Enjoy affordable premiums, flexible coverage periods, and peace of mind with the benefits of term insurance plans.
Home / Life Insurance / Term Insurance / Benefits of Term Insurance plans in India
The Indian insurance market offers various types of insurance policies that cater to the diverse requirements of its population. One such popular insurance product is Term Insurance (TI), which provides financial security to the policyholder's family in case of the policyholder's untimely demise. With an increasing number of people realising the importance of financial planning, Term Insurance has become an essential financial tool for ensuring a secure future for the policyholder's family. This article highlights various benefits of Term Insurance Plans in India, their importance, and some frequently asked questions.
Term Insurance policies come with several benefits that make them an attractive financial product for individuals seeking financial protection for their families. Here’s a list of such benefits.
Term policies provide financial protection to the policyholder's family members in case of their untimely demise. The nominee's death benefits can be used to meet various financial needs, such as paying off debts, managing household expenses, funding children's education, or ensuring a comfortable retirement for the surviving spouse.
One of the significant advantages of Term Life Insurance is that it is a cost-effective way to secure high coverage. Its premiums are comparatively lower than other life insurance policies because they do not have an investment component. It makes term plan an affordable option for people seeking extensive coverage at a reasonable cost.
Term Insurance policies offer tax benefits to policyholders. The premiums paid for such policies are eligible for deduction under Section 80C of the Income Tax Act up to one and a half lakh rupees as the upper limit. Moreover, the death benefits received by the nominee are tax-exempt under Section 10(10D) of the Income Tax Act 1961 as per applicable terms and conditions.
Term Insurance Policies offer policyholders flexibility in choosing the coverage amount and policy term. They can select a sum assured and policy tenure based on their financial needs and risk appetite. Some plans also allow policyholders to increase the coverage amount or extend the policy term during the policy period, providing additional flexibility.
Term Insurance plans are straightforward to understand, making them a popular choice among people new to life insurance plan. No complicated investment components or maturity benefits are involved, allowing policyholders to focus solely on securing financial protection for their families.
Many term plans offer customisable features, allowing policyholders to tailor the policy according to their needs. For example, policyholders can choose between level term insurance and decreasing term plans, select various payout options such as lump-sum or staggered payments, and even opt for increasing sum assured to combat inflation.
Some Term Insurance policies offer joint life coverage, which allows policyholders to cover their spouse under the same policy. This feature ensures that both partners are protected, and the surviving spouse receives financial support in case of the other's demise.
Specific Term Insurance plans include a terminal illness benefit, which provides a lump-sum payment if the policyholder is diagnosed with a terminal illness that has no known cure or has reached a point where it cannot be cured. Life expectancy that is assumed to be less than 12 months falls under terminal illness. End-stage cancer, major injuries, coma etc., fall under terminal illness. This benefit can be used to cover medical expenses, ensure the family's financial stability, or fulfil any last wishes of the policyholder.
Before purchasing a Term Insurance plan, there are several factors that an individual must consider. These factors include the following.
Coverage amount: The sum assured should be adequate to cover the financial needs of the policyholder's dependents. Factors such as outstanding loans, future expenses, and inflation are essential while determining the coverage amount.
Policy term: The policy term should be long enough to cover the policyholder's working years and ensure financial protection for the family.
Premium: The premium should be affordable and within the policyholder's budget. Comparing different plans and their premium rates can help individuals choose the best plan for their needs.
Riders: Insurance Riders can enhance the coverage provided by the base Term Insurance policy. Policyholders should consider adding riders based on their specific requirements and financial goals.
The eligibility criteria for Term Insurance Policies vary across insurance companies. Generally, the minimum age to buy a TI policy is 18 years, and the maximum is 65 years. The policy term usually ranges from 5 to 40 years, depending on the insurance provider and the policyholder's age. Some insurers may also have minimum and maximum sum assured limits.
Also read: Age limit for Term Insurance
Riders are optional add-on benefits that can be attached to the base TI policy at an additional premium. Some standard riders are as follows.
Accidental Death Benefit rider: Provides an additional sum assured in case of accidental death of the policyholder.
Critical Illness rider: Offers a lump sum payment upon diagnosing a specified critical illness.
Disability rider: Pays a lump sum or monthly income in case of permanent or temporary disability due to an accident.
Waiver of Premium Rider: Waives off future premiums if the policyholder becomes disabled or critically ill, ensuring the policy remains active without any financial burden on the insured.
Income Benefit Rider: Provides a regular monthly income to the nominee for a specified period and the death benefit in case of the policyholder's demise.
Here are some essential tips to follow to pick the right Term insurance plan.
Assess your financial needs: Evaluate your financial goals, liabilities, and dependents' requirements before selecting a Term plan.
Compare plans: Research and compare different term insurance plans offered by various insurers to find the one that suits your requirements and budget.
Check the insurer's credibility: Verify the insurer's claim settlement ratio, financial strength, and customer reviews to ensure you choose a reliable provider.
Read the policy document carefully: Understand the terms and conditions, exclusions, and limitations of the policy before purchasing it.
Term Insurance Policies play a vital role in times of uncertainty by offering financial protection to the policyholder's family. The global pandemic, natural disasters, and economic instability have highlighted the significance of having a robust financial safety net. A TI policy can help ensure your loved ones are financially secure in unforeseen circumstances.
Traditional Term Insurance policies do not offer any maturity benefits. However, some insurers provide term plans with a return of premium option, where the premiums paid are returned to the policyholder if they survive the policy term.
In the event of the policyholder's death, the nominee must submit the required documents, such as the death certificate and claim form, to the insurance company. The insurer will then verify the claim and, if found valid, settle the claim by paying the death benefit to the nominee.
If a policyholder stops paying premiums for their Term Insurance Policy, the policy will lapse, and the coverage will cease. If the policyholder dies after the policy has lapsed, no death benefit will be payable to the nominee. However, some TI plans offer a grace period to pay the outstanding premiums and reinstate the policy.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.