What is a Term Insurance plan?

The Term Insurance plan is a ‘Pure Protection Plan’. We all know that death is unfortunate, but through the term Insurance plan, you can financially protect your loved ones against all uncertainties. In case of the sudden demise of a policyholder, compensation is given to the nominee (family member) so that they can lead a financially stable life.

How Term Insurance Works?

Term insurance offers only death benefits to the term insurance policyholder. Read here that how term insurance works:

• You can buy a term insurance plan for the specific sum assured and policy tenure to secure the future of your loved ones financially.
• In term insurance plan, the insurance company assures a lump sum amount to the family of policyholder at times of sudden demise of the policyholder.
• To avail the benefits of the term insurance plan, the policyholder has to pay a premium on time.
• You can even add riders in your term insurance plan to enhance the plan’s coverage.

Features and Benefits of a Term Insurance Plan

Cost-effective

Term insurance is one of the most cost-effective insurance plans. The premium of term insurance is lower than that of other insurance policies.

Offers a peace of mind

With term insurance, you can get peace of mind. The best way to secure the future of your loved ones financially in your absence.

Flexible premium payment option

A term insurance plan gives policyholders the flexibility to choose the premium payment option. You can pay premium monthly, quarterly, half-yearly or yearly basis.

Staggered Claim Payout Option

If you do not want that lump sum paid by the insurer to your family in one-go after your demise. You can go with the staggering claims payout option like monthly payout for the whole life.

Free-Look up Period:

The policyholder can cancel the policy if not satisfied with the terms and conditions. Term Insurance policy comes with a free-look period ranging between 15-30 days.

Grace Period

Due to any reason, if the policyholder fails to pay premium before a due date, then can renew the policy during the grace period. It also ranges from 15 days to 30 days.

Tax Benefits

The Term Insurance Plan comes with a l tax benefits. The premium paid on term insurance comes under tax-free deduction under Section 80C of the Income Tax Act 1961. Also, as per Section 10(10D), the sum assured (SA) received on death or plan maturity is eligible for tax exemption if the premium is up to 10% of the SA or SA is at least 10X of the premium amount.

Types of Term Insurance Policies in India

There are different types of Term Insurance Policies in India. You can choose any term insurance plan to secure your family’s financial future.

Pure Term Insurance

It is a basic Term insurance plan where the nominee gets the fixed income assured in case of demise of the policyholder. In this plan, no maturity benefit included.

Term Plan with the return of Premium

It is a kind of Term Insurance where all premium paid at the time of maturity. Nominee will get the death benefit of the policy in case of demise of policyholder during the policy period.

Group Term Insurance

It offers financial coverage for the entire group instead of one individual. The companies usually go with the option of a group insurance plan to secure the employees.

Increasing Term Insurance

With the term plan, your term insurance cover also changes. It increases at a predetermined rate through policy tenure depending on the insurance needs.

Zero Term Insurance- In this term insurance plan, the policyholder has the flexibility to exit after completion of the specified tenure and get a return of all premiums paid until date.

Decreasing Term Insurance:

Under this type of term insurance plan, the sum assured continuously decreases based on the decreasing requirements of the policyholder.

The eligibility criteria to buy a Term Insurance Plan

The documents required to buy a Term Insurance Plan in India

1. Income Proof
2. Photo Identity Proof
3. Age Proof
4. Address Proof
5. Application Form

Who all needs a Term Insurance Plan?

Parents

As a parent, everyone wants to secure their child’s future, give them the best of education, accumulate money for their wedding, etc. For this, buying a Term Insurance plan would prove beneficial; you can assure your child’s financial protection even when you are not around to protect them.

Young individuals

Many young professionals are the sole breadwinners in their families. By purchasing a term insurance plan, you can secure your family’s future in your absence. Your family can pay off the loans and liabilities. The premiums of term insurance plans of young individuals are less as compared to those of older people like who are above 40.

Working Women

Women nowadays are no less than men when it comes to supporting families financially. A term plan helps sole breadwinner women to secure the future of their loved ones.

Retirees

Even after retirement, you can buy a term insurance plan and offer financial security to your spouse. It helps them continue the same lifestyle even in your absence.

Newly Married

By buying a term insurance plan, the married couple can ensure complete financial support to the spouse in case of an unfortunate event. It is one of the wisest life insurance plans for young couples who want to secure their future from all kinds of uncertainties.

Taxpayers

There are tax benefits also associated with buying a Term Insurance Plan. The entire premium paid becomes eligible for tax deductions under Section 80C of the Income Tax Act, 1961. Additionally, the death benefit paid to the nominee is tax-deductible under Section 10(10D) of the Income Tax Act.

Self Employed

A self-employed person does not earn a fixed income, unlike a salaried individual. Their source of income is always uneven as it keeps on changing with the market up and down. Hence, purchasing a term insurance plan is necessary as it makes their family financially secure.

Tips for choosing the best term insurance plan

Assess your policy requirement

When you are looking to purchase a term insurance policy, always assess your insurance policy requirements. You need to determine the coverage amount that should be sufficient to help your loved one lead a healthy lifestyle even in your absence.

Go with the high coverage amount

Term insurance plans usually come with high coverage, which is also an affordable premium. The premium of term insurance is less than that of Life Insurance Plans. When you are buying a term insurance plan, it is wise to go with the amount that is 15-20 times of your annual income, keeping in mind the current lifestyle, expenses and inflation. If you are buying a term insurance plan of 1 crore, the minimum premium rate is Rs 500 per month.

Choose and compare insurance plans

There are many insurance companies with many insurance plans in India. So, whenever you are planning to buy term insurance, always compare and then select the one. Comparison should be with respect to features and benefits. For this, you can also take the help of a term insurance premium calculator.

Check the claim settlement ratio

Claim settlement ratio is one of the important factors to consider before buying a term insurance plan. It is the ratio of the number of claims approved and settled against the total number of claims received. Always go with the insurer that is offering a high claim settlement ratio.

Check for the riders available

A term insurance where there is an option to add extensive coverage is the best. This extensive coverage comes as riders. The most popular riders in the Term Insurance Plan are critical illness, accelerated terminal illness, premium waiver, permanent disability rider, etc.

Never go for cheap premiums

Sometimes going with the cheaper insurance plan can be misleading, so always read the terms and conditions of the term insurance policy to understand the exclusions and inclusions of the term plans.

Key takeaways

Buying term insurance plans is a wise financial decision that provides essential protection for you and your loved ones.

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