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Getting Started With Insurance: Here’s All You Need To Know About Term Insurance

A term life insurance policy is made to effectively cover the needs of the insured and their dependents through an assured death benefit sum in the event of the policyholder’s demise

A basic term insurance plan in India is considered to be one of the most affordable means of securing one’s future where premiums are low and one can customise their coverage, add riders and choose payout patterns according to their needs.

Insurance today is not limited to being an instrument of coverage, but an essential asset as well. For an earning individual and their dependents, the importance of having financial stability during unforeseen circumstances such as death, illness or injury is vital.

A term life insurance policy is made to effectively cover the needs of the insured and their dependents through an assured death benefit sum in the event of the policyholder’s demise. A basic term insurance plan in India is considered to be one of the most affordable means of securing one’s future where premiums are low and one can customise their coverage, add riders and choose payout patterns according to their needs.

The process of term plan comparison and to navigate through various plans can be a daunting task for new policyholders or ones with less comparison resources at their disposal. However, there are plans which are standard across all income brackets and can be accessed by people if it fits their insurance requirement profile. Let us look at some off the types of term insurance plans in India:

1. Standard or Level Term Plan

Term insurance plans that operate within the standard patterns and requisites of a sum assured at the death of the insured along with tenure benefits. These plans are basic, affordable and are accessible to people across all incomes.

These plans are often supplemented with riders and customisations that a policyholder may choose to add for situations such as disability, premium waivers, critical illness and more.

2. Convertible Term Plan

These are standard term plans that can be turned into a different plan with altered coverage and requisites after a certain time period as per the policyholder’s requirements. For example one may choose to change their term plan into a whole life policy after 10 years of their term plan have elapsed.

3. Return of Premium

Since standard term life insurance policies do not provide any maturity benefits in the event the insured survives the policy tenure, one can go for a term plan that has the option of returning a policyholder’s invested total premium amount at the end of the term if they survive.

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4. Increasing and Decreasing Term Plans

Increasing term insurance plans offer the provision where the assured sum under the policy increases annually with no effect on the premium amount paid to support the policy. For decreasing term insurance plans the assured sum decreases every year; it is useful in the event the policyholder has existing loan liabilities which can ease the financial pressure.

Let us look at some of the features and benefits of a term life insurance policy:

1. Premiums

A recurrent premium payment maintains the coverage provided by the insurance provider and adds to the payout that is assured to the beneficiary at the end of the policy term.

2. Policy Tenure

It is the tenure of coverage determined and decided upon by the policyholder after consultation with the insurance provider. The policy tenure for a term plan is usually longer than most standard insurance plans. The duration for the best term plan in India may range somewhere between 25-30 years. The plan reaches maturity once the tenure is completed.

3. Death Benefit Sum Assured

It is the promised payout amount promised to the beneficiary of the policy in the event of the insured person’s passing. This amount is usually a financial resource for the beneficiary to maintain their financial obligations after a disturbance in the income patterns.

The features of term life insurance are standard blocks upon which most insurance plans are built; let us look into the benefits one can expect to avail from a term insurance plan in India:

1. Affordable Premiums

The more complex a plan is, the higher the premiums for them are. Even the best term plan in India is one that is simple and accessible to people across all income strata.  Hence, for those who are starting out in their professional careers, with limited finances can choose a term insurance plan as they are one of the most affordable plans available in India.

2. Death Benefit Payout

The amount that is paid out to the beneficiaries as denoted by the policyholder is one that is assured and handed over to the beneficiaries of the policy at the time of the insured person’s passing. This payout can be customised into a staggered monthly income instead of a lump sum if deemed fit for the beneficiaries.

3. Rider Benefits

One can add riders for Income, Waived Premiums, Disability, Accidental Death or even Critical Illness in their existing term insurance plan. The cost of these riders added to the basal premium cost, hence one should choose after adequate deliberation.

4. Tax Benefits

The premiums paid for a term life insurance policy and the payout sum thus received from the same at the time of maturity is exempted from taxation under Section 80C and 10(10D) of the Income Tax Act, 1961.

With the anxieties and increased demand people have towards protecting their future, insurance providers introduce solutions like term insurance plans that fulfil these purposes. They not only provide coverage, but also act as recurrent support systems for families that may require additional support in the times of financial distress.

In order to know more about the benefits of purchasing a term insurance plan, you can reach out to insurance providers such as Max Life Insurance who can guide you through the process of term plan comparison and create insurance solutions tailor-made for your needs.

Pic Credit: Shutterstock

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