TERM INSURANCE

• Term insurance is a type of life insurance product that provides a large sum assured to the policy buyer at a relatively affordable premium. Term insurance plans can usually be purchased for a policy tenure ranging anywhere between 5 years and 40 years. The catch to this kind of life insurance is that usually it does not carry any survival or maturity benefits, unlike whole life policies or endowment/money-back policies.
• Term insurance plans are much cheaper compared to whole life insurance plans because these plans carry no cash value. Term insurance plans provide pure financial protection benefits. This means that if the life insured dies during the policy term, the beneficiary will receive the death benefit, provided all premiums are paid and the policy is in force. If the person survives until the end of the policy term, no benefits are payable to anyone.
• In most cases, term insurance plans offer a level premium rate, wherein the policyholder is charged the same premium for the duration of the policy tenure. However, in such cases the premium payable will increase during renewal of the policy based on the concerned individual’s age at the time. While the coverage provided by a term insurance policy is more or less fixed, most life insurance providers offer a number of riders that policy buyers can choose to purchase along with a term policy.

For those who have dependents whom they look after, term plans are ideal as they provide a large payout for very cheap premiums. Individuals can choose a high sum assured while paying a low premium. This way, if the breadwinner/policyholder passes on from this life, the people who relied on them will receive a substantial amount that will help them get by financially. These plans have a set duration limit and the cover will be offered only for this period. Once the plan lapses, the holder can choose to renew it or give up all benefits. Listed below are a few reasons to purchase term insurance plans:

• Provides financial security: The primary purpose of a life insurance policy is to provide financial security to one’s dependents. The benefit that is paid to the nominee in the event of the policyholder’s death can help one’s family members meet their short-term and long-term financial goals.
• Helps deal with liabilities: If you have liabilities like loans or credit card debts, it is vital that you purchase a term insurance policy at the earliest. The payout provided by your policy can help your dependents clear off your liabilities without having to go through any additional hassles.
• Highly flexible: Term insurance plans are highly flexible in nature. Most insurance providers offer term insurance plans through both online and offline channels. With regard to the policy tenure, policy buyers can choose any policy tenure between 5 years and 30/40 years. Further, prospective buyers can also choose a sum assured as per their needs.
• Riders: Insurance providers offer a number of riders along with term insurance plans. Some of the popular riders that are offered include the Accidental Death Benefit Rider, Accidental Death and Disability Benefit Rider, Critical Illness Rider, Waiver of Premium Rider, etc. As a policy buyer, you can choose to purchase any rider offered by an insurance firm and receive an enhanced coverage.
• Tax benefits: Term insurance plans also offer tax benefits to policy buyers and their nominees. You can claim tax rebates under Section 80C for premiums paid. Similarly, your nominee will also be able to claim tax benefits for any payouts received through the policy under Section 10(10D) of the Income Tax Act.

If you apply for a term insurance plan, you will be required to pay a premium. If the life insured dies during the coverage period, then the person nominated will receive the death benefits. There are a variety of term plans in the market ranging from 1-year coverage up to 40 years. Term plans are usually renewable once the policy term ends.

Types of Term Insurance Plans in India
There are different types of term insurance plans. Some of the major plans are:

• Renewable These term plans can be renewed once the policy ends. The insured will be able to skip the medical examination. At the most, the insured will have to provide evidence or a declaration of good health in order to renew the plan.
• Convertible Customers have the option to exchange their policy for a cash-value policy. However, if the customer chooses to convert the term plan to a standard life insurance plan, the premiums will be higher.
• Level These term plans provide a fixed sum of coverage through a certain period of time. The premiums also remain stable.
• Decreasing Term Insurance With one of these plans, the sum assured will decrease over a period of time at a set percentage rate. This is usually at around 5% p.a. Premiums for these types of plans usually remain constant even though the sum assured decreases. These plans are suitable for those who want to secure loans.
• Increasing Term Insurance Working in the opposite direction of a decreasing plan, the sum assured under these plans increase by around 5% p.a. Premiums will remain constant through the plan. The sum assured increases taking into consideration rising costs of living and inflation.
• Return of Premium These plans are rare, but in certain cases, insurers offer a return of the premium if the policyholder survives till the end of the term. Usually, term plans do not have any survival benefits. Under these plans, the insured person will receive the premiums paid minus any fees, administrative charges, and so on.

All insurance companies lay down certain requirements that individuals need to meet in order to be approved for a term plan. Some of the general requirements are listed below, however, this may vary between different insurers:

• The minimum age at entry is 18 years.
• The maximum age at entry is between 60 years to 70 years.
• The maximum age at maturity is 80 years.
• The minimum sum assured is around Rs.10 lakh.
• The maximum sum assured is Rs.100 crore.
• Premiums need to be paid either as a single pay, monthly, quarterly, bi-annually, or annually.