What is Term Insurance, How to buy best Term Insurance, Difference between Term Insurance and Life Insurance, Taking Term Insurance a good idea, Eligibility Criteria for Term Insurance, How does it works, Which are the best term plans, who can take term insurance, how to buy term plan online / offline, Know about the terms and conditions of term insurance.
What Is Term Insurance
Term insurance is a pure life insurance product of life insurance that provides financial protection to the policyholder for a fixed period of time in exchange for a fixed premium amount. It is called Term Life Insurance only because of providing financial security for a certain period of time. The premium for a term life insurance policy depends on the individual’s age, gender, policy term, sum assured and lifestyle.
Term Life Insurance The financial benefits are paid to the nominee only in the event of the unfortunate death of the policyholder during the policy term. If the policyholder survives till the end of the policy term, then no benefit is paid. Term life insurance policy offers only death benefit and not maturity benefit. Term life insurance policies provide only financial protection hence offer high coverage amount at the most affordable and economical premium.
Why Should I Buy Term Insurance
Financial security is very important in life. If you are the sole breadwinner in your family and your entire family depends on your earnings, then buying term insurance ensures that you meet the obligations of your loved ones whether you are present or not. It is very important to tell you some special reasons for buying term insurance like –
- To be safe from uncertainties – Life is full of uncertainties, which can be understood very well after the corona pandemic. Term plans are the best option for this, which saves one’s life from financial loss to the family due to such untoward incidents.
- For secure financial future of loved ones – If you are the only earner in your family then you must buy term insurance. Through a term insurance policy, you can secure the financial future of your loved ones. Even if you are not there, they still get a financial help in running their life smoothly.
- To protect your assets – When you make a big investment like home, car or any personal loan then you should first take term insurance. Your family should not suffer any financial loss when you are no more. Whatever liability you have can be easily met through term insurance.
How Do Term Insurance Plans Work
As we all know life insurance is a legal contract between the insurer and the insured. How Term Insurance works to go through the following steps –
- Assess the financial needs – Term insurance meets the financial needs of your family in your absence. Before buying a policy, you need to assess your financial goals and requirements. You have to look at your income, what are your priorities. You don’t have any liabilities. When you assess your needs, you can be sure how much you need. You can take a cover of 10 to 20 times of your annual income.
- Buying a policy – Once you have assessed your financial needs, the next step is to buy a policy. Now you have to decide how much sum assured and for how long you will need the policy. The premium of your policy depends on your age, gender and life style. Once you have determined all these things, you can now buy the policy.
- Maintain Regularity – When you buy a policy, you have to pay regular premiums to maintain it. Insurers ask you to choose according to your convenience, which you can keep the policy regular by paying monthly, quarterly, half-yearly, yearly or lump sum amount. If you are not able to maintain the policy premium regularly, then your policy gets discontinued. You have to maintain regularity to avail the policy benefits.
- Policy Benefit – Term insurance policy is a pure protection policy in which only death benefit is available. There is no maturity benefit available in this policy. However, in this type of policy, you can add a rider for additional benefits. Through the rider, you get a lump sum amount after you get disability and critical illness, for which you have to pay a little higher premium.
What Are The Types Of Term Insurance Plans
Term insurance plans are meant for the protection of the individual but you can choose the plan as per your convenience. There are mainly 4 types of term insurance plans. Let us know about the types of term insurance plans –
- Standard Term Insurance Plans – These are the most popular term insurance plans. Everything in this plan is determined at the time of taking the policy such as the sum insured, premium, and tenure. In this type of policy, there is no change during the policy term. In this type of policy only death benefit is available.
- Increasing Term Insurance Plan (ITIP) – In this type of term insurance plan, your insurance cover increases every year through specific points. In this type of plan, every year your premium keeps increasing at a predetermined rate and also the sum insured. This type of plan is suitable for those people who want to increase their insurance every year according to the inflation.
- Decreasing Term Insurance Plan (DTIP) – Term insurance plan mainly covers financial risk. Financial risk is high when you are young but it decreases as you get older. This type of plan is called Decreasing Term Insurance Plan. This plan is also perfect for those people who want to reduce their cover over time.
- Term Return of Premium (TROP) – In this type of term insurance plan, the premium amount paid by you is returned to you if there is no accident till the end of the policy term. If the policyholder dies during the policy term, the death benefit is paid to the nominee.
What Are The Salient Features Of Term Insurance Plan
- High Sum Assured – The biggest feature of term insurance is that you can choose a high sum assured. You can take Sum Assured up to 20 times your annual income.
- Affordable Premium – The main features of term insurance also include affordable premiums. Term insurance is much cheaper than other insurance premiums. If you are under age and do not smoke, the premium is very low.
- Premium Paying Flexibility – Another feature of term insurance is that you can pay the premium as per your convenience. You can pay the premium in monthly, quarterly, half-yearly, yearly and lump sum instalments.
- Long Coverage – In term insurance, you can decide your protection cover according to your own. You can also take till the age of 80 – 85 years. If you are younger then you can take longer coverage. Also premium works.
- Easy To Buy – Buying a term insurance policy is very easy and simple, you can buy a policy online from any insurance company by visiting the website.
- Claim Assistance – After buying term insurance, the biggest problem is how to get the claim, what to do, what documents are required. For all these questions, nowadays many companies provide Claim Assistance. So that your nominee does not face any problem in getting the financial amount.
- Rider Facility – You can also add rider facility in term insurance. With the help of rider, you can increase your policy coverage. You can add the rider at the inception of the policy as per your convenience. You can avail the benefits by adding the following riders to the policy –
- Accidental Death Benefit Rider
- Critical Illness Rider
- Permanent Disability Rider
- Income Benefit Rider
- Waiver Of Premium Rider
What Are The Benefits Of Term Insurance Plan
- Can take a higher sum insured at a lower premium cost.
- Riders can avail the facility for additional benefits.
- Term insurance is very easy to understand as there is no investment amount involved.
- Can avail premium refund at the end of the policy term.
- Income tax can be availed on premium (80C) and death benefit (10(10D)
Also Read – What is Life Insurance, and How does it work?
How To Choose The Best Term Plan?
Buying term insurance is very easy but you have to do some thinking for which is the better plan. Let us go through the following steps to buy a better term insurance policy for yourself.
- Claim Settlement Ratio (Claim Settlement Ratio) – How many claims came to the insurer company and how many claims were passed by the company. This ratio is called Claim Settlement Ratio. Whenever you go to buy a better term insurance for yourself, first of all check the Claim Settlement Ratio of that company. The higher the Claim Settlement Ratio, the better service your family will get. Through this ratio you can determine the company.
- Solvency Ratio (Solvency Ratio) – Solvency Ratio only tells how capable the insurer company you have chosen is financially capable of paying claims. As per the rules of Insurance Regulatory and Development Authority of India (IRDA), every company has to maintain at least 1.5 Solvency Ratio. The higher the Solvency Ratio, the more capable the company will be to pay the claim. That’s why do check it for better policy.
- Additional Benefits (Additional Benefits) – After checking the financial condition of the company, you have to see about the additional benefits available in the next step. Whether the policy you are opting for has rider facility or not. Because you are taking it for the financial benefit of your family. If you are suffering from any critical illness, then you will not be able to pay the premium during this period, in which case you will not get any benefit. To avoid such a situation, a better critical rider must be seen.
- Premium Cost – After checking all the things, you have to look at your pocket, that means how much premium you can pay. Today one can easily check the features and premium through online calculator. Buy the policy after checking the premium premium.
Why Buy Term Insurance Online?
You can buy term insurance both online and offline.
There are many reasons behind buying a term insurance policy online. Let us know why you should buy online –
- Policy Comparison – While buying a policy online, you get a lot of options through which you can compare the plans of all the companies. After comparing, you can buy a better plan soon. Off-line does not have this facility, you have to talk to the agent of every company and get information about the policy. And buying a policy also takes a long time.
- Cost effective – The biggest advantage of buying a policy online is that its premium amount is much less as compared to offline. With no online intermediary, you have to pay less premium amount.
- Easy Premium Option – You get a lot of premium payment options while buying a policy online. You can pay the premium through your Debit Card, Credit Card, NetBanking and UPI. You can also pay your upcoming premiums from your account through ECS.
What Are The Documents Required And Eligibility Criteria For Term Insurance Plan
You can buy a term insurance policy by using the following documents –
• Address Proof –
• Identity Proof –
• Passport Size Photograph –
• Income Proof – ITR or Salary Slip
Required eligibility for term insurance policy –
• One must be a citizen of India to take advantage of term insurance policy, however nowadays term insurance plans are being given to Person of Indian Origin (PIO) and NRI also.
• You must be above 18 years of age to buy a term insurance policy.
• Some policies also require you to submit your medical test report. The medical report shows whether you smoke or not. The medical report shows how much risk is there in giving the policy to you.
How Does A Term Insurance Plan Secure Your Family’s Future?
As you know that term insurance is a pure protection plan. Let us know how term insurance secures the future of your family –
In critical illness – If you are the sole bread earner in your family and your family is dependent on your income. When you learn that you have a serious illness, you and your family suffer a financial setback. One is the treatment of your illness and above all the financial need of the family. In this situation, if you have a Critical Illness Rider with Term Insurance, then there is no need to worry. You get a lump sum amount for the disease so that you can get your disease treated. There will be no financial crisis on your family also.
In Disability – It is often seen that a person becomes disabled after a major accident. In such a situation, he puts the family in great financial trouble. Both the cost of treatment and the financial needs of the family become difficult. In such a situation, if there is a disability rider along with term insurance, then you get a source of income for your family along with the cost of treatment.
In Uncertain Death – When you are the sole breadwinner in your family and you die then the financial condition of your family can be very bad. Term insurance plays a huge role to keep this financial situation smooth. The financial future of your family can be secured by paying a lump sum amount by the insurer in case of an uncertain death.
What Are The Terms And Conditions Related To Term Insurance Plan
Although term insurance is a pure protection policy, there are certain terms and conditions imposed by the insurer that apply to your policy. Let us know about the terms and conditions of term insurance –
- At the time of accident – Although all types of death are covered in the term insurance policy, but in case of death due to accident, every insurer conducts death investigation at its level. The claim amount is paid only after the verification is satisfied.
- Reasons for lifestyle – When you take the policy, you have to tell about your lifestyle whether you smoke or not. If you do but you have provided wrong information while taking the policy. In this situation, if you die due to smoking, then the claim amount is not given to your family. If you do not provide correct information about your lifestyle then the insurer has the right to reject your claim.
- Cause of Suicide – If the policy holder commits suicide within one year of taking the term insurance policy, no financial assistance is given to his family. Also, if the insured participates in a risky game of his own free will and during that time he dies, then no amount is given to his family even in this situation.
- Consumption of intoxicating substances – If a policyholder dies due to banned drugs and excessive alcohol, then no claim amount is paid in this situation also.
- Sexually Transmitted Diseases – Policy claim is not paid if the death of a policyholder is due to sexually transmitted diseases like HIV AIDS.
- Due to pre-existing medical conditions – If you have any health problem before taking the policy and you have not told the insurer and you die due to the same diseases then your family is not entitled to claim. For this it is necessary that you provide all your information while taking insurance so that your family does not face any problem.
- Due to criminal activities – After taking a term insurance policy, if you participate in any type of criminal activity / riots and you die, then no amount is payable by the insurance company to your family.
Frequently Asked Questions (FAQ’s)
Q1. What is meant by term insurance of 1 crore?
Term insurance of 1 crore means that on the death of the policyholder during the policy term, 1 crore is paid to his family. The sum insured is Rs 1 crore.
Q2. Should I get term insurance?
First of all, it is important that you assess your financial needs. Look at the dependence of your family on you. If you have any financial liability then you must take a term insurance plan.
Q3. Can I take 2 term insurance policies?
You can take term insurance up to 20 times your income. You can take the plan from the same company or you can also take it from different company. The total cover of all companies should be up to a maximum of 20 times of your income.
Q4. Which is the best term insurance?
For the best term insurance you need to look at and buy –
You can check out HDFC Life’s Click 2 Protect and ICICI Eye Protect Smart.
Q5. What is a term insurance rider?
A term insurance rider is an add-on to a permanent life insurance policy, which is often a whole life insurance policy. The rider term adds additional life insurance, but instead of being permanent. Term riders are an affordable way to add an additional death benefit for a limited period of time.
The Bottom Line
Life insurance is the first thing in financial planning, and if you want to keep your family financially secure, then definitely buy life insurance. Term insurance is a pure life insurance product of life insurance that provides financial protection to the policyholder for a fixed period of time in exchange for a fixed premium amount. It is called Term Life Insurance only because of providing financial security for a certain period of time. Term life insurance policies offer only death benefit and not maturity benefit. Term life insurance policies provide only financial protection hence offer high coverage amount at the most affordable and economical premium.