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 (FY14-15) 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||98.20%|
|Max Life Online Term Plan||18 / 60 Years||70||10 - 35 years||Annual||Rs 25,00,000||Lumpsum & INcome Options||96.03%|
|BSLI [email protected]||18 / 55 Years||80||5-30 years||Monthly (ECS), Annual & Single||Rs. 50,00,000||LumpSum Only||95.30%|
|Tata AIA iRaksha Supreme||18 / 70 Years||80||10-40 years||Annual, Semi-Annual, Single||Rs 50,00,000||LumpSum Only||94.50%|
|ICICI prudential - iProtect Smart Plan||18 / 65 Years||75||5-40 years||Monthly, Halfyearly, Annual & Single||Subject to minimum premium paid||Lumpsum & Income Options||93.80%|
|PNB Metlife - Mera Term Plan||18 / 65 Years||75||10-40 years||Monthly & Annual||Rs. 10,00,000||Lumpsum & Income Options||92.90%|
|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||91.90%|
|Kotak Preferred e Term Plan||18 / 65 Years||75||10-40years||Monthly, Yearly, Single||Rs 25,00,000||LumpSum Only||90.70%|
|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||90.50%|
|AEGON Life iTerm Plan||18 / 65 Years||75||5 - 40 years; or upto 75years||Annual||Rs10,00,000||LumpSum Only||89.80%|
|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||89.60%|
|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||89.40%|
|Reliance Online Term||18 / 55 Years||75||10 | 15 | 20 | 25 | 30 | 35 years||Annual||Rs 25,00,000||LumpSum Only||83.80%|
|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||83.70%|
|Aviva I Life||18 / 55 Years||70||10 - 35 years||Half-Yearly, Yearly||Rs 25,00,000||LumpSum Only||82.60%|
|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||80.90%|
|IDBI Federal - iSurance||18 / 50 Years||75||10-25 years||Annual||Rs 50,00,000||LumpSum Only||75.80%|
|IndiaFirst Life - Anytime Plan||18 / 60 Years||70||5-40 years||Monthly (ECS), Half-Yearly, Annual, Single||Rs. 10,00,000||LumpSum Only||72.20%|
|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||57.14%|
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
|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. )
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.
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.
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.
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.
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.
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.
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.
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.
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
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 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.
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.
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.
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.
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.
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.
Policyholders can also claim exemptions under Section 10 (10D) of the Income Tax Act for benefits received through insurance policies.
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.
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:
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.
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.
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.
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 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.
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.
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 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.
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 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.
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.
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.
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
- 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.
- Q.Can I take more than 1 term insurance plans?
A.Yes, you can take more than 1 term insurance plans.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
A.No, you cannot switch your term insurance policy to another provider during the policy term.
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.
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.
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.
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.
A. The following documents are needed for buying term insurance plans:
- Proof of age
- Proof of residence
- Photo identity proof
- Salary proof
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.
A. No, policyholders are not eligible for loans as the policy doesn’t come with maturity benefits nor does it attain surrender value.
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.
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.
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News & Latest Articles On Term Insurance
Nepal to insure Nepalese workers working abroad
Nepal, for the first time since the signing of the 1950 peace treaty between India and Nepal, migrant workers coming to India and other countries will be insured by Nepal. This plan was recently unveiled by Prime Minister Prachanda of Nepal. Prachanda has reported that the government will soon be regulating the Nepali migrant influx into India by issuing formal documents like permission letters, etc. Prachanda also stated that the plan was aimed at providing life insurance cover to migrant workers and to their families and to also provide social security to them. If this plan is enforced, more than 5 million Nepalese workers who are employed in 110 different countries will benefit from this plan.
New committee to review insurance product regulations
The Insurance Regulatory and Development Authority (IRDAI) has set up an eight-member committee that will review insurance product regulations along with some other things including the Sumit Bose Committee. The committee will be chaired by Amitabh Chaudhry, who is the CEO and MD of HDFC Standard Life Insurance Co. Ltd. Product regulations in terms of distribution incentives, policyholders’ interest, and current market environment as well as recommendations of the Sumit Bose Committee, will be reviewed by the committee.
Small Finance Banks Become Favorites As Banks and Insurers Rush To Invest
Small finance banks (SFBs) have suddenly become the hot new favorite with the beginning of the year. There are several small finance banks in which insurance companies have raised their stake. Even mutual funds are not far behind and are investing in SFBs. According to experts, one of the major reasons why this trend is picking up is that financial institutions like banks and insurers are placing their bets on the potential of SFBs in the distribution of financial products in semi-urban and rural segments of the market.
IDBI Federal unveils term plan packed with features
Leading life insurance company, IDBI Federal Life Insurance has launched its improved term plan, IDBI Federal iSurance Flexi Term Insurance Plan. The insurer suggests that the plan offers comprehensive coverage and has flexible options that are unavailable in the existing term insurance plan from the company.
IRDAI Plans To Introduce Simple PoS Products To Increase Rural Selling
Insurance penetration in India has come to an all-time low of 3.44%, which is the lowest in a decade. To combat this low percentage, IRDAI is starting to take measures to introduce simpler point of sale (PoS) products which will help facilitate and increase broad-based selling in rural regions.
Irdai lays down rules for compulsory listing of insurance companies
The Insurance Regulatory and Development Authority of India (Irdai) has issued a debate paper on cataloguing of country’s insurance companies. The Irdai strongly recommended that insurance companies (both general and individual ones) that are past eight years of service in general insurance, and ten years of service in life insurance must be entered in a register accessible for public. According to the supervisory structure in place, an insurance firm may list its shares.
Online platforms give surprising push to term insurance
Term Insurance, till date, has not been a very popular insurance category for the Indian buyers. Most Indian buyers have either been skeptical or unaware of buying term insurance. But with the widespread use of social and digital media and online platforms, insurance providers have been able to popularize term insurance.
Confused about Insurance, choosing which to buy pure, life, term plans, online etc
Many people in India, are still confused when it comes to insurance. Officials say that this perception is slowly started changing, with the new generation of citizens opting to buy insurance of all types either online or offline. Top insurers for life, share of term policies, will be on average 5% to 7% in 2015. The online industry, and digital marketing has boosted sales for term insurance. Different insurers, are offering chances to compare and buy policies.
Hike in Term Plan upfront commission
In a bid to boost the morale of insurance agents, the IRDAI has issued a draft policy aimed at increasing the commission of such agents. The plan proposes to hike the upfront commission of pure risk policies like term insurance to 50% of the annual premium for policies with a term of over 12 years while it will be 40% of the annual premium for policies with terms between 5 and 11 years. This is a hike of about 15% from the current commission which ranges between 20% and 35% of the annual premium. The commission on policy renewals has also been hiked by 5%, standing at 10% of the annual premium now. Single premium policies will earn agents 2% the premium amount as commission, with the changes expected to be enforced from April 1, 2016.
New scheme from IDFC, called Fixed Term Plan Series 117
IDFC Mutual Fund is launched a new close ended scheme called Fixed Term Plan Series 117. The new fund offer for this scheme is open from 4th January 2016 and closes a day later on 5th January 2016. The will be no entry or exit loads on this scheme. The minimum subscription amount will be a sum of Rs. 10, 000, with multiple of Rs. 10 thereafter. The fund’s performance will be benchmarked against CRISIL Composite Bond Fund Index, and the fund manager will be Harshal Joshi. The key highlight of the scheme is to generate income by investing in debt portfolios, money market instruments that mature either on or before the scheme matures.
30th January 2017
25th January 2017
Ujjivan is a small finance bank which recently got listed on the stock exchange some months back. As of Sept 6, 2016, insurance companies held a stake of nearly 9.75% at Ujjivan. The stake is held by several leading insurers such as HDFC Standard Life Insurance, Bajaj Allianz Life Insurance, Birla Sun Life Insurance, Max Life Insurance and Shriram Life Insurance. An insurance officer employed with one o the insurance firms said that SFBs are likely to have the potential channels that will allow them to reach out to customers in rural market segments. Insurers will see this as a valuable investment for the future.
Suryoday Microfinance is another small finance bank which is all set up to commence operations from the middle of January. Mr. Bhaskar Babu, a senior executive at Suryoday Microfinance said that leading insurers such as HDFC Holding and HDFC Life Insurance together hold a stake that is close to 4% in the SFB. Suryoday Microfinance will start operations with 5 branches and plans to grow that number to nearly 30 branches by the month of March 2017. The relatively new IDFC Bank has also invested in Suryoday Microfinance and holds a stake of nearly 4.99% in the SFB. Other small finance banks which have seen investements by major insurers and banks are Disha Microfin and the Varanasi based Utkarsh Micro Finance.
9th January 2017
The advancement in medical facilities has contributed to improved life expectancy. Karthik Raman, CMO, Head of Products and Strategy of the company mentioned that they have modified their term plan to suit the changing preferences of customers and their lifestyle.
The iSurance Flexi Term Insurance Plan offers the customer the flexibility to update the policy to cover critical illness, if needed. In case the insured suffers from any critical illness, he can encash the death benefit at a rate that was previously agreed upon. The death benefit payout can be availed as a monthly income, if required. The policy also allows customers to opt for availing a portion of the life cover as a lump sum, and the remaining amount as monthly payouts. The plan covers the insured for up to 80 years of age, and is simple and affordable.
29th November 2016
Taking examples from the success of the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which is a term insurance plan that provides, for a very nominal premium of Rs 330, insurance cover of Rs 2 lakh insurance cover, IRDAI has recently issued guidelines last week, asking insurance providers to come up with simple frill-free Point of Sale products for the masses distribution. The insurance regulatory authority has urged insurance providers to craft annuity and savings plans which are customized in a way that the policy reach a lakh.
24th November 2016
18th August 2016
The outcome is that most insurance companies have conceded that the growth in buying of term insurance has almost doubled as compared to the last fiscal. This is however, still a meagre percentage of the entire market since in developed countries like US and Japan, this percentage is almost 50. Digital marketing campaigns have led the march in popularizing insurance policies and in sensitizing customers about the features and benefits of term insurance.
20th February 2016
19th February 2016
13th January 2016
5th January 2016