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  • Term Insurance

    What is Term Insurance?

    Term insurance can be defined as a type of insurance that is availed for a certain period of time or a fixed term (number of years). The basic differentiating feature of term insurance is that unlike other types of life insurance policies, a term insurance policy is less expensive since it does not have any cash value. The policy comes useful only if the policyholder dies within the timeframe during which the term insurance policy is in force.

    Term insurance policies are offered by almost all major insurance providers and these come for various terms like 10 years, 20 years, 30 years etc. The most significant point about term insurance policies is that most of these policies have a built-in feature to get converted to permanent life insurance policies irrespective of the state of health of the term insurance policyholder.

    Comparison of Best Online Term Plans in India

    Term Plans Entry Age (Min / Max) Maturity Age Policy Term Premium Payment Option Minimum Sum Assured Payout Type Claim settlement ratio (FY 15- 16) as per IRDA
    LIC's e-Term 18 / 60 Years 75 10-35years Annual Rs. 25,00,000 for Aggregate category  Rs. 50,00,000 for Non-smoker category LumpSum Only 98.33%
    Max Life Online Term Plan 18 / 60 Years 70 10 - 35 years Annual Rs 25,00,000 Lumpsum & INcome Options 96.95%
    BSLI [email protected] 18 / 55 Years 80 5-30 years Monthly (ECS), Annual & Single Rs. 50,00,000 LumpSum Only 88.45%
    Tata AIA iRaksha Supreme 18 / 70 Years 80 10-40 years Annual, Semi-Annual, Single Rs 50,00,000 LumpSum Only 96.8%0
    ICICI prudential - iProtect Smart Plan 18 / 65 Years 75 5-40 years Monthly, Halfyearly, Annual & Single Subject to minimum premium paid Lumpsum & Income Options 96.20%
    PNB Metlife - Mera Term Plan 18 / 65 Years 75 10-40 years Monthly & Annual Rs. 10,00,000 Lumpsum & Income Options 85.36%
    Bajaj Allianz iSecure 18 / 60 Years 70 10 | 15 | 20 | 25 | 30 years Monthly, Quarterly, Semi-Annual, Annual Rs.250,000 for general category Rs.20,00,000 for the categories split by Preferred Non-Smoker1 , Non-Smoker1 & Smoker LumpSum Only 91.30%
    Kotak Preferred e Term Plan 18 / 65 Years 75 10-40years Monthly, Yearly, Single Rs 25,00,000 LumpSum Only 89.09%
    HDFC Life Click 2 Protect Plus 18 / 65 Years 75 10 – 40 years Monthly, Quarterly, Semi-Annual, Annual Rs 25,00,000 Lumpsum & Income Options 95.02%
    AEGON Life iTerm Plan 18 / 65 Years 75 5 - 40 years; or upto 75years Annual Rs10,00,000 LumpSum Only 95.31%
    Canara HSBC Life - eSmart Term Plan 18 / 70 Years 75 10 | 15 | 20 | 25 | 30 | 35 | 40 years Annual Rs. 25,00,000 LumpSum Only 92.99%
    SBI Life - eShield  18 / Max:  1.For Level Cover & Level Cover with Accidental Death Benefit: 65 years  3.For Increasing Cover & Increasing Cover with Accidental Death Benefit: 60 years 70 Min:  For Level Cover & Level Cover with Accidental Death Benefit: 5 years  For Increasing Cover & Increasing Cover with Accidental Death Benefit: 10 years MAX- 30 years Annual Rs. 20,00,000/ LumpSum Only 93.39%
    Reliance Online Term 18 / 55 Years 75 10 | 15 | 20 | 25 | 30 | 35 years Annual Rs 25,00,000 LumpSum Only 93.82%
    Future Generali - Flexi Term Plan 18 / 55 Years   Min: 10 years , Max: Smoker: 65 years minus Entry Age, Non-smoker: 75 years minus Entry Age Annual Rs. 50,00,000 Lumpsum & Income Options 90.26%
    Aviva I Life 18 / 55 Years 70 10 - 35 years Half-Yearly, Yearly Rs 25,00,000 LumpSum Only 81.97%
    Bharti Axa Life – eProtect 18 / 65 Years 75 Fixed Policy Term - Minimum - 10 years, Maximum - 30 years Customised Policy Term - Up to 60 years, Up to 65 years, Up to 70 years, Up to 75 years Annual Rs. 25,00,000 LumpSum Only 80.02%
    IDBI Federal - iSurance 18 / 50 Years 75 10-25 years Annual Rs 50,00,000 LumpSum Only 84.79%
    IndiaFirst Life - Anytime Plan 18 / 60 Years 70 5-40 years Monthly (ECS), Half-Yearly, Annual, Single Rs. 10,00,000 LumpSum Only 71.87%
    Edelweiss Tokio - MyLife+ 18 / 60 Years 80 10 | 15 | 20 | 25 | 30 | 35 | 40 years; & 80years minus Age at Entry Annual Rs. 25,00,000 Lumpsum & Income Options 85.11%

    Comparison of Best Offline Term Plans in India

    Term Plans Minimum Entry Age Maximum Entry Age Policy Term Sum Assured Payout Type Riders Available
    Bajaj Allianz iSecure More 18 60 10, 15, 20 & 25 years Rs. 2,50,000 Income Yes
    HDFC Life CSC Suraksha Plan 18 55 5 years to 15 years Min-Rs. 30,000
    Max- Rs. 2,00,000
    Lumpsum No
    SBI Life - Smart Shield 18 60 Min: 5 years Min: Rs 25,00,000 (in multiples of Rs.1,00,000) Income Yes
    SBI Life - Grameen Bima 18 50 5 years Min: Rs. 10,000
    Max: Rs. 50,000*(*Aggregate Sum Assured under this plan will be capped at Rs. 50,000 for each life. )
    NA NA
    What is Term Insurance?

    Why Do You Need to Buy Term Insurance?

    Term insurance is generally overlooked in comparison to other insurance products. The main reason for this is the belief that term insurance plans do not offer significant returns or any additional benefits besides the Sum Assured on the policyholder’s demise.

    However, term insurance plans are an excellent way to build a financial safety net. This is especially true in today’s world, as such a plan makes provision for the financial security of the policyholder’s dependents in the event of his demise.

    Term plans are also a very cost-effective way to build up a financial safety cushion in case of the policyholder’s death.

    Term plans are generally a part of other insurance products. These products have other benefits that come along with the plan, resulting in a higher premium amount. Instead of opting for a plan with a host of other add-ons and end up paying a high premium, opt for a term insurance plan with a fixed, affordable premium for almost the same features.

    Term plans also fit everyone’s needs. A term insurance plan is one where the benefit received is much more than the sum invested, resulting in higher returns without the hassle of having to manage these funds.

    How does Term Insurance Works?

    A term insurance policy can be considered one of the most traditional forms of insurance. To understand how it works, you can look at it in these three situations:

    • Buying the policy: To be able to buy a term insurance policy you don’t need to put aside tens of thousands of rupees every year. Many of the insurance policies can offer you a sum assured of up to Rs. 1 crore for a premium that could be as little as about Rs. 10,000 per annum (These are indicative figures. The actual premiums may differ depending on the sum assured and the insurance providers).
    • Keeping the policy: Just like any other insurance policy, you pay the premium towards these policies at a frequency chosen by you. These premiums can be paid every month, every quarter, every 6 months or once a year. They can also be paid as a lump sum instead of being paid at regular intervals.
    • Redeeming the benefits: Term insurance plans don’t typically come with any maturity benefits, except for term insurance with. Their main objective is to provide life insurance cover and that is exactly what they do. In case the policy holder passes away, the person who is named as the beneficiary of the policy will receive the sum assured.

    The way it works is also one reason why you will notice that a lot of the time insurers refer to these plans as pure protection plans. There are no frills attached to the plan. You pay the premium and you get a fixed sum if case something happens to you.

    Types of Term Insurance Plans:

    Insurance companies offer a wide range of term insurance plans with exciting features and benefits to stand out amongst competitors in the insurance space. A term insurance plan offers financial coverage to the insured for a specific period of time, and in case of his/her demise the beneficiaries are paid the assured benefits.

    Regular Term Insurance plans:

    A regular term insurance plan is a no-frills insurance plan that provides coverage against a specific set of risks on payment of a pre-decided premium amount. These plans offer no benefits upon maturity. Premium payments can be made periodically or they can be paid at once (single pay). The options for insurance cover can go as high as the insurer is willing to underwrite and the policy tenures can be as high as 20 years. When the policy matures, the insurance cover ceases, as does the need to pay premiums for such a cover.

    Standard Term Life Insurance Plan:

    In a standard term life insurance plan, the policyholder chooses a plan which offers a certain risk coverage for a period specified under its scope. These are typically low premium plans that come with a multitude of features to suit the insurance needs of customers. Standard plans are the commonly chosen ones by policy buyers among all other term life plans available in the market.

    Group Term Insurance Plans:

    These are policies offered to a group of individuals by an employing organization, association, or trusts and societies. It provides coverage to each and every member insured under the plan is less expensive compared to an individual term insurance plan. Group term plans offer more or less the same benefits as in individual plans, however, the only disadvantage is that the coverage expires once the employment or membership ends.

    As is made obvious by the name, a group term insurance plan is meant to be an insurance instrument that can be used by a group to secure its members against untoward occurrences. These plans can be taken by any group of people or companies for their employees but can come with one essential clause, which is that there may be a mandate set by the insurer where the policy will require a minimum number of people participating in it. For example, if a policy says that it will cover groups of at least 20 people then a small company that has less than 20 employees won’t be able to purchase the policy.

    The benefits of such a plan are similar to individual policies but the list of illnesses and other factors are generally more exhaustive as compared to an individual policy.

    Convertible term insurance plans:

    A convertible term plan allows the policyholder to convert his/her policy into a permanent one during the policy tenure. Some insurers provide this as an additional benefit rider while others offer the same as a standalone plan. As far as the terms and conditions have been met, converting a term life policy into a permanent policy should not be a difficult process.

    Term Return of Premium Plans (TROP):

    TROP plans are standard term life insurance plans with a slight variation in the method of providing survival benefits. On survival, policyholders are returned the total amount of premiums paid by them during the policy tenure, excluding tax. Such a method ensures that the money spent on the policy is returned to you after a specific interval. In other terms, it can be called as a zero-sum game.

    Similar to a regular insurance plan, a TROP offers a refund of the premium upon the policy’s maturity if the policyholder survives till the policy matures. A TROP plan generally allows policyholders to add riders or benefits to their existing plans to increase their coverage. TROP plans have a slightly higher premium amount compared to regular term insurance due to the premium repayment facility.

    Decreasing and increasing term plans:

    The insurance market is flooded with various types of policies that it often becomes difficult for the buyer to choose the best suited plan. Decreasing and increasing insurance policies are two of the commonly used terms in the insurance realm. Let’s take a look at the features and benefits of the aforementioned policies:

    Decreasing term insurance: In this type of policy the sum assured on death as well as the premium decreases at a certain rate throughout the policy term. Such plans are generally offered by financial institutions to insure the property held as collateral against the loan offered. It is an additional safety component which ensures that the bank will get back the amount released as loan, in case of the worst scenario.

    Increasing term insurance: Under increasing term insurance plans, the insurance coverage increases at specified durations when the policy is in full force. It evaluates risks on par with the rising costs at any given time in future and compensates accordingly, in case of emergencies. Ideally, the cover keeps increasing till the time it attains a value which is 1.5 times higher than the original cover.

    Joint term insurance plans:

    As the name suggests, joint term insurance plans are those plans which allow the person insured to cover his/her spouse in the same policy. It’s a comprehensive financial protection solution with multiple benefits for couples. It basically ensures that the family equilibrium remains intact during hardships, or in the worst case, during the absence of one of the two or both. These policies are well suited for married couples with dependent children.

    Term insurances for specific durations:

    Most of the insurers provide term insurance plan for a specified number of years such as 5, 10, and 15 years. Such plans are commonly known as level term insurance plans, as they can be matched against the income replacement needs of individuals. These plans can range from 5 years to 30 years. But once the term period is expired, the same coverage at the previous rates of premiums may not be guaranteed by the insurance companies. The difference between level term plans and permanent life insurance plans is that the latter provides a lifetime coverage at fixed rates of premiums. The level term plans are suitable for people falling in the below categories:

    • Those with short term financial needs
    • Individuals seeking additional insurance cover
    • Prospective buyers who can afford only low premiums
    • People planning their retirement

    Online term insurance plans:

    The digital advancements of the recent past has created significant changes in every sphere of activity, especially in the way business transactions take place these days. Most of the insurance companies have started offering term life insurances online, without involving mediators. All the information related to the policy will be hosted on the insurance company’s website which makes it easy for the buyers to compare and choose the best suited plan.

    Endowment Plans:

    Endowment plans are non-linked insurance plans that offer both savings as well as protection. Endowment plans can extend up to 35 years, with the maturity at 75 years. Endowment plans come with a maturity benefit as well as a death benefit. Under the maturity benefit, if the policyholder survives till the policy matures and has paid all premiums, he will receive the premium as well as a bonus amount on maturity.

    Some insurers provide add-ons such as accidental death benefit which can be availed along with an Endowment plan.

    Money Back Plan:

    A money back plan is similar to an endowment plan. As the name suggests, a money back plan pays out a specific sum during the policy term. The Sum Assured amount is paid out over the policy term at regular intervals. If the policyholder survives after the plan matures, the balance of the Sum Assured is paid in a lump sum.

    Features and Benefits of Term Insurance:

    • Flexible Payment Options:

      Term insurance policies offer flexible premium payment options, allowing policyholders to choose a payment plan based on their convenience. Premiums can be either limited pay, single pay or regular pay plans. Policyholders who choose limited or regular pay plans can pay their premiums either monthly, quarterly, half-yearly or annually.

    • High Sum Assured for Low Premiums:

      Term insurance premiums are some of the lowest in the insurance sector, allowing for a prudent and relatively inexpensive way to safeguard the policyholder’s dependents in case of untimely demise. The Sum Assured associated with term insurance plans are also relatively high when compared to the premium amounts. Regular plans as well as TROP plans offer as much as 105% return on premiums paid as a benefit upon maturity.

    • Choice of Plan:

      A number of insurers offer policyholders a choice when it comes to the type of plan they wish to opt for. Policyholders can choose between single or joint life plans, depending on their need. They can thus choose to extend coverage for dependent spouses or choose a plan exclusively for the breadwinner of the family.

    • Death Benefit:

      On the death of the policyholder during the policy term, his/her dependents stand to receive the amount chosen at the time of choosing the policy. The amount would depend on the term plan, with the amount increasing, decreasing or remaining the same irrespective of at what juncture of the policy tenure the policyholder’s death occurs.

    • Tax Benefits:

      Policyholders can claim tax exemptions under various sections by virtue of opting for a term insurance policy. Tax exemptions can be got under Section 80C of the Income Tax Act on premium amounts.

      Policyholders can also claim exemptions under Section 10 (10D) of the Income Tax Act for benefits received through insurance policies.

    • Survival Benefits:

      While a regular term insurance plan does not have any survival benefits, a number of insurers have designed plans that also offer survival benefits in the form of premium refunds on maturity.

      On maturity of the policy, surviving policyholders stand to receive benefits under a TROP policy only. In the case of a TROP policy, the policyholder will receive the premium amount paid over the policy tenure as one lump sum.

    • Add-on Benefits:

      A number of individuals have begun to opt for add-on features to their regular term insurance policies. These add-on plans will push up the price of the premium being paid but provide additional benefits in case of accidental death, critical illness, total and permanent disability benefit etc.

    How to Choose a Term Insurance Plan:

    The market is flooded with term insurance policy options, with varying policy terms, benefits and Sum Assured amounts. Navigating this maze of policies and making sure you choose the one that fits best and meets your requirements is a difficult task. The following points can be kept in mind when looking for a term insurance plan:

    • Reliability:

      When picking an insurance policy, it is always advisable to look at the insurance company’s reputation. This is important as a term insurance policy is a long term investment and as a policyholder, you should not be left in the lurch in the event the company shuts down or meets with any difficulties. Checking the company’s FICO score would be a good way to gauge its stability and reliability.

    • Claim Settlement Ratio:

      The insurance company’s claim settlement ratio is an indicator of the number of claims settled out of every 100 claims received by the company. Insurance companies with a healthy claim settlement ratio are seen as more reliable and a better choice, as a higher settlement ratio is considered favourable. The IRDA publishes the claims settlement ratio for all insurance companies for a particular year.

    • Riders / Add-on covers:

      The riders provided by the insurance company in addition to the regular policies are also to be considered. A policy that provides the basic coverage and also offers additional benefits and riders is seen as a secure one, and insurers who provide a wide range of riders are considered a good option.

    • Cost:

      The amount you would be paying in terms of premium for the protection offered is a key factor in selecting a term insurance policy. Given that these policies can have a tenure up to 20 years, the amount being paid annually as premium is a significant amount. Thus companies that offer reasonable protection for low premiums are preferred by policyholders.

    • Inflation:

      When selecting a term insurance policy, take into account factors like inflation. Term insurance policies are usually taken out for 10-20 years, during which time inflation will erode the value of the rupee, resulting in lower returns at the time of maturity.

      To offset this, consider companies that offer plans where the cover increases by 5% - 10% annually to keep in line with inflation.

    Documents Required for Term Insurance:

    The following documents are to be submitted while applying for a term insurance policy:

    • PAN card.
    • Proof of age (passport/birth certificate/driving licence/PAN card etc.)
    • Proof of address (utility bills/ration card/bank account statement/voter’s ID card/passport).
    • Proof of identity (passport/voter’s ID card/Aadhaar card/driving licence/letter from a public servant or authority verifying identity).
    • Proof of income (Income tax return/employer’s certificate/Income Tax assessment order).
    • Recent passport sized photographs.

    Exclusions for Term Insurance Plans:

    Term insurance plans cover a list of specific events and circumstances. Depending on the type of plan selected, this could be an exhaustive list. However, there are some exclusions that term insurance policies do not provide coverage for. Given below is a list of exclusions:

    • Suicide: Suicide is an exclusion in all term insurance policies. Insurers will not pay dependents in the event of the policyholder committing suicide within a year of purchasing the policy. In the case of group insurance, suicide will not be liable for compensation as well.
    • Death due to war, terrorism drought: Death due to natural calamities and acts of war are not covered under a term insurance plan.
    • Death due to actions by the insured: Accidental death brought on by the actions of the policyholder (such as extreme sports etc.) are not covered as these are viewed as self-imposed risks by the policyholder.
    • Death due to intoxication or narcotics: If the policyholder’s death was brought about by or as a result of consumption of alcohol or narcotic substances, the insurance company is not liable to compensate dependents.

    Claim Process:

    In the event of the demise of the policyholder, the dependents are required to file a claim to recover the amount as decided at the time of purchasing the policy. This process is known as a claim process. The claim process for term insurance is a relatively simple one.

    The claim settlement process is provided in brief below:

    • Intimate the insurer regarding the claim: The first step of the process consists of notifying the insurance company of the claim. This can be done by contacting the insurance company or visiting a branch with the documents as mentioned in the insurance document.
    • Document submission: On intimating the insurer about the claim, the claimant will have to submit the necessary documentation, such as the original insurance document, proof of the claim, death certificate, medical records etc. as required. In some cases, the insurer could ask for additional documents in order to check the veracity of the claim.
    • Decision on the claim: Once the documentation has been submitted and verified, the insurer will take a decision on whether the claim will be honoured based on the documentation provided.

    Term Insurance Premium Calculator:

    Insurance companies providing term insurance are often fielded with questions regarding the premium to be paid for a particular policy. As the premium amount is integral to selecting a policy, a number of companies have a premium calculator on their websites which allows policyholders to calculate the premium they would be paying for particular policies. The premium calculator facility is available to all individuals who wish to calculate an estimate of the premium to be paid.

    The premium calculator for most insurance companies requires you to input details such as your gender, date of birth and mention if you are a smoker or non-smoker. The coverage amount required (depending on your needs) is to be entered as well.

    On doing so, the premium amount to be paid will be displayed on screen. The premium amount would be calculated based on the maximum policy term offered by the insurer.

    Any additional benefits included as part of the policy would be displayed below the premium amount payable.

    Some insurers provide an estimate based on the insurance plan selected, and will provide the premium amount based on the type of plan and coverage it offers.

    The premium calculator is an excellent way for individuals to check their premium contribution if they wish to opt for a particular term insurance policy. Popular Term Insurance Plans in India:

    Some of the popular term insurance plans in India are mentioned below:

    LIC e-Term:

    LIC e-Term Insurance plan offers policyholders coverage from a minimum of 10 to a maximum of 35 years. It covers individual policyholders only and cover is provided up to 75 years. The policy is available exclusively online, with the minimum Sum Assured being Rs.25 lakh. The policy makes provision for riders and add-ons as well, and has a 30 day free look period. The policy cover can be extended if the policyholder wishes to enhance coverage.

    ICICI Pru iProtect Smart Plan:

    The ICICI Pru iProtect Smart Plan provides term insurance for individuals as well as dependents. The plan is offered exclusively online. The plan covers policyholders for a minimum period of 5 years and a maximum of 40 years, with cover provided up to a maximum of 75 years of age.

    There are three options - the Life Option, Life Plus Option and the Life & Health Option which offer varying coverage depending on the policyholder’s requirement.

    The options offer coverage ranging from death benefits, terminal illness cover, permanent disability cover as well as accidental death benefit cover.

    Bajaj Allianz iSecure More:

    The Bajaj Allianz iSecure More plan is a term insurance plan offering a range of options to the policyholder. The plan is an individual coverage plan which can be extended to cover the policyholder’s spouse. The plan provides coverage for a minimum of 10 years and a maximum of 25 years. The plan also features an increasing cover every year, with a 5% increase in the Sum Assured, up to a maximum of 2 times the Sum Assured at the time the policy was purchased.

    The minimum Sum Assured is Rs.2,50,000.

    Policyholders can choose to receive the death benefit amount in instalments over a 5-10 year period.

    HDFC Life Click2Protect Plus Term Plan:

    HDFC Life Click2Protect Plus plan offering from HDFC provides policyholders with a variety of cover options, namely the Life Cover option, Extra Life with accidental death benefit option, Income option and Income Plus option. There is provision for both individual as well as joint coverage plans. The plans provide coverage for a minimum of 10 and a maximum of 40 years, with the plan providing coverage up to a maximum of 75 years. The minimum Sum Assured for these plans is Rs.25 lakh, with dependents receiving up to 125% of the premium in case of the policyholder’s demise.

    How Much Term Insurance Do I Need?

    There is no set formula that can be applied to answer the question of how much insurance is enough insurance. What can be done, when trying to answer this question, is to take into consideration the factors that have the maximum impact on the sum assured. These factors will include things like how much you can afford to pay as a premium, what is the sum assured that you think will be adequate for your families future expenses and is the sum assured you want available.

    Eligibility Criteria of Term Insurance:

    Before anyone can take a life insurance policy, they will have to meet certain eligibility criteria which can be:

    • The minimum age of the policyholder will have to be 18 years old when taking the plan.
    • The maximum entry age will depend on the minimum tenure of the policy.
    • The maximum age at the time of maturity for these policies can be 75 years but this could change from one insurer to the next.
    • The minimum age for maturity will be determined based on the minimum age at entry and the minimum tenure offered.
    • The sum assured will also be a factor in calculating the eligibility as many policies have a fixed minimum sum assured.
    • This may not be mandatory but some insurers may ask you to undergo a medical check-up prior to taking the policy.

    Things to know about term insurance plans:

    As explained, buying a term insurance plan is the most economical way of securing yourself and your dependents. There are multiple features and benefits associated with term insurance policies which makes them stand out from the rest of the insurance options. Let’s take a look at some of the must know features of term insurance policies.

    An economical approach towards financial security:

    Most of the insurance companies offer term life plans at lower rates of premium, because these plans offer coverage only for a predefined duration. What makes these plans cheaper is that, most of the times the person insured survives the policy term, in which case the company will have to pay nothing in return. However, this is not the case with TROP plans where the premiums are returned on survival of the policyholder. A simple term plan can be compared with a vehicle insurance policy which compensates only at times of an accident.

    Even term plans can offer better returns on investment:

    Even though term plans are opted widely by people worldwide, a considerable few are still hesitant to go for it because of the zero returns on survival of the term. However, some insurance companies offer a Term Return of Premium (TROP) plans, under which the person insured will be paid all the premiums that he/she has paid during the policy tenure. Generally, TROP plans are priced a bit higher than normal term insurance plans.

    A monthly income for dependents of the policyholder:

    Buyers at the time of application can choose whether the death benefits should be paid as a lump sum to the nominee or in installments. However, if at the time of claims the nominees choose to take the entire amount as a lump sum, they can avail the same at a reduced value.

    Enhancement of insurance coverage:

    In term plans, you also have an option to increase the level of insurance coverage at different stages of your life. The percentage of increase depends purely on your insurer and on the type of plan selected.

    Choose your premium term and policy term:

    Your term insurance plan allows you to choose the tenure at the time of policy inception. It’s an excellent feature which helps you to choose the plan based on your financial situation. This particular feature of term plans makes it a better risk management planner for loans and debts.

    Term Plan Vs Endowment Policy Vs ULIP:

    There are a lot of life insurance products that are available to customers and they can range from a term plan to an endowment plan to a ULIP. So the question really is how term insurance stacks up against ULIPs and

    Term Insurance Endowment Plans ULIPs
    Premium (for Rs. 1 crore) Approx Rs. 9,000 Approximately Rs. 60,000 NA
    Max sum assured No limit No limit Depends on fund value
    Premium payment Offers single pay, monthly, quarterly, half-yearly, yearly and limited pay options Offers single pay, monthly, quarterly, half-yearly, yearly and limited pay options Offers single pay, monthly, quarterly, half-yearly, yearly and limited pay options
    Maturity benefits None unless it’s a TROP Does offer maturity benefits Maturity benefits linked to market investments
    Risks No risks No risks Has risks since the premium is invested in the equity and debt markets

    The interpretations that we can draw from the table are:

    • For a sum assured of Rs. 1 crore, the premium for a term plan is about Rs. 9,000 whereas for endowment plans, it is much more and ULIPS don’t always offer a fixed sum assured.
    • The premium payment options are the same for all the insurance plans.
    • While ULIPS come with an inherent risk due to investments made in equity and debt markets, term insurance plans are quite safe.
    • If you opt for a tem insurance with a return of premium option then when the policy matures, you stand to get 100% of your premiums back.

    Term Insurance FAQ’s

    1. Q. Will every insurance company offer the riders?

      A.No. The riders are offered at the desecration of the insurance providers so they can differ from one provider to the next.

    2. Q.Can I take more than 1 term insurance plans?

      A.Yes, you can take more than 1 term insurance plans.

    3. Q. What if I want a sum assured that is in excess of Rs. 10 crore?

      A.In case the sum assured is really high, the decision to provide the policy will rest with the insurer and the policy issued only if the insurer is willing to insure for such high amounts.

    4. Q. Are there any situations under which the claims won’t be honoured?

      A.Yes. If your claim falls under any of the exclusions mentioned in the policy, the claim won’t be honoured.

    5. Q. What are some of the exclusions?

      A.The exclusions can include indulgence in activities that are illegal. They also include participating in activities that are known to be dangerous, example extreme sports. In the case of the policyholder committing suicide within the first year, only the premium paid may be returned.

    6. Q. What do insurers mean by healthy lifestyles?

      A.A healthy lifestyle can mean that the policyholder is not indulging in any activity that could harm their health. An example of this would be smoking.

    7. Q. What is the benefit that I get for health lifestyles?

      A.The main benefit that insurers offer for healthy lifestyles is a discount on the premiums payable.

    8. Q. Can I take a term insurance plan if I am an NRI?

      A.Yes. If you are an NRI then you can still take term insurance cover.

    9. Q. Does term insurance have a free-look period?

      A.Yes. Term insurance has a free-look period of 15 days, from the day you receive the policy document, within which you can surrender the policy in case you are not satisfied with it and get the premium refunded. There may be some deductions involved.

    10. Q. Do I have to pay penalties if my payment is late but within the grace period?

      A.Late payment policies may differ from one company to the other but generally if payments are made within the grace period then no interest is charged on the payment.

    11. Q. What is accidental death benefit?

      A. Accidental death benefit is a rider or add-on to term insurance policies by which the dependent will receive a pre-determined amount of money in the event of the policyholder’s death due to an accident.

    12. Q. What is the age limit for a term insurance policy?

      A.Different insurers and plans have different age limits for term insurance policies, with the limit ranging from 55 years to 70 years.

    13. Q. What is term insurance with monthly income?

      A.In such cases, the Sum Assured is decided on the policyholder’s monthly income after taxes. The death benefit paid out is 12 times the monthly income, inflated at 5% annually throughout the term of the policy.

    14. Q. Can I alter the duration of the coverage after the policy has been issued?

      A.No, it is not possible to change the duration of the coverage after the policy has been issued. However, some policies allow for extensions in the coverage period.

    15. Q. What is the maximum tenure for a term insurance plan?

      A.The maximum tenure for a term insurance plan depends on the insurance company and the type of plan opted for. The maximum tenure available is 40 years.

    16. Q. I smoke occasionally. Will I have to declare myself a smoker at the time of applying for the policy?

      A.If you have smoked in the last 12 months, you are required to declare yourself a smoker at the time of applying for a term insurance policy. If you do not and the insurer is made aware of this, you could risk losing your policy benefits.

    17. Q. How do I cancel my insurance policy?

      A.Cancelling your insurance policy can be done by notifying the insurer within 15 days of the policy being issued.

    18. Q. What are the eligibility criteria when applying for term insurance?

      A.The eligibility criteria for term insurance are as follows:

      • Should be a citizen of India.
      • Should be above the minimum entry age (18 years).
      • Should be below the maximum entry age (depends on insurer and plan).
      • Should be able to pay the plan premium.
    19. Q. Can I switch my term insurance plan to another insurance provider during the policy term?

      A.No, you cannot switch your term insurance policy to another provider during the policy term.

    20. Q. Can the dependent/nominee re-apply for a claim if it was rejected once?

      A.Yes, the nominee/dependent can re-apply for a claim if it was rejected before, and can approach the insurer’s grievance redressal cell if necessary.

    21. Q. What is a term insurance policy?

      A. Term insurances are the most inexpensive way of availing insurance coverage for a specific period of time. It is merely a risk cover and does not provide any benefits on survival.

    22. Q. What are the main reasons for buying a term insurance plan?

      A. Term insurance policies come with a multitude of benefits to suit the requirements of buyers. A common few are listed below:

      • It offers financial protection to your family
      • Takes care of your liabilities
      • Term plans come at easily affordable prices
      • Offers tax benefits under Section 80C and 10(10D) of Income Tax Act
      • You can avail additional benefits such as accidental death or disability rider, critical illness rider, etc.
    23. Q. Should I opt for a term insurance plan even if my employer provides an insurance coverage?

      A. Yes, it is advisable that you choose a term insurance plan even when your employer provides you an insurance coverage. This is because the insurance cover offered by your employer expires once you change the job.

    24. Q. What are the documents required for buying term insurance plans?

      A. The following documents are needed for buying term insurance plans:

      • Proof of age
      • Proof of residence
      • Photo identity proof
      • Salary proof
      • Photographs
    25. Q. What are the maturity benefits offered under term insurance plans?

      A. Except for TROP plans, term insurance plans do not offer maturity benefits. The sum assured is offered to the beneficiary only in case of death of the person insured.

    26. Q. Can I get loan on term insurance plans?

      A. No, policyholders are not eligible for loans as the policy doesn’t come with maturity benefits nor does it attain surrender value.

    27. Q. What happens when I change my country of residence a few years after choosing the plan?

      A. The term insurance plan will continue to be active even when you relocate from India. However, make sure that you keep your insurer informed about such a change.

    28. Q. Is there any advantage in buying a term insurance plan at a young age?

      A. Generally term insurance plans are available at lower prices for people who in an early stage of their life. Therefore, buying a term plan at a young age is definitely beneficial.

    News & Latest Articles On Term Insurance

    • Government aims at insuring 40% of sown cropland

      The government has set its targets to bring more gross sown area of cropland under the crop insurance schemes. For 2017-18, starting from July, the government hopes to get 40% of the 194.4 million hectares of gross sown area insured. As per records, in 2016-17, 51.1 million hectares of the gross sown land was insured, amounting to about 26.28%. To achieve these targets, the state governments, insurance companies and banks will be required to put into practice appropriate strategies. This will include notification of more number of crops. All eligible loan takers will have to compulsorily be covered. Electronic modes of premium payments will be enabled. The government is also taking steps to ensure claims are settled in a timely manner.

      24th April 2017

    • Merger between HDFC Life and Max Life Insurance to be completed by the end of 2017

      A final nod from the Attorney General of India is expected in the next few weeks post which a number of regulatory approvals will be needed for the merger to come into effect. The merger between HDFC Life and Max Life Insurance is said to be completed by the end of 2017. MD and CEO of HDFC Life Insurance, Amitabh Chaudhry, has stated that if they get an approval within the next 30-45 days, the entire process for the merger will end in the month of December 2017. Chaudhry also stated that approvals are required from the Insurance Regulatory and Development Authority of India (IRDAI), the court, Competition Commission of India, and Securities and Exchange Board of India. HDFC and Max Financial Services received an approval from their respective boards for the merger in June 2016. The IRDAI had questioned the legality of the merger as Max Financial was to merge with HDFC Life. An application was filed by the insurance agencies seeking approval from the IRDAI but the insurance regulator had expressed a certain amount of reservation in granting the approval. The deal was later referred to the Attorney General of India.

      20th April 2017

    • HDFC Standard, ICICI Prudential & Pi Ventures Acquire 14.7% Stake in Capital Small Finance Bank

      HDFC Standard Life Insurance, ICICI Prudential Life Insurance and Pi Ventures LLP have recently bought 14.7% stake in Capital Small Finance Bank. All three financial companies have together invested Rs 64.66 crore in the Capital Small Finance Bank. HDFC Standard Life Insurance, ICICI Prudential Life Insurance and Pi Ventures LLP have each invested 4.9% in Capital Small Finance Bank which commenced operation a year back. The financial advisor of this deal was KPMG.

      Capital Small Finance Bank had been previously operating as Capital Local Area Bank, the largest local area bank in India. With total business of more than Rs 3,750 crore , the bank had over 4.32 lakh accounts which customers had opened with them. The bank has set up 73 branches out of which 35 are located in rural areas, 27 in semi urban areas, 7 in urban areas and 4 in metropolitan areas. The bank has revealed its plans to open 40 more, including in states like Haryana and Delhi.

      17th April 2017

    • Going Forward You will Be Able To Buy Insurance Policies At An ATM

      The idea of purchasing insurance covers at an ATM was proposed 2 years ago. Due to insufficient data and lack of confidence, this plan was not executed immediately. As e-commerce is growing rapidly day by day, insurance companies have tried to sell insurance plans at an ATM. The Government of India is searching for ATM-like centres that will be able to sell insurance policies in few minutes. The customer will have to provide their Aadhaar card and the insurance company will access their KYC documents. So far insurance companies have been selling their insurance products through multiple distribution channels like agencies, banks, and internet. Now, they have decided to try ATM-like centres.

      14th April 2017

    • Rubique, A Fintech Firm Join Hands With Bajaj Allianz To Offer Insurance Policies

      Rubique is one of the leading online marketplace for financial products in India. Recently, they have joined hands with Bajaj Allianz with an objective to sell the latter’s insurance products. The company went a step further and spoke with HDFC Life to partner with them. They are in the final stages of signing the contract with HDFC Life. Founder and Ceo of Rubique, Manavjeet Singh, stated that they have received approval from the Insurance Regulatory Development Authority of India for their proposed insurance plans.

      13th April 2017

    • RBI gives the go-ahead for Kotak Mahindra’s NBFC-IDF

      The Reserve Bank of India (RBI) has given Kotak Mahindra Bank a certificate of registration for commencing business as a Non-Banking Financial Institution Infrastructure Debt Fund (NBFC-IDF) through its subsidiary Kotak Infrastructure Debt Fund. Sponsored by NBFCs and commercial banks, NBFC-IDFs form a source for people to invest through bonds and units that are issued by IDFs by domestic and offshore investors.

      There are three NBFC-IDFs that are registered and these are India Infradebt (which is a joint venture between Bank of Baroda, ICICI Bank, LIC, and Citi Bank), IDFC Infra Debt Fund, and L&T Infra Debt Fund.

      Kotak Mahindra Bank has a large plethora of financial services and banking products, such as life insurance, wealth management, etc., that are offered to both retail and corporate customers.

      12th April 2017

    • IRDAI Gives Insurers April 30 Deadline To Appoint Data Security Officer

      Recently, IRDAI passed a set of security guidelines for insurers to comply, the first phase of which is slated to commence from April 30. According to the guidelines, insurance firms have been instructed to appoint a chief information security officer (CISO) by April 30. The primary responsibility of this officer will be to ensure data protection. These guidelines given by IRDAI will complete a full cycle by end of March 2018.

      The responsibility of the Chief Information Security Officer (CISO) will be to create and also enforce policies to protect the information assets of the insurer, along with forming an Information Security Committee (ISC). However, insurance companies which are less than 3 years old will not compulsorily be required to have a full-time CISO. The responsibility of a CISO may be given to any functionary who is reporting to the Board.

      IRDAI has stressed on the importance of data security which needs to be guarded against theft and misuse because besides insurers, there are several other entities such as common service centers, call centers and insurance repositories have access to a policyholder’s information. This may include very sensitive personal, health-related and policy related information of the policy holder.

      10th April 2017

    • Insurers to Soon Sell Products via Point of Sale Persons

      IRDAI has recently issued guidelines which will now permit life insurance providers to sell pure term insurance products, immediate annuity products and non-linked non-participating endowment products via point of sale persons. Pre-underwritten products which are approved by IRDAI will soon be launched in the market as insurance companies have begun designing specialized policies that will be sold by Point of Sales Persons (POSPs).

      IRDAI has given instructions that products being sold via POS must be plain vanilla products which are simple not only to understand but also to sell. Following this guideline, in the general insurance sector, POSPs can sell third party motor insurance, personal accident policy, cattle insurance, home insurance policy as well as travel insurance policies.

      Beside regular policies, IRDAI has also permitted POSPs to sell other insurance products such as crop insurance (government insurance schemes such as Pradhan Mantri Fasal Bima Yojana), Weather Based Crop Insurance Scheme (WBCIS) and Pradhan Mantri Jeevan Suraksha Bima Yojana.

      6th April 2017

    • Income Protection Plan unveiled by Bharti AXA Life

      Bharti AXA Life has launched a new term plan, the Income Protection Plan that provides a return on premium at maturity. It is a non-participating non-linked plan that provides the family of the life assured an income through instalments in the event of his/her death. The instalments will be provided annually for a specific duration, as pre-defined in the plan.

      Additionally, the plan provides a lump sum survival benefit of up to 120% of the premiums paid, when the policy tenure ends. This is also based on the choice of the policyholder at the time of policy purchase.

      28th March 2017

    • Launch of term insurance plan with return of premium from Canara HSBC OBC Life

      Canara HSBC Oriental Bank of Commerce Life Insurance Company will soon be launching a pure term insurance plan that provides a return of premium. The plan is expected to be launched in April, 2017. The insurer will be approaching the IRDAI for approval on the product.

      Term plans with return on premium will pay back the premiums borne by the policyholder, if death does not occur during the policy term. The upper limit for the sum assured in this product will be Rs.15 lakh, without any underwriting. Customers can walk into a bank branch and submit their particulars to buy the policy. The credentials will be submitted online and authentication will be Aadhaar-based. Customers will not be required to take any medical tests.

      The company is expecting a business income of Rs.630 crore at the end of FY17, as opposed to earnings of Rs.445 crore the previous year. The target for FY18 is Rs.800 crore.

      The company stated that the gross written premium will touch Rs.2,400 crore in FY17, while the value for the previous year was Rs.1,850 crore.

      15th March 2017

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