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.
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%|
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.
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.
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.
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 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.
Policyholders can also claim exemptions under Section 10 (10D) of the Income Tax Act for benefits received through insurance policies.
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.
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:
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.
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
- 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.
- 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.
- 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.
- 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.
- 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.
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
Reliance Capital Files IPO Application To List Its General Insurance Arm
Reliance General Insurance Company (RGIC) recently became the fourth general insurer in India to file their IPO application with the IRDAI (Insurance Regulatory and Development Authority of India). With this IPO, Reliance Capital (RCap), the parent company of RGIC, plans to sell up to 25% of its stake in its general insurance venture. They plan to raise approximately Rs.1,500 to Rs.2,000 crore via the IPO. According to sources, the application for the IPO has already been filed by Reliance Capital for the RGIC IPO.
Currently, Reliance General Insurance Company is wholly owned by Reliance Capital which is waiting for the regulatory body’s approval to sell up to 25% of its stake in RGIC in the initial offering. Apart from RGIC, Reliance Capital also has plans to list Reliance Nippon AMC and Reliance Home Finance on the market this year. According to sources, these listings are a part of the value unlocking measures being undertaken by Reliance Capital, as per which Reliance Home Finance is planned to be listed in September followed by Reliance Nippon AMC in October.
The IPO for Reliance General Insurance is planned to be listed in November. However, earlier this year, in June, the board had already given the green signal to the proposal of listing the company independently on the stock exchange. With this IPO, the company is expecting to offer substantial value to all their stakeholders. Reliance General Insurance currently offers a wide array of general insurance products like health insurance, motor insurance, travel insurance, fire insurance, home insurance, and crop insurance.
FY17 has been a good one for Reliance General Insurance. The insurer outperformed its competitors in the industry, recording 40% growth in FY17 along with an annual early gross written premium worth Rs.4,007 crore. Reliance General operates via a diversified distribution network which includes alliances with several leading banks like IndusInd Bank, Catholic Syrian Bank, Andhra Bank and Bank of India. The insurer has over 120 branches and 24,000+ agents across the country.
14th August 2017
Bajaj Allianz Life Insurance Launches Future Wealth Gain ULIP WIth Cancer Cover
Bajaj Allianz Life Insurance Co. Ltd, one of India’s leading insurance provider has recently launched a new unit linked insurance plan (ULIP) known as ‘Future Wealth Gain’ which offers insurance cover if the life insured is diagnosed with cancer. This is a ULIP plan which offers the dual benefit of insurance cover along with the chance to invest money in market-linked funds.
The Future Wealth Gain is classified as a type-1 ULIP where in the event of the death of the policyholder, the insurance company will pay either the insurance cover or the fund value, whichever amount is higher.
There are two variants available under this plan – Wealth Plus and Wealth Plus Care. Under the first variant (Wealth Plus), in case the policyholder passes away during the policy term, the insurance company will provide either the sum assured or the fund value, whichever is higher, subject to a minimum payment of 105% of total premiums paid.
Under the second variant (Wealth Plus Care), if the policyholder is diagnosed with cancer or passes away due to it, the insurer will pay either the sum assured or the fund value, whichever is higher, subject to a minimum payment of 105% of total premiums paid. Besides the aforementioned benefit, this variant of the policy also includes an income benefit where the remaining policy premiums are paid to the beneficiary as per the schedule under which they are due for payment. However, one must also remember, that the cancer cover provided under this variant is subject to an initial waiting period of 6 months. Also, individuals who are already diagnosed with cancer will not be eligible for this plan.
The working of this policy is quite simple. The premiums paid by the policyholder will be invested in funds of their choice. Policy charges such as cost of insurance, will be taken care of from the fund value. Premium allocation charges, which can range from 0 to 8.5% in the first year, will be deducted from the premium amount itself.
9th August 2017
IRDA Instructs Insurers To Lower Costs, Cap on Expense Ratio Likely
IRDAI (Insurance Regulatory and Development Authority of India) chairman, Mr. T.S. Vijayan has recently hinted at a likely cap on expense ratios of insurance companies. If brought into effect, this move may force insurance companies to lower agent commissions, curb misselling of policies and offer affordable products.
Speaking at the annual insurance summit organized by the Confederation of Indian Industry (CII), Mr. Vijayan urged insurers to take steps to offer cost-effective insurance policies to customers instead increasing the incentives of agents in form of commissions and only focusing on upping profits. He also mentioned about the insurance information bureau which analyses various ratios and provides bigger data about the insurance industry. He urged insurers to make use of this data. He also hinted at the likely imposition of a cap on management expenses of insurance companies, a step which may be taken eventually.
Expense ratio in the insurance industry has been a measure of profitability and is calculated by dividing the expenses associated with acquiring, underwriting and servicing premiums by the total premiums earned by the insurer. Expenses may include employee salaries, advertising costs, and commissions for the sales people. Adding to this, he said that India’s insurance sector has been troubled with high expense ratios for over a decade. As per an analysis carried out by Willis Towers Watson in June 2016, the overall expense ratio for the life insurance industry, with the exception of Aviva Life, Sahara Life and Bharti AXA Life, decreased from 16.3% in 2014-15 to 15.5% in 2015-16, with concentrated efforts being made to rationalize expenses. State owned LIC (Life Insurance Corp. of India) continues to take the top spot by maintaining the lowest expense ratio of 8.5% in the industry.
8th August 2017
SBI Life Receives Final Approval from SBI Central Board for IPO
SBI Life Insurance will soon become the second insurer to go public after ICICI Prudential Life. SBI has approved the dilution of its stake in the life insurance company through a public offering and has now received a sectoral regulatory approval. The Insurance Regulatory and Development Authority of India (IRDAI) has recently approved a Rs.7,000 crore IPO application filed by SBI Life. SBI Life follows ICICI Prudential as the second largest private life insurer. SBI Life’s net profit last year has shown a growth of 10.9% to Rs.954.65 crore from the previous year’s Rs.861.03 crore in March this year.
7th August 2017
Private Banking Sector To Have A Clear Home Run Following PSU Consolidation
Mr. Rohit Agarwal, Equity Fund Manager at Kotak Life Insurance recently gave his views on some of the events affecting the financial and insurance sector. Following the recent 25 bps rate cut by the RBI, there was a strong reaction from the markets which were expecting 50bps. Asked if Kotak would be adjusting their portfolio, Mr. Agarwal said that at this time, private banks which are making use of technology and employing digital platforms as their medium are simply far ahead of their peers, adding significantly to their market share with each quarter. He also said that a clear majority (70%) of the banking system market share has been and continues to be in favour of PSUs. However, with the likely consolidations in the PSU sector for the coming 2-3 years, the private banking sector will have a clear home run and will have the chance to actually choose the credit.
Regarding the effect of the GST implementation on FMCG companies, Mr. Agarwal was of the view that the impact of GST has been quite evident on the FMCG sector in terms of destocking. However, it requires thorough evaluation to actually find out which companies will end up benefiting due t =o the GST implementation. While most companies will benefit, most does not include everyone. Also, the extent of the benefit won’t be the same.
The system which was unorganized will definitely benefit by becoming increasingly organized. Stocks which are correcting 10-20% may actually end up offering good value in the long term. However, the restocking phase which began in July witnessed only minimal trade in the first 10 days of the month, following GST implementation. Due to this, expectations from the second quarter need not go high, just because the Q1 was a destocking phase. However, one can expect things to get better as the GST system gets more refined with time.
4th August 2017
Kotak Life Insurance Unveils New Digital Campaign #LaterMayBeLate
Kotak Life Insurance recently unveiled its latest digital campaign, #LaterMayBeLate which targets people between the ages of 30-40 years who have not bought insurance to secure the future of their loved ones. The campaign has been conceptualized by an agency called What’s Your Problem.
The essence of the campaign is to tell the audience near death experiences can happen anytime and anywhere, experiences which can make us really think and act on securing the future of our loved ones. The ad is meant to urge the viewer to take insurance in order to avoid leaving their loved ones to fend for themselves.
Jasneet Bachal, Senior Vice-President & Head, Marketing, Kotak Life Insurance, said that through the #LaterMayBeLate campaign, the company wants to create awareness among the viewers to not procrastinate anymore in protecting their loved ones. Though everyone wants to protect their family, people often procrastinate when it comes to purchasing life insurance cover, leaving the purchase for just another day. That life can be very uncertain and is something which these series of short films have tried to bring out. The campaign comes with the message that sometimes, later may be too late and we mustn’t wait for an emergency to act to protect our loved ones.
3rd August 2017
IRDAI grants Embattled Sahara Life One More Week
The ongoing Sahara Life issue has taken a new turn. In the last update, IRDAI (Insurance Regulatory and Development Authority of India) had ordered ICICI Prudential Life Insurance Co. Ltd to take over Sahara Life’s insurance business on 28th July. The takeover was to take place on 31 July. However, as per the new update, this takeover has been put on hold.
On the date of the takeover, the Securities Appellate Tribunal (SAT) ordered a status quo after Sahara India Life Insurance approached the tribunal against IRDAI’s takeover order where Sahara’s life insurance business would be transferred over to ICICI Prudential Life Insurance. Following the appeal, the tribunal has asked IRDAI to respond to the matter by 4 August. The issue will be taken up for a final hearing on 7 August. Status quo implies that Sahara Life will continue to operate under the administration of IRDAI, which has appointed Mr. R.K. Sharma, GM at IRDAI, as the administrator. During this period, Sahara Life will not be allowed to issue fresh policies to customers but can continue to service existing policies till 7 August.
Post status quo
More clarity regarding this issue can only be expected after Aug 7 after the SAT has made a decision regarding the matter. Till then, Sahara Life can service existing policies, which includes claims and renewal of policies. They will not be permitted to issue fresh insurance policies. However, experts have assured that the customer’s interests will be given utmost priority in the matter, regardless of the decision that is reached.
2nd August 2017
11,000 Women To Receive Life Insurance Cover On Occasion of Rakshabandhan
On the occasion of Rakshabandhan, BJP MP from Aligarh. Mr. Satish Gautam has announced the gifting of life insurance covers to 11,000 women and girls in his constituency, this life insurance cover will be provided under the Prime Minister Suraksha Bima Yojana (PMSBY).
Speaking about the announcement, Mr. Gautam was of the view that this life insurance cover would make for a very useful gift as it would provide security to the future of these women and girls.
the yearly premium for the insurance scheme, which amount to approximately Rs.1.32 lakh, will be paid by the MP himself. The insurance policy will provide financial cover of up to Rs.2 lakh under PMSBY to the girls and their families against death or disability due to accidents.
The PMSBY scheme provides a cover of Rs.2 lakh at an yearly premium of Rs.12. the cover is provided against the total and irrecoverable loss of both eyes, or loss of use of both hands or feet, or loss of sight of one eye and loss of use of hand or foot. If there is complete and permanent loss of sight of one eye or loss of use of one hand or foot, the policy will provide a sum assured of Rs.1 lakh. To avail this scheme, the applicant must be between the ages of 16 to 70 years and must have a savings bank account.
27th July 2017
Subrata Roy Seeks More Time To Resolve Sahara Life Crisis
Chairman of Sahara Group, Subrata Roy recently met the chairman of IRDAI (Insurance Regulatory and Development Authority) to seek more time to detangle the crisis at Sahara Life Insurance. Meanwhile, ICICI Prudential, India’s biggest private insurance player handed in a valuation report to IRDAI to acquire Sahara Life. Following governance related issues at Sahara Life, IRDAI recently appointed an administrator to run the crippled company. In the near future, all assets and liabilities of Sahara Life policyholders will be transferred to ICICI Prudential Life.
However, Mr. Roy’s request for additional time has been turned down as IRDAI has has already appointed an administrator to run the Sahara Life. Mr. R.K Sharma, General Manager, IRDAI, was appointed as an administrator for Sahara Life on June 23.
27th July 2017
Insurance Companies To Provide Coverage Details Of Farmers in Telangana
Ahead of the kharif crop season, officials of the Telangana Agriculture Department recently met with insurance companies for a review of the insurance coverage status of the farmers. Chairing the meeting was Mr. C. Partha Sarathi, Secretary at the Agriculture Department while the attendees included Mr. Jagan Mohan, Agriculture Commissioner, representatives of Agriculture Insurance Company, Chola MS, National Insurance Company, United India Insurance Company, and other officials from the Agriculture Department. following the meet, insurance companies have been requested to provide the details of all farmers who are covered (including loanees and non-loanees), area insured & the premium collected for Kharif 2017.
25th July 2017
GST of 18% is applicable on life insurance effective from the 1st of July, 2017