Term Life Insurance Plan

A Term Life Insurance Plan is the most basic form of life insurance that provides coverage for a set period, known as the “term.” If the insured person passes away during this term, a death benefit is paid to the nominee or beneficiary. This type of insurance is an affordable way to ensure financial security for your loved ones.

Eligibility Criteria to buy Term Life Insurance Plan

What is Term Life Insurance?

It is a life insurance policy that offers financial protection to your family for a specific number of years, called the “term.” It provides a death benefit to your nominee if you pass away during this period. Term insurance plans offer high coverage at low premiums, making them an economical choice for many.

For example, a healthy 30-year-old non-smoking male can purchase a term policy with a coverage amount of Rs. 1 crore for 20 years. By paying a premium of just Rs. 725 per month, he can ensure his family maintains their current lifestyle in case of his untimely death. Note that the premium may vary depending on the payment option selected by the policyholder.

How Term Life Insurance Works

Let’s illustrate how this policy works:

• Chetna, a healthy non-smoking female: Purchases a term insurance policy with a Rs. 1 crore coverage for a 25-year term to financially protect her husband.
• Untimely Demise: Unfortunately, in the 9th policy year, Chetna passes away.
• Nominee: Her husband receives a Rs. 1 crore death benefit from the insurer.
• Death Benefit: The amount allows her husband to maintain his lifestyle and cover his financial needs.

Why Should You Buy Term Life Insurance?

• Financial Protection for the Family: As the main provider, securing your family’s financial future in your absence is crucial. It ensures your responsibilities are met even if you’re not around.
• Long-Term Coverage: Some term plans offer coverage up to age 99/100, allowing you to leave a legacy for your loved ones.
• Affordable Coverage: It is cost-effective, providing significant life coverage at a reasonable premium, like Rs. 478 per month for a Rs. 1 crore plan.
• Critical Illness Protection: Many term plans offer add-ons for critical illnesses, ensuring access to quality treatment without financial strain.
• Disability Coverage: Accidents can lead to disabilities. Term plans can include disability coverage, supporting your family in such cases.
• Survival Benefits: Standard term plans don’t provide survival benefits. However, Term Return of Premium (TROP) plans refund the premiums paid at the policy’s end, helping achieve financial goals.
• Flexible Premium Payment Options: Choose from regular, limited, or single premium payments.
• Tax Benefits: Enjoy tax savings up to Rs. 1.5 lakhs on premiums under Section 80C of the Income Tax Act, 1961. The death benefit is also tax-exempt under Section 10(10D).

Factors to Consider Before Buying Term Life Insurance

1. Assess Your Dependents and Lifestyle: Evaluate your family’s financial needs and lifestyle to choose a suitable plan.
2. Review Existing Liabilities: Ensure the policy covers outstanding debts and liabilities to avoid financial burdens on your family.
3. Add Riders: Enhance coverage with riders like critical illness or accidental death benefits.
4. Check Claim Settlement Ratio: Choose insurers with a high claim settlement ratio for reliable payouts.
5. Verify Solvency Ratio: Ensure the insurer’s financial stability with a solvency ratio of at least 1.5.
6. Read Customer Reviews: Consider real experiences and the insurer’s persistency ratio for informed decisions.
7. Understand Plan Details: Review policy documents and consult a financial advisor to ensure the plan meets your needs.
8. Choose Benefit Payout Options: Opt for lump sum, monthly income, or combined payouts based on your family’s requirements.
9. Finalize the Purchase: Buy the plan online by entering details and making a secure payment.

Who Should Buy Term Life Insurance Plans?

• Young Professionals: Lock in low premiums by purchasing term Life insurance early in your career.
• Newly Married Couples: Secure your spouse’s future with term insurance as a meaningful gift.
• Working Women: Protect your family’s financial security with coverage that includes critical illness riders.
• Homemakers: Ensure your family’s financial stability in your absence with a suitable term plan.
• Taxpayers: Enjoy tax benefits under Sections 80C, 80D, and 10(10D).
• Parents: Provide for your children’s education and future needs with term insurance.
• Retirees and Senior Citizens: Ensure financial security for your spouse and family with term coverage.
• Self-Employed Individuals: Safeguard your family from financial instability with term insurance.
• Non-Resident Indians (NRIs): Secure your family’s future in India with a term plan.

Features of Term Life Insurance Plans in India

• Low Entry Age: Available for individuals aged 18 to 65 years.
• Long-Term Protection: Coverage up to age 99/100.
• Easy Purchase: Compare and buy plans online in minutes.
• Premium Payment Flexibility: Choose from monthly, quarterly, bi-annual, or annual payments.
• Customizable Coverage: Adjust coverage as your needs change.

Types of Term Life Insurance Riders

1. Accidental Death Rider: Provides an additional sum assured if the insured dies in an accident.
2. Critical Illness Rider: Pays a lump sum upon diagnosis of specified critical illnesses.
3. Hospicare Benefit Rider: Offers daily payouts during hospital stays.
4. Accidental Total and Permanent Disability Rider: Covers permanent disabilities from accidents.
5. Accelerated Death Benefit Rider: Provides part of the sum assured upon diagnosis of a terminal illness.
6. Waiver of Premium Rider: Waives future premiums in case of disability or critical illness.

How to Choose the Best Term Life Insurance Plan in India 2024

• Evaluate Needs: Consider your family’s financial situation and future goals.
• Compare Plans: Review coverage, premiums, and additional features from different insurers.
• Consider Riders: Add riders for enhanced protection.
• Check Insurer’s Reputation: Assess claim settlement, coverage, solvency, and customer service.

Payout Options in Term Life Insurance

• Lump Sum: Provides a one-time payment to the nominee.
• Monthly Income: Offers regular payments over 5 to 10 years.
• Lump Sum with Monthly Income: Combines immediate and regular payouts.
• Increasing Income: Provides monthly installments with a fixed annual increase.

Documents Required to Buy Term Life Insurance Plan

• Identity Proof: Passport, Voter ID, Aadhaar Card, or PAN Card.
• For Salaried Individuals: Bank statements, Income Tax Returns, and Form 16.
• For Self-Employed Individuals: Income Tax Returns, balance sheets, and profit-loss documents.
• Address Proof: Utility bills or property tax receipts.
• Medical Proof: Recent medical reports provided by the insurer.

Common Terms Related to Term Life Insurance Plans

• Claim Settlement Ratio: Percentage of claims settled by the insurer annually.
• Death Benefit: Payout to the nominee upon the insured’s death.
• Grace Period: Extra time to pay premiums without policy lapse.
• Maturity Claim: Refund of premiums in TROP plans at policy term end.
• Nominee/Beneficiary: A person designated to receive the death benefit.
• Policy Term: Duration of coverage.
• Premium Payment Term: Period for paying premiums.
• Riders: Additional coverage options.
• Sum Assured: Amount paid to the nominee.
• Term Insurance Premiums: Cost of coverage over the policy term.