Term insurance plans are way economical than any other form of insurance. They come at comparatively much lower premium rates for the cover amount they offer. So, don't delay your decision anymore and invest in a term insurance plan today. Get your peace of mind and your family's financial stability in a single package.
What is Term Insurance Plan?
Term insurance is a life insurance plan that provides pure protection and covers the risk of untimely death of the policyholder during the policy term. A term plan is one of the cheapest ways to insure your family’s financial future. With this form of life insurance, you get the highest life insurance coverage by paying the lowest premium amount. Not only it will make your family financially independent in your absence, but it will also help them fulfil their future financial liabilities such as your child’s higher education, etc.
Why are Term Insurance plans known as the most affordable form of Life Insurance?
- They are pure protection plans with no investment factor.
- The insurance provider pays the benefit nominee only in case if the policyholder dies during the policy term.
- By purchasing term insurance online, you get to save a good amount of money on administration & other related charges.
- You only have to pay a sum of 2-3% of your annual income to get a cover 20 times your annual income
How a Term Plan Will Secure the Future of Your Family?
Like every other doting father/mother/guardian of a family, you will definitely want your loved ones to get all the good things in life. You will want your children to study in the best institutions and your spouse to get all the pleasures and privileges s/he deserves. Have you ever wondered what will happen to your family when you won’t be around?
God forbid if anything happens to you, the last thing you would want is your family to face a financial crunch. Therefore, buying a term plan is considered as the best and the most affordable way to secure the future of your family.
A term insurance plan allows the nominee or the beneficiary to receive a fixed sum assured in case of covered eventualities. For example, if you opt for a term plan with a cover of Rs. 1 Crore for the tenure of 30 years and you pass away during the policy tenure, the insurer will provide your nominee/family/dependents the pre-decided sum assured as the death benefit.
Your family can use the payout to meet the day-to-day expenses and fulfill other financial liabilities (if any). It can also be used to pay off your loans (if any) or to pay for the education of your children.
Best Term Insurance Plans
There is a wide range of term insurance plans available in Indian insurance market. All of them come with different set of features and benefits. Choosing the best term insurance plan amongst this wide array might prove to be a tedious process for the prospective buyers.
Term insurance can be taken through online as well as offline mode. In online mode, it can be directly purchased from the company’s website or through insurance websites. And, in offline mode, a term policy can be bought through an agent or the insurance provider’s offices.
Please go through the below enlisted table of the best term insurance plans that have been shortlisted to smooth out this process for you:
Online Term Plan & Their Eligibility Criteria
|Term Plan||Policy Term||Entry Age (Min-Max)||Maturity Age||Sum Assured (Min-Max)|
|HDFC Life Click 2 Protect 3D Plus||10- 40 years||18 -65 years||85 years||Rs 10,00,000 – No limit|
|Max Life Online Term Plan Plus||10- 40 years||18 – 60 years||85 years||Rs 25,00,000 – 1 crore|
|LIC E term plan||10 – 35 years||18 -60 years||75 years||Rs 25,00,000 – No limit|
|Bharti Axa Flexi Term||10 - 25 years||18 - 65 years||85 years||Rs 10,00,000 – No Limit|
|HDFC Life Click 2 Protect Plus||10- 40 years||18 -65 years||75 years||Rs 25,00,000 – No limit|
|SBI life eShield Plan||5 – 30 years||18 -65 years||70 years||Rs 20,00,000 – No limit|
|Aegon iTerm Plan||5 – 62 years||18 -65 years||100 years||Rs 25,00,000 – No limit|
|Bajaj Allianz Life eTouch Online Term||10 – 40 Years||18-65 Years||75 years||Rs 50 lakh – No limit|
|ICICI iprotect Smart||5 – 20 years||18 -65 years||75 years||No limit|
|Aditya Birla sun life DigiShield Plan||5 -40 years||18- 65 years||80 years||Rs 30 lakh – No limit|
|Bharti Axa Secure Confident||5 - 25 years||18- 55 years||60 years||Rs 5,00,000 – No Limit|
|Edelweiss Tokio Life Total Secure +||10 – 62 years||18 -65 years||75 years||Rs 25 lakh – No limit|
|Reliance Nippon Life Online Term Plan||10- 35 years||18 -55 years||75 years||Rs. 25,00,000 – No Limit|
|Exide Life Elite Term Plan||5 -35 years||21 – 60 years||70 years||Rs 50 lakh – No Limit|
|Bharti Axa Elite Secure||10 - 25 years||18 – 75 years||75 years||Rs 25,00,000 – No Limit|
Offline Term Plan & Their Eligibility Criteria
|Term Plan||Policy Term||Entry Age (Min-Max)||Maturity Age||Sum Assured (Min-Max)|
|ICICI Pru Life Raksha||5 years||18 -60 years||65 years||Rs 50,000 – Rs 5,00,000|
|Max Life Super Term Plan||10 - 35 years||18 -65 years||75 years||Rs 25,00,000 – No limit|
|LIC Anmol Jeevan II||5 -25 years||18- 55 years||65 years||Rs 6 lakh to Rs 24 lakh|
|LIC Amulya Jeevan II||5 - 35 years||18- 60 years||70 years||Rs 25 lakh – No limit|
|SBI Life – Saral Swadhan Plus||10 - 15 years||18 – 65 years||75 years||Rs 5 Lakh – No limit|
Types of Term Insurance
Before you write a cheque and sign the dotted line to finalize your deal, it’s important to understand the different types of term insurance plans available in the market. It will help you buy the one that will meet your set of requirements and will give you the best deal in return of your money.
Enlisted below are the various types of term insurance plans available:
Hence, it becomes extremely important to buy a term plan for the financial betterment and independence of your family. A term insurance plan will work as an income replacement tool in the hour of need. It will not only safeguard your family from financial distress but will also take care of your loans, children’s education, EMIs, etc.
Standard Term Insurance
It is undoubtedly the simplest and most uncomplicated form of term insurance. The premium amount, as well as the sum assured, is decided at the time of purchasing the policy and can’t be changed later on. In case the policyholder dies during the policy period, the life cover amount will be given to the nominee by the insurer. This form of term insurance only has death benefit to offer and doesn’t have maturity or survival benefit. It means that if the policyholder outlives her/his policy period, there will be no pay-outs.
Illustration of a Standard Term Insurance Plan:
Given below are 2 sample premium rates for both the genders (male & female) who have bought standard term insurance policies. Let's assume, both of them are of 30-years and are non-smokers. They have chosen a sum assured of Rs.50 lakhs and the maturity age chosen by them is 65 years.
The premium amount and sum assured remain the same throughout the tenure of the policy. The death payout is given to the nominee as chosen by the policyholder at the time of policy inception.
|Age||Gender||Term (Tenure)||Sum Assured||Annual Premium|
|30-year||Female||35 years||Rs 50 lakh||Rs 3900 – Rs 6000|
|30-year||Male||35 years||Rs. 50 lakh||Rs 4500 – Rs 6700|
Term Return of Premium (TROP)
In this type of term insurance, if the policyholder outlives her/his policy tenure, the insurer will pay back the entire premium amount paid by you. If you buy a plan where you have to pay Rs. 7,000 annually for 25 years for a term life cover of Rs. 50,00,000, and if you survive the plan term, the insurer will return approximately Rs.1,75,000 (exclusive of applicable taxes).This is why TROP plans are more expensive than standard term life insurance plans.
Increasing Term Insurance Plan
This policy is very much like the standard term policy in terms of premium payment & policy period. The only difference is, under this plan, the life cover also increases with the age of the policyholder. Increasing term plan has been structured to match the inflation rate; it increases the original life cover by 1.5 to 2 times over its term period. The life cover increases at a pre-decided rate. Mostly, the sum assured increases annually and the increment can be anywhere between 5% and 10% of the base coverage.
The coverage amount keeps on increasing in the subsequent on every annual anniversary of the policy. Depending upon insurer to insurer, there could be an increase of 5% - 10% on the basic sum assured amount.
Illustration of Increasing Term Insurance Plan:
Given below are 2 sample premium rates for a male subscriber who has bought increasing term insurance policy. Let's assume, his age is of 30-years and he is a non-smoker and the sum assured chosen by him is of Rs.1 crore.
On every policy anniversary, the coverage amount will increase by 5%, subject to the maximum increment offered by the insurance provider.
|Age||Gender||Term (Tenure)||Sum Assured||Payouts|
|30 year||Male||35 years||Rs 1 crore||After the death of the policyholder, the nominee will be paid the Effective Sum Assured by the insurer|
Life-Stage Event Term Insurance Plan
In this type of term plan, you get an option to increase your life cover at every life-related milestones, such as your marriage, first child, the second child, etc.
It will also have a significant effect on your premium amount.
|Event||Increasing sum assured as %age of original sum assured|
|1st Child Birth||25%|
|2nd Child Birth||25%|
Similar to other term insurance plans, in case of death of the life insured in mid of the policy tenure, the insurance provider will pay the effective sum assured to his beneficiary based on the payout opted by the insurance holder at the time of buying the term policy.
Convertible Term Plan
With this term plan, you get the option to convert your existing term insurance into an endowment plan or a whole life insurance. You can switch the plan at a later stage in your life. Please remember that the charges may be applicable at the time of the switch.
Joint Life Term Plan
A joint life term plan is designed to cover both husband and wife in a single policy. In this plan, both will pay a combined premium. If any of the husband or wife dies unexpectedly, the insurer will give the sum assured to the surviving partner as s/he will be the rightful nominee.
Illustration of a Joint Term Insurance Plan
A married couple buys a joint term policy with a cover amount of Rs.1 crore for each where the chosen policy term is of 30 years.
Let’s suppose the age of the wife is 28 years and the husband’s age is of 30 years. If in an unexpected turn of events, the husband dies in the 6th year from the policy’s subscription date (while the policy is active), his wife will receive the cover amount of Rs.1 crore as a lump sum. Eventually, the term policy will be terminated by the insurance provider, once it has paid the sum assured to the surviving partner.
Group Term Insurance
Group term insurance plans are coverage plans provided by the employers for their employees who are working full-time in their companies, organisations, businesses, or any other large group of people associated together.
Group term insurance plans provide life cover to all the group members of a particular organisation. Group term policy works same as an individual term policy, except these plans are designed & priced for a group rather than an individual and the premium amount keeps on changing every year.
Under Group term insurance plans, the moment an individual leaves the company/organisation/group he is working with, he will not be a part of the group term policy anymore.
Features of a Term Insurance Policy
The basic concept behind buying a term insurance plan is to provide coverage to your family in times of stress, especially when you (the income generator) are absent. Its primary purpose is to keep your family stable & happy and ensure that they meet their regular and unexpected expenses without much trouble.
Enlisted are few key features of the term insurance plans that make them stand out:
|Flexibility||Generally, a term insurance plan offers a policy term from 5 to 25 years. Further, whole life plans are also available. This flexibility lets you choose a tenure which would be best-suited for you. Along with that, also keep in mind the financial needs of your family while finalizing the term of your plan.|
|Maturity Age||It is considered to be one of the most important features of a term plan. This is because, as an individual, you would like to be covered for most of your life, typically until the age of 75 years and term insurance provides you with just that. However, it isn’t technically a maturity age as you do not get anything back unless it is a TROP plan.|
|Renewability||Renewability is one of the most unique features of term insurance plans. With this feature, whether you opt for a 20-year or 50-year policy at inception, you get to renew your plan at any point of time. Due to this, you get to enjoy the benefits of your plan at the same price and premium. Hence, it as a good deal in the long run.|
|Death Benefit||This is a benefit provided to your nominee in case of your unfortunate death. Since there are various types of term insurance plans available, this benefit can be availed in several ways. It may be a lump sum amount, a partial lump sum amount combined with a fixed amount payment at a monthly, quarterly, half-yearly or annually basis. Or else, you can also extend the annuities over several years.|
|Survival Benefits||Technically, term insurance plans don’t offer survival or maturity benefits. However, you can opt for their advance version, Term Return of Premium (TROP), if you’re looking for maturity/survival benefits.|
Advantages of Term Insurance Policy
Term plans are much easier to understand as compared to the policies that combine risk cover with investments or savings like ULIPs and endowment policies. It is not easy for a layman to understand the complexities of cash value plans.
A term life is all about simplicity; you just have to pay the premium and get covered for the policy term – as simple as that.
With term plans, it’s easier to get a large life cover amount at a much smaller premium. For instance, a 30-year-old individual can easily get a Life Cover of Rs. 1 crore for 20 years at a premium of approximately Rs. 500 per month.
On the other hand, for the same sum assured, the premium of an endowment policy can go up to Rs. 2100 per month, which is indeed a huge amount of difference.
With term plans, you get dual tax-benefits. The first tax benefit can be availed on the premiums paid. The maximum permissible limit of this benefit is up to Rs 1.5 lakhs u/s 80C. The second, the lump-sum amount paid to your family in case of an eventuality is eligible for a tax rebate under section 10(10)D of the Income Tax Act.
Critical Illnesses Cover
New age term insurance plans have introduced critical illness cover to provide additional protection to the insured. Now, besides safeguarding your family’s financial future in your absence, you are also protected against lifestyle and critical illnesses. All you have to do is pay a nominal amount of additional premium and you will be provided with a lump-sum cash pay-out on the very first diagnosis of a critical illness like cancer, heart attack, kidney failure, etc.
Disability Coverage Rider
With this particular feature, the insurance provider will pay all your future premiums if there is a case of total or permanent disability. Here, you will get the assurance that your life coverage will remain active even if you are unable to pay your future premiums due to a permanent disability.
The term insurance plans also give you the option to enhance your family’s financial security by opting for its double pay-out feature. For example, if you have got a life coverage of Rs. 1 crore, with additional Accidental Cover, in case of an accidental death, your family will get Rs. 2 crores instead of the initial amount of Rs. 1 crore.
Variety of Claim pay-outs Options
Although, most of the term insurance plans pay death benefit as a lump sum amount, you still have the option to disperse this pay-out payment in different forms. There are certain scenarios wherein the policyholders don’t feel too confident about the financial reasonability of their dependents.
To handle such scenarios, one can opt for different payout options available with the insurance companies wherein 50% of the sum assured will be a lump sum amount and other 50% as monthly payments or 100% of the sum assured will be given as monthly payouts.
It all depends upon the financial understanding and maturity of your family members and your own decision that how you want to get the life cover amount given to them.
This arrangement usually proves to be beneficial in case an emergency situation arises. Your family can use the lump sum amount to deal with the particular emergency; whereas, the monthly pay-outs can be used to handle monthly expenses.
Adjust It Suiting Your Life-Needs
Term insurance plans come with an option to be adjusted according to the current stage of your life. For instance, if you buy a term plan in your bachelorhood for a sum assured of Rs 25 lakhs, you can get it increased to Rs 50 lakhs or more, once you get married. In other words, a term plan allows you to make amendments in it at any time during its tenure.
There are certain riders available with a term plan that can be used to add another layer of protection to your plan. Few of these add-on riders include disability rider, accidental death rider, income benefit rider, critical illness rider, waiver of premium rider, etc.
Different riders have a different set of benefits attributed to them which increases the value of your policy. A combination of different riders makes your policy an all-inclusive, well-rounded which ultimately benefits your loved ones.
Protection For Your Liabilities
It’s a natural phenomenon to procure assets in order to lead a comfortable life. Besides buying a house, car, etc. there are other liabilities too that we procure in the forms of debts or credits.
These liabilities are not necessarily in smaller amounts that can be taken care of in a few months. In case something untoward happens, you need to make an arrangement that will help your family to deal with the expenses related to those liabilities. Term insurance will work as an income replacement tool in your absence so that your loved ones aren’t burdened with these unnecessary burdens.
How Much Term Insurance Do I Need?
It’s always a traumatic experience for the family members if there is an unfortunate demise in the family. However, the situation is much worse if the breadwinner in a family dies as it leads to financial instability in the family, besides the emotional trauma. There might be other family members who are not equipped enough for getting a job easily.
Therefore, it becomes more important to purchase term insurance plans and especially for the breadwinner. There are a number of factors that determine how much coverage one needs against her/his term policy. Few of them are:
- Sole earner in a family – If an individual is the only earning member in the family and her/his family is dependent upon his income; it becomes like a responsibility for him to get a term policy as it would help her/his family members to fight off financial trauma in case of any unfortunate eventuality.
- Starting a family – If an individual is planning to start a family, they need to buy a term insurance plan whether it’s an online term plan or an offline one. It’s to ensure that if anything goes wrong, the future of the insured’s family is not jeopardized in any way.
In such scenarios too, where both of the partners are working they should secure their life as in case if anything happens to one of them, the other member would not have to face any financial problem due to loss of other member’s income.
- Starting a new business – If an individual is taking a chance of starting a new business, there is a possibility that most of her/his savings will be gone into it which gradually means that might be her/his family members won’t have any other source of income left with them.
Furthermore, if something unfortunate happens, there must be a channel in place that can help her/his family to overcome the situation. Getting an online term insurance or an offline one will help the particular individual’s family to at least overcome the financial loss in such cases.
- Secure the future of children – With the growth of children, the cost and fees associated with their education and lifestyle needs also increase. Getting a term policy will help the guardian of the family to ensure her/his kids’ future, even if something happens to her/him. Getting a term policy will help the children to focus on their career rather than make them bear responsibilities at a young age and that too, at the stake of their career.
- The Pendency of Loan – A responsible individual must have an idea of how much loan amount s/he has to take care of including her/his credit card payments, housing loan, car loan and others.
Most of the assets that people purchase these days are mostly on credit or EMIs.
In case of any unfortunate eventualities, besides dealing with the emotional pain the family would also have to deal with this additional responsibility. However, if the particular individual has already planned ahead and has bought a term insurance plan, the burden of loan will not go to family member and all will be paid off.
- Lifestyle – Every family has a particular standard of living to follow or maintain in the society. It would be certainly not easy for the family members to cope-up with the breadwinner’s loss as well as failing to maintain their lifestyle. Therefore, the amount chosen for the term policy should be sufficient to help the family maintain their lifestyle which they were leading when the policyholder was alive.
More or less, the aforementioned factors will help an individual determine how much coverage s/he would need to ensure a financially stable life for her/his family.
Term Insurance Premium Calculator
Premium calculator for term insurance plans is designed to enable the policyholders to check and confirm how much premium they would need to pay for the sum assured which is desired. This will help in determining the exact amount of the premium so that the policyholder can decide by himself whether he would be able to pay the regular premium or not.
One of the major benefits of online term insurance premium calculator is that if the policyholder finds the amount of premium to be higher for the requisite sum assured, he can reduce the coverage amount to get the desired premium. As a matter of fact, if the premium is not paid on regular basis and on time, it would not give the desired benefits all the money invested till date could go waste. But in a term policy, the premium amount comes secondary to the sum assured (which is the actual amount a family would get in case something happens to the insured).
Benefits of Term Insurance Calculator
There are different benefits of using online term insurance calculator. It helps the policyholders decide how much policy premium they would be able to pay without financially burdening themselves. The benefits of online term plan calculators are –
- Helps determining the coverage amount – There are instances where people may not have a clear idea of how much coverage they would need to protect their families if anything happens to them. The online term plan calculators let them calculate how much coverage would help their families to live a comfortable life in case of any mishappening.
- User friendly – Using calculator is one of the easiest ways to get the premium or coverage amount one is looking for. The user just needs to fill-in the details required and the calculator will do the calculation on itself with all the given information. Even a layman who does not have any idea of online calculators can easily use it without any hassle.
- Calculates the premium – As details are given by an individual about the age and other details, the amount of premium that would be charged will be reflected on it. So, the user will now know that how much premium they have to pay to get a certain amount of sum assured.
Not only will the insurance holders get the option to choose the most affordable premium amount, but they can also compare features and benefits of different plans with the help of online term insurance calculators.
- Analyzing the data – The online term plan calculators analyzes all the data shared by the insurance seekers and deliver the best-suited results based on the shared information. The insurance seekers will get a better idea of how much benefit they are going to earn by comparing different term insurance plans.
- Saves time – Online term plan calculators also help saving time of the insurance seekers by getting premium rates of different companies at one platform. By using this method, the insurance seekers can easily check the premium rates that are being charged by different companies and can instantly decide which policy they would like to opt for.
- Compare different plans – Last but not the least, with the help of online term insurance calculators, the policyholders can easily compare different plans and their features & benefits.
Why Should You Buy a Term Insurance Plan?
Life is never predictable and eventualities can rip you off physically, emotionally, and financially too. No one has control over death neither can anyone predict it. For a family, the death of the bread-earner can cause emotional as well as financial setbacks.
Tem insurance plays a vital role in finding solutions for these setbacks. Due to their low premium, term plans are the most affordable way to build a financial safety net for your family. It will help your family take care of regular and unexpected expenses, such as children’s fees, unpaid loans, etc. when you aren’t around.
Your family members will receive a lump sum amount (death benefit) upon the policyholder’s death. Here, it’s important to understand that the death benefits will be zero if the policyholder dies after the policy expires.
Who Should Go For a Term Insurance Plan?
Ideally, everyone who has a dependent should buy a term plan. In case you are the sole breadwinner of your family, you ought to purchase a term plan. It will ensure the financial future of your family.
Here is the list of individuals that should go for a term insurance plan:
- If you are the sole breadwinner of your family.
- If you have dependents like your parents, spouse, kids, etc. to take care of.
- If you are a married and working individual who is planning to start a family.
- If you are an entrepreneur running a start-up or business.
Everyone wants their loved ones to prosper. No one wants them to face a financial struggle or see them struggling to make the ends meet. If you are the sole breadwinner of your family, if you pass away your family would be affected emotionally as well as financially. Buying a term insurance plan is the sure-fire way to secure the financial future of your loved ones.
Secure Children’s Future
Being a parent is a major life-changing event in one’s life. From the moment a child is conceived, the monthly expenses begin to touch the new heights.
As the child grows up, the responsibilities of a parent along with the monthly expenses keep on increasing. After all, raising a child is not a child’s play.
With the sense of responsibility sinking-in, parents start looking for different savings instruments to secure the future of their child. A child’s major long-term financial includes education or marriage.
When financial needs arise, a term insurance plan comes to the rescue. It helps to keep financial woes at bay.
A Source of Regular Income
Buying a term insurance plan helps to ensure that your family gets a financial cushion even in your absence. As a death benefit, it provides a pre-decided lump sum payment that helps your family to live a dignified life.
Outstanding Debts or Bank Loans
Currently, most of the individuals take a loan to pay for their dream car or dream house. In case a person who has to pay different EMIs such as housing loan, mortgaged property, business loan, car loan etc. passes away, his family would suffer financially in his/ her absence
With the lump sum payment provided by a term plan, such outstanding loans can be paid without any hassle.
How Does a Term Insurance Plan Work?
Term insurance plan is one of the traditional forms of life insurance. In a term insurance plan, you get a higher sum assured at lower premiums. As a policyholder, you’ll be covered by your insurer against any life risk (accidental or natural death) during the tenure of the policy.
In case of any eventuality, the insurance provider will pay the sum assured to your nominee. The sum assured payout is based on the payment format you have opted at the time of purchasing the term plan. The benefit can be paid out either as a lump sum, a lump sum and monthly income or as monthly income.
How to Choose the Best Term Insurance Plan?
People are often confused about what should be the characteristics of the best term insurance plan and which one plan to buy. To help you make a better selection, here are a few questions that you must ask:
What is your life stage and how many members are there in your family?
Financial responsibilities of an unmarried individual might be very different when compared to that of a married person with kids. It means that the needs of your dependent family members will not be the same at every stage of your life.
Therefore, a term plan and its sum assured should be chosen accordingly. Make sure to keep an eye on your future financial responsibilities to make the right calculation.
In your absence, how much will your family need to maintain its current lifestyle?
Typically, people follow the approach of considering their family’s current lifestyle to calculate the extent of cover in a term plan. However, one should always assess the situation by calculating the amount of funds required in the future to sustain their current lifestyle. Make sure to include the inflation factor while planning the life cover.
Is your income the sole criterion in choosing a plan?
It doesn’t matter whether you are a contributing member of your family or the sole income generator. It’s always better to opt for a term plan that can provide your family with a sum assured that is equivalent to the funds they will need in your absence.
Are your Liabilities accounted for?
There might be certain liabilities for you to take care of, such as personal loans, short-term loans, mortgage, car loan, etc. To prevent your family from the burden of paying EMIs for these liabilities, it’s advised to look for a term plan that can take care of these outstanding loans in your absence.
Have you checked the Claim Settlement Ratio (CSR) of the insurer?
Claim Settlement Ratio actually represents the number of claims settled against the number of claims filed with an insurance company. Higher the claim settlement ratio of the company, better are the chances of your claim getting settled. Insurance companies are supposed to have an effective claim settlement process in order to show their ability to pay reimbursements.
Exclusions for a Term Insurance Plan
An insurance policy provides the opted sum insured if a covered event occurs during the policy term. However, every insurance provider lists down some exclusions and restricts its insurance coverage.
These exclusions can be defined as certain conditions and events that are not covered under a particular insurance policy.
Shivam, a 30-year old healthy individual purchased a life insurance plan. Unfortunately, he chose to end his life and committed suicide. Ideally, as per the policy norms, his nominee should receive the pre-decided death benefit. However, an event of suicide is not covered under a term plan and is usually termed as exclusion in most of the term plans.
Insurance providers do not pay out the sum insured if the death occurs due to suicide.
Exclusions for Accidental Death
In case of accidental death under suspicious circumstances, the insurance provider will take its time to investigate the case before settling the claim. Every insurance company follows its own investigation procedure. Hence, it might differ from one insurance provider to another. Insurers can also take help from a team of equipped medical professionals to investigate the claim.
However, in the case of death due to accident or critical illness, sum insured won’t be paid if death occurs due to:
- Taking part in a hazardous sports activity.
- Drought, war, and terrorism.
- Consumption of drugs or alcohol.
- Criminal act.
- Pregnancy, childbirth, and related complications.
- Pre-existing illness.
Exclusions for Death due to Lifestyle Diseases
In case the policyholder passes away due to a lifestyle disease, the insurer can reject the claim. Additionally, if the insured has not revealed his/his pre-existing illness at the time of filling out the application form and he passes away because of the same, no coverage will be provided.
Note- Smokers are categorised as high-risk as they are more likely to succumb to lifestyle diseases. Based on the risk factor, they attract higher insurance premiums.
Why You Should Buy Term Insurance Online?
Everyone likes to save some extra penny while buying new commodities. Buying term plans online gives you an easy chance to do so. As per an estimate, buying online term plans is approximately 40% cheaper as compared to buying them offline.
Going for the online buying mode effectively saves you from unwanted charges such as agent’s commission, paper cost, processing fees, etc. In the modern era, when everything is going digital, buying insurance is no different. Besides the usual benefits such as 24X7 availability, speed and convenience, using online insurance makes sense.
Here’s a look into the reasons why it’s a convenient option:
Option to Compare & Choose
Almost every insurance company in India is offering online term plans these days. As an interested buyer, you can access a plethora of information including informative articles, online calculators, educative videos, case studies, customer reviews, etc. All these entities ultimately help you learn the benefits & features of different plans in more details and make informed decisions.
One of the key elements that affect the cost of online plans is the absence of a consultant or an agent. It saves the random costs associated with selling term plans such as distributions costs, commission, etc. Apart from this, you also get to save a good amount of money on documentation, stationary, logistics, etc.
Speed and Security
When you opt for online payment mode for your premiums, you get to choose from a whole set of secure and fast payment options such as net banking, credit cards, debit cards and more. You don’t need to fret over payment delays or even worse payment lapse, as these online payments are instantly processed through a secure gateway. You also get an instant online receipt for your payments which can use as a proof of payment if required. This especially comes handy when you need to claim your tax exemptions and need to furnish the documents on an urgent basis.
While buying term plans through online mode offers all these benefits, you can still contact the insurance providers on their online or on phone assistance channels to get your doubts clarified. Please make sure that you get all your concerns addressed before you finalize your decision to buy a term insurance plan.
11 Factors that Affect Premium Charges for Your Term Plan
Before you start looking for a term insurance plan, it would do you good to get familiar with different factors that influence its premium rates. This will help you get a better idea of how insurance companies compute premium for term plans and what factors they look into before issuing a policy.
The below-enlisted factors may affect the premium rates of a term plan.
Age:It is one of the initial factors that is taken into consideration while deciding the premium rates for an applicant. A young individual is considered as a low-risk entity. It’s because his/her health is at its peak and the chances of him/her contracting or developing any life-threatening diseases are lower.
Additionally, a young individual will pay more premium installments as compared to the old aged people. Hence, the premium rates for them are low.
Gender: As per recent studies, it has been found that on an average, women live five years longer as compared to men. Due to this reason, women usually have to pay less premium amount as compared to men.
Current Health Condition:Before an insurance provider underwrites the policy, the applicant has to undergo a preliminary medical screening. It is done to check the eligibility of an applicant for the policy. The applicant’s cholesterol level, blood pressure, blood sugar level, etc are checked as a part of the preliminary medical screening.
It helps the insurer to compute insurance premium for the applicant on the basis of his/her current health status. Hence, the fitter you are, the less premium you need to pay.
Medical History of the Family: The medical history of your family plays a crucial role in determining the premium amount. In case anyone from your elder generation has suffered from serious illnesses such as stroke, heart attack, cancer, etc., it exposes you to the risk of developing/ contracting the same illness. As a result, the premium for your plan may go higher.
Health History: Insurance providers take your health status into consideration while determining your premium rates. Therefore, if you are healthy & fit and don’t have any medical history of chronic diseases or any other health issues, the premium rates for you will be low and vice-versa.
Smoking and Drinking Habits: Your smoking and drinking habits also contribute to the final premium amount you would have to pay for a particular term plan. This is because these factors expose an applicant to the risk of contracting/ developing life-threatening diseases. Every life Insurance provider checks with the applicant about such habits. An individual who is a chain smoker or a heavy drinker will have to pay a premium 2-3 times higher than a teetotaler does.
Participation in Adventure Sports: If you are an adventure junkie who loves the adrenaline rush triggered by participation in adventure sports such as skydiving, car racing, mountain climbing, sea diving, hot air ballooning, etc., the premium charges for you is going to be on higher side.
Profession: In case your profession exposes you to life-threatening risks, it affects your term insurance premium. Individuals working in industries such as mining, shipping, aviation, oil, and gas, etc., are highly exposed to the risk of accidental death. Due to this, the premium is bound to be much higher as compared to the individuals having desk jobs.
Premium Payment Mode: You can choose to pay your premium on the annual, half-yearly, quarterly or monthly basis. However, it’s important to note that the insurance providers charge a higher premium from the policyholder paying a premium on the monthly or quarterly basis.
This is because frequently made payments attract various costs such as administration cost, collection cost, and processing cost for the companies. Whereas, the premium paid on an annual basis helps the insurer to saves such costs.
Policy Tenure &Payment Mode: The policy tenure also plays a vital role in determining the premium amount. The policy with a longer duration is more expensive as compared to the policies with shorter duration. The longer tenure you opt for, the higher the death benefit your nominee would get. Therefore, long-term plans attract a higher the premium.
Policy-buying Mode: Buying a policy through online mode always costs less than the offline mode. It is because buying a term plan offline increases the company’s service & administration costs such as the agent’s commission, distribution channel cost, etc.
Buying a plan online saves the insurer from these extra costs and hence, the applicant has to pay low premiums.
Term Insurance Claim Process
The main purpose of buying a term policy is that in case of any mishappening the family members do not have to suffer on the financial part. For this, the buyer should have term insurance plans from a company which has the claim settlement ratio on a higher side. So that the family members do not have to face any difficulty for getting their claim settled when the life assured is not there.
It is always advised that the nominee should know what amount will be taken as sum assured and other details of the policy. If this information is there with the family members, they can go ahead with the claim process easier.
There is a certain procedure which the claimant needs to follow for claiming the sum assured. But to get the claim it is essential to find that whether the policy is in force or not. If the policy is in force, the claimant needs to follow these steps such as –
- Intimation to the company – For starting the procedure the company need to be informed about the death of the life assured. The details that are required for intimation are a name of the life assured, the number of policy, a reason of death with date, a place where the death occurred a name of the nominee under the policy and many others.
The intimation form of the claim could be obtained from the website which needs to be filled by the claimant. Many of the term insurance companies nowadays are also having an online claim form for the intimation purpose.
- Requirement of documents – There are different documents that need to be given by the nominee for claiming the sum assured –
- Certificate of Death
- Policy document in original
- Other documents that are required by the company for the proof.
In certain companies, if the policy holder had not completed even three years of getting the policy then they need to investigate for knowing whether the claim is genuine or not. For this different documents could be asked by the company such as –
- Whether policy holder has been admitted to the hospital and the related papers
- Certificate of the doctor regarding the disease.
- In case of an accident, a copy of FIR report, post mortem report and other documents as required.
- If the policy holder dies from the suicide, murder or accident then the policy holder should have the documents such as post mortem report, FIR (First Information Report), Panchanama, etc.
- Claim settlement – As per the rules, it is the duty of the IRDAI to settle the claim within a span of around 30 days from getting the full documents. If there is an investigation which needs to be done then it would take around 6 months. After the claim is settled the amount will be credited to the account as mentioned by the nominee in an application form.
Documents Required for Term Insurance
There are different documents that an insurance company can ask for when a person is buying a term insurance plan. If an individual has bought an online term plan, s/he has the option to submit the required documents through online mode.
However, if an individual has taken the term policy through an agent or company, s/he needs to submit the documents to the agent or deposit it in the nearest office or branch of the particular insurance provider.
Here, it’s important to understand that the subscribers need to self-attest their documents before submitting them to the agent or in the company’s branch.
Here’s a look into the list of documents that a company can ask for before issuing a term insurance plan:
- Documents as Proof of Income – These documents are required to get an idea of the applicant’s income. It helps the underwriting team to decide if the applicant will be able to pay the premium for his term policy on time or not.
Normally, insurance providers tend to provide approximately 20 times of the annual income earned by an insurance seeker.
Following is the list of are various documents that a company can ask from the applicants irrespective of the fact whether they have applied for an offline or online term plan:
- Salary slips of last 3 months
- Last 2 to 3 years of Income tax returns
- Bank statement of last six months with at least 3 months’ salary credit.
- If the applicant is pursuing business, s/he needs to represent a certificate from CA
- Form 16 (the latest one)
- Proof of address – The address proof is required for the verification and communication purpose. It includes:
- Lease agreement
- Statement of bank for last 6 months with the latest entries
- Statement of credit card (less than 3 months old)
- Driving License with address mentioned
- Recent bill of Gas Connection
- Telephone bill of the latest month
- Recent water bills
- Electricity bill
- Passport which should be valid
- Ration Card
- Voter Identification card
- Aadhar Card
- Proof of Identity – There are various documents that can be submitted as a proof of identity to purchase a term policy:
- Permanent Account Number (PAN) Card
- Passport which should be valid
- Aadhar Card
- Voter Identification Card
- Proof of Age – The documents submitted by an insurance seeker should have her/his date of birth mentioned on it. Here’s a list of different documents that are acceptable by different insurance providers in order to issue term insurance plans:
- Permanent Account Number (PAN) Card
- Passport which should be valid
- Aadhar Card
- Voter identification Card
- Certificate of marriage
- Ration Card
- Certificate of Birth
- Driving license
- Any school/college leaving certificate
Term Insurance Renewal Process
When a buyer buys a term policy, it is necessary for them to keep in mind that the renewal of the policy should be done on time. This is essential to have the maximum benefit of the policy. If a policy holder goes for the new policy, depending upon his age the premium would be higher.
Therefore, it’s better for a policy holder to renewing his term insurance plan. However, if one is looking forward to renew his policy, he should make sure that all the premium are paid on time and even the renewal premium in certain cases. There are the different benefits that will be there with the renewal of policy –
- No further checkup of health – As a person grows old, chances of him getting ill are prone. Hence, to get a term policy it is essential for him to have medical checkup. But if the policy is renewed and all the premiums have been paid, there would be no need to have the medical checkup again.
- Premium will cost more – If the policy holder is renewing the policy, the premium would be taken which is calculated on that day and not on the present age. As the age grows the premium of the policy also increases. But in the case of renewal, the premium will remain same as it was at the time of taking the policy.
- Purpose of insurance – The main purpose of insurance is to secure the family. And, if the time is spent on finding a new policy or initiation of policy and if anything unexpected happens in that search period, ultimately then there will be no use of having a term insurance. All the efforts will go into vein. So, it is always better to have the insurance and renew them every time.
Different Payouts Offered Under Term Plans
Lump Sum: The nominee will receive the sum assured as a one-time payment after the unfortunate demise of the policyholder.
Shikhar, a 30-year old healthy (non-smoker) individual has opted for a term plan with a sum assured of Rs 1 Crore for the tenure of 30 years. In case he dies (due to a natural cause or due to an accident) during the 21st year of the policy, his nominee will receive Rs 1 Crore as the sum assured, all at once as the death benefit.
Lump Sum + Monthly Income: The nominee of the policyholder will receive half of the sum assured as a lump sum and the remaining half will be paid as on a monthly basis.
Shikhar, a 30-year old healthy (non-smoker) individual has opted for a term plan with a sum assured of Rs 1 Crore for the tenure of 30 years. In case, he dies (due to a natural cause or due to an accident) during the 21st year of the policy, his nominee will receive the sum assured in two parts: the first 50 Lakhs as a lump sum and the second half in the form of regular monthly payouts.
Monthly Income or Income Replacement: The sum assured is paid at regular intervals as a percentage of the sum assured from the first month of processing the death claim.
Shikhar, a 30-year old healthy (non-smoker) individual has opted for a term plan with a sum assured of Rs 1 Crore for the tenure of 30 years. In case, he dies (due to a natural cause or due to an accident) during the 21st year of the policy, his nominee will receive Rs 1 Lakh every month for next 84 months (approximately) as the death benefit.
What could happen if you don't purchase a term insurance plan?
Nowadays in most of the families both the partners are earning. Still, the untimely demise of one partner can affect the financial stability of the family. It is because the family is already used to a good lifestyle because of the double breadwinners of the family.
If you don’t opt for a term insurance plan and you pass away, your untimely demise can severely affect the mental peace and financial stability of your loved ones. The emotional trauma may subdue after a certain period of time but the financial stress won’t be minimised until and unless your financial planning is strong.
Hence, it becomes extremely important to buy a term plan for the financial betterment and independence of your family. A term insurance plan will work as an income replacement tool in the hour of need. It will not only safeguard your family from financial distress but will also take care of your loans, children’s education, EMIs, etc.
Single vs Joint Life Term Insurance
A term policy is generally purchased by an individual to protect his family in case of any mishappening. In case the individual is married he can also get a joint life term insurance plan. However, it entirely depends on the preference of the individual to choose single life term insurance or joint life term insurance.
Differences Between Single & Joint Term Insurance Plans:
- Covers – In the single life term insurance, only one life assured is covered and the sum assured will be given for a single individual only.
In joint life term insurance policy, there will be two life assured covered. There are many instances where there are two hands running a house. The premium will be less as compared to the purchase of two single life term insurance separately.
- Death benefit – In case of a single life term insurance, if the policyholder dies the nominee will get the sum assured. In case a married couple had taken two different term insurance plans, in case of death of one of the insured, other will be still covered under her/his own policy.
In case of joint life term insurance plan, the sum assured will be paid on the death of the first member only and after that, the policy will lapse. There will be a single sum assured which will be paid on the death of one of the life assured and then the policy will end. The partner who will survive does not have any benefit of sum assured after that. If both the partners die together, the sum assured which is there in the policy will be given to the nominee.
- Separation – In case the married couple gets separated, the policy which is taken under single life term insurance will be paid by both of them for their own policies. In this case they both individually responsible for paying the premium of term insurance.
The policy will end in case of separation under joint life term insurance.
- Premium – The premium charged under the single life term insurance will be higher as both of the partners have taken the term insurance separately. Naturally, the premium will be charged higher as compared to joint life term insurance when taken term insurance jointly.
Which One to Choose?
- If the budget is low, the partners could go for a joint life term policy. But taken separately does not cost much of burden as compared to single life term insurance.
- In today’s time, there is nothing certain and many issues arise which lead to breaking of relationship. So, in this case, a new term policy needs to be purchased. As the age grows the term insurance become costly and taking the joint term life insurance would be waste. So taking separate term insurance will make both of the partners responsible for their term insurance.
How much of the sum assured is required? Is there need to have the separate policy or would it be a burden financially?
Term Insurance vs Whole Life Insurance
- The premium of the term insurance is much lower as compared to that of a Whole Life Insurance plan. The premium of whole life insurance can be up to 5 to 10 times greater than term insurance for the same sum assured.
- Premium remains same in case of whole life insurance plans for throughout the life of the insurance holder; whereas, premium amount in some of the term insurance plans may vary after renewing the plan.
- In a term policy, the premium paid will not be returned to the life assured in case of his survival. Only, at the death of life assured his nominee will get the benefit. While, in whole life insurance, in case of survival the amount of whole life is paid to the policyholder.
- Whole life technically covers the whole life i.e. 100 years of the life assured. But, the term insurance is valid for a particular tenure and after that, it does not cover the policyholder’s life.
- Premium paid in whole life insurance is invested in funds and if any profit is earned, the policyholder will get the share from the profit. While in term insurance plans there is no such investment or profit component. It only secures the life and for that premium is charged.
- Term insurance plans do not provide any loan facility against the premium paid for it. Whole life insurance, on the other hand, has a loan facility offered to its subscribers.
Which one is Better: Term Plan or Whole Life Insurance?
Term Insurance Plans should be taken in case the policyholder wants to get considerable coverage at affordable premium rates. Buying a term policy gives huge sum assured to the family of the life assured which gives them financial stability in the absence of the breadwinner (the policyholder) of the family. Hence, the individuals who are not in a position to not to be able to pay the huge premium but want to secure their family could opt for this.
Term Plan vs Endowment Plan vs ULIP
|Key Points||Term Insurance Plans||Endowment Plans||ULIPs|
|Premium||Maximum sum assured in return of minimum premium payment||Higher premium compared to term insurance due to investment component||The premium depends upon the investment made and the insurance provided. Usually, the premium is higher than that of term plans but lower than endowment plans.|
|Maturity Benefit||Standard term insurance plans don’t have any maturity benefit.|
One can always opt for TROP (Term Return of Premium) plans, in case he is looking for maturity benefit. However, the premiums for TROPs are always on the higher side as compared to standard term plans.
|Unlike term insurance plans, the insurance holder will get the maturity benefit along with different bonus amount accumulated by him during the policy tenure.|
In case of his death, the company will provide the sum assured to his beneficiary.
|ULIPs work on a different mechanism. Investors can redeem their units based on the rates prevailing at the term of selling those units.|
In case the investor has accumulated any additional unit for factors like loyalty, etc., that can be also redeemed at the prevailing market price.
|Risk Involvement||No risk factor in term insurance as they don’t have any investment component||No risk factor as the life insurance component enables the nominee to receive the complete sum assured in case of any mis-happening||There is a risk factor involved in ULIP; however, the investor has an option to track the growth of his funds and can change it from equity to debt and vice versa, in case he is not satisfied with the fund’s performance.|
|Transparency||Not required as it doesn’t have an investment component.||No transparency. The insurance company makes the investment on behalf of its customers. Hence, there is no way they can track the performance of their funds.||In ULIPs, the insurance holders can track their fund’s performance to confirm whether it’s going into profit or loss. Accordingly, the investors can change it depending upon the fund’s performance. The investors will get a proper chance to track how much investment he has made how much profits/loss he is making.|