a house or a car. However, if something happens to you, your loved ones might be burdened with loan repayments. In such a situation, the term insurance payout which your family will receive can be utilized in paying off outstanding loans.

Your assets need protection : You may take loans for assets like a house or a car. However, if something happens to you, your loved ones might be burdened with loan repayments. In such a situation, the term insurance payout which your family will receive can be utilized in paying off outstanding loans.

Lifestyle risks: Modern day lifestyle problems can lead to a host of ailments. Some term insurance plans don’t just protect your family after death but also during your lifetime by offering critical illness protection. This feature pays out on the diagnosis of certain critical ailments like cancer or heart attack.

Tax Benefit: A term policy also allows the policyholder to save tax under section 80C and 10(10D) of the Income Tax Act, 1961. If you want financial stability for your family and don’t want them to suffer in your absence, you should definitely choose a term plan with an adequate live cover as soon as possible.

Why you should buy Term Insurance Plan?

Young parents

Young parents

Young parents enter a high responsibility phase in their lives. They have to take care of children and each other. Mothers often take a break from work for periods ranging from a few months to several years. Sometimes this entails a complete change in role to that of a homemaker. This can result in the family being largely or wholly dependent on the earnings of the husband. There’s also the cost of raising a child toys, books, schooling and yes the latest PlayStation all of which go up with inflation.

Life insurance need:

Very high, to finance household expenses and child rearing including those ever-rising school fees. Consider buying it immediately.

Newly-married

Typically, such couples only consider term insurance if one of them is a home-maker or has a part-time job. However, remember that even working families can have periods when one member is dependent on the other because of unemployment, sickness or childbirth. Such couples should consider getting term insurance, even if they do not see an immediate need for it.

Newly Married

Life insurance need:

High. You should consider buying it immediately.

Dual Income families with no kids

Dual Income families with no kids

With double income and no dependents, sometimes you have more money than ways to spend it and insurance can seem unnecessary. However, if one member of the family brings home a much larger salary than the other or there are outstanding liabilities such as credit card bills, mortgages, and car loans, you should consider getting term insurance. Your spouse may not be able to pay these liabilities, in your absence.

Life insurance need:

Moderate, if there is a substantial inequality of income and/or outstanding loans. Buy it in the next three months.

Single Persons with no dependents

Do you need life insurance if you are single and have no dependents? The answer is no as of now. However, your situation might change as you grow older. You might marry and have children within a few years. In such a scenario, it is better to get your term insurance policy early because premiums are much lower at younger ages. Also, if you have dependents such as aged parents you should also consider buying life insurance to protect their lifestyle.

Single Persons With No Dependents

Life insurance need:

None, but can arise with future family or dependent parents. You should consider buying it in the next one year.

Senior Citizens

Senior citizens

Retirement is a time of relative freedom and few family responsibilities. Retirees typically get pensions or live off their accumulated savings. Their children are usually grown up and financially independent. However, this may not always be the case. Your spouse may still be financially dependent on you. Your children may also need your support during periods of sickness or unemployment or even for major financial goals like home buying. You also might also be helping them meet EMIs on their mortgage. It is advisable to keep your cover intact unless you are absolutely certain your family will not depend on you in any way.

Life insurance need:

Consider buying it unless you are absolutely certain that your family will not depend on you in any way.

IT professionals

As an IT professional, you are surrounded by an environment of great opportunity and great risk. Your job may allow you to quickly move up the income ladder and travel the world for on-site assignments. However, the stress of living and working in a big city can also pose major risks to your health. You might also be in the initial stages of buying a home and have a loan outstanding on it. Will your family be able to pay the EMIs, in your absence? You can safeguard them from this problem and secure their financial future, by buying term insurance.

IT professionals

Life insurance need:

Rising standard of living and lifestyle risks make life insurance a necessary purchase.

SIP Investors/Mutual Fund Investors

SIP Investors/Mutual Fund Investors

An SIP will build wealth for your future but you should also secure that future with a Term Insurance Plan (TIP). You should buy a Term Insurance Plan even before you start investing through a Systematic Investment Plan (SIP) if you have financial dependents. The size of the term insurance cover depends on many factors such as your annual income, your family’s monthly expenditure, their goals and your age, and others. Here are two simple ‘Rules of 10’ to consider. One, for every Rs100 of SIP, spend Rs10 on the TIP. Two, ensure that the life insurance cover you get from your TIP is about 10 times of your annual income.

Let’s look at a quick example. Say you have an annual income of Rs 5 lakh and you do a monthly SIP of Rs 5,000. According to the two Rules of 10, either your life insurance cover should be Rs 50 lakh or your TIP should be Rs 500 per month. Simple, isn’t it?

Life insurance need:

Life Insurance cover will help protect the wealth-building process launched through SIPs.

How to choose best Term Insurance Plan?

While buying a Term Plan, we always have questions like which Term Plan is best and how to compare the best Term Insurance Plan. Here are some parameters which may help you choose the Best Term Plan for yourself:

Claim Settlement Ratio

Claim Settlement Ratio

This is the total number of death claims approved by an insurance company, divided by the total no. of death claims received by the insurance company. Go for a higher number.

Option to add Critical Illness Benefit

Option to add Critical Illness Benefit

A critical illness like cancer or brain surgery can cost a lot of money and cripple the family's finances. Critical illness protects your family from this risk. It pays out immediately on diagnosis and only medical documents confirming diagnosis are to be submitted.

Regular Pay

Solvency Ratio

Solvency ratio tells you whether the insurer you choose will be financially capable of settling your claim if the need arises. IRDAI mandates that every life insurer should maintain a solvency ratio of at least 1.5.

How to choose best Term Insurance

Things To Keep In Mind While Buying Term Plan

  • Earlier you buy term insurance plan, better it is
  • Buy the term insurance policy only till your retirement age
  • Don’t get mislead by “per day premium” marketing gimmick
  • Don’t buy single premium policies
  • Don’t get over excited by term insurance riders
  • Tell them if you are smoker/alcoholic
  • Don’t hide your health information
  • Don’t hide your family health history
  • Don’t take small insurance cover (like 10-20 lacs)
  • Don’t overanalyze and delay your decision
  • Don’t forget adding nominee name
  • Don’t take more than 1-2 policy
  • Disclose old insurance policy
  • Check the policy papers once you get it
  • Communicate to your family that you bought a term plan

inclusions and Exclusions Of Term Insurance

Term plans promise to pay a lump sum amount to the nominees of the policyholder in the event of death. While the policy brings you security and hosts of benefits, your term policy comes with a few inclusions and exclusions:

Inclusions:

The nominees are provided with the sum assured as a lump sum amount or through the chosen payout option in the event of the policyholder’s death. Tax deductions and exemptions are provided with under section 80C and 10(10D) of the Income Tax Act, 1961 and other prevailing tax laws. Additional amount over and above the policy’s sum assured is provided if the event mentioned in the added rider is fulfilled. Other facilities like loan facility for meeting any unforeseen financial requirement, extra benefits for higher premium are included.

Exclusions:

The insurance claim is rejected by the insurance company if the death has occurred under abnormal circumstances.

In case the policy includes Accidental or Critical illness rider, the insurance claim is rejected if the death has occurred due to:

a) Accidental death because of driving under the influence of drugs or alcohol
b) Death as a result of participating in life-threatening activities like racing or trekking
c) Death due to any pre-existing medical condition not mentioned in the policy term
d) Death due to any illegal activity
e) Suicide is one of the common exclusions that most of the insurers would not cover. The dependents would not get any compensation if the insured commits suicide, whether medically sane or insane, within one year of the policy issuance or revival.

Other exclusions for term insurance plans include:
a) Suicide within the first year of term policy tenure
b) Death due to sexually transmitted disease not mentioned in the policy term
c) Any self-inflicted injury resulting in death
d) Death due to the consumption of illegal narcotics or drugs

What documents do I need while buying a Term Insurance plan?

You need the following documents while buying a term insurance plan:

  • Age proof – PAN card, Voter ID card, Driving License, School/College Leaving Certificate
  • Address proof – Utility bill, Passport, Ration Card, Electricity Bill
  • Identity proof – Driving License, Voter ID card, PAN card
  • Income proof – Salary slips of last 3 months, income tax returns of last 3 years, bank statement with last 3 month’s salary entries, Form 16
  • Medical reports – If the insurance company has requested any

When you’re buying term insurance online, you can upload the attested copies of these documents.

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