Term Life Insurance plans in India are the most basic, effective and important Insurance Plan for an individual. Term Insurance Plans are basically protection plans and designed to protect your family against unforeseen circumstances by providing them financial security. It is the most recommended Life Insurance Plan by financial planners, Insurance Industry experts and renowned Life Insurance Advisors as securing the future of one’s family is the most important goal of life.
Now Let us see what the benefits of a Term Insurance Plan are and why it is so highly recommended.
What are the benefits of a Term Insurance Plan
Lowest premium- Term Insurance Plans allows you to have the highest death benefit or life cover in lieu of a very low premium. This is possible because unlike other insurance plans, it is pure death protection plan with no ancillary benefits attached to it. If you compare the premiums of any traditional plan with that of term insurance plan, you will find that the term insurance plan premiums are the cheapest.
Lower tenure– Term Insurance Plans can be taken for shorter tenure also. For example - you are aged 30 and have taken a home loan for 50 Lakhs for 15 years. In that case, you can take a term insurance plan of 50 Lakhs for 15 years tenure. This is just to ensure that during the loan period if something happens to you, your family will be able to repay the loan and retain the house.
Benefits of starting early– The premium of term plan depend on your age and the term. If the age is lower and the policy term is high, the premium will be the lowest. Therefore, one should take a term plan at an early age of their working career.
Income Tax Benefits– The policy holders can avail a tax rebate on the premiums paid upto
र150,000 per annum under Section 80C of the Income Tax Act 1961. The maturity benefits paid (in case of term plans with return of premium) is also tax free under Section 10 (10D) of the income Tax Act 1961.
Further, the claim amount received by the nominee, in case of policy holder’s death is also tax free in the hand of the recipient.
Longer tenure– Term plans can be taken for a long period of time. Generally the term plans can be taken upto the age of 70, some companies allow taking the life cover upto 75 years of age. With growing life expectancy rate in India, it make sense to take life cover till age 75 through a term insurance plan.
Fixed premium– Once the Insurance Company accepts your policy against a certain premium, it will never revise or change the premium during the policy tenure even if you survive till end of the policy term.
Peace of mind– Our responsibilities keep increasing as and when we start our career, get married and have children. The utmost important things in life are protecting the family from unseen circumstances and provide them with financial security. A term plan with adequate life coverage can assure you peace of mind as you need not worry about the unforeseen circumstances that your family might have to face in future.
Continuance of policy– Sometime it so happens that we are unable to pay our premiums due to financial difficulties. In that case the term plan becomes ‘paid up’. This feature allows the policy to continue, but with limited cover. Normally the life cover reduces with the proportion of premium paid till ‘paid up’ status of the policy.
Now that we have known the benefits of a Term life Insurance Plan, let us see what is the various types of Term Insurance Plans available in India.
Type of Term Insurance Plans
Level Term Plans
– This is the simplest form of Term Insurance Plan where the sum assured do not change during the tenure and benefits are paid out to the nominee on the death of the policy holder.
Return of Premium Plans
– Unlike level term plans, here the plans have maturity benefit, wherein the premiums are returned to the policy holder if he or she survives till maturity of the policy.
Increasing Term Plans
– In this plan, One can opt to increase the sum assured at annual frequency during the plan period while keeping the premiums same. Of course, the premiums of this plan will be different than that of level term plans.
Decreasing Term Plans
– The opposite of increasing term plan is the decreasing term plan. Here the sum assured decreases year after year so as to match the decreasing insurance needs of the policy holders. These plans are mostly taken when someone has taken a large home loan or personal loan and paying an EMI. The sum assured decreases with a chosen frequency as and when the EMIs are paid out and the total loan amount keeps decreasing.
Convertible Term Plans
– This is a plan offered by some of the Insurance companies wherein a term insurance plan can be taken with an option to convert it into some other plan of your choice at a future date. For example – You have taken a term plan for 25 years but after 5 years you can covert this into a whole life insurance plan, endowment plan or any other plan of your choice, if you so wish.
Term Plans with Riders
– This is a unique plan whereby you can buy riders like, critical illness cover, accidental death cover or disability cover etc. by paying a small additional premium. If you take a rider and opt for premium waiver benefit, then you need not pay the future premiums in case of any eventualities for which you have taken the rider.
For those of you who are still wondering why we are praising the term Insurance plans so much, let me tell you that a term insurance plan is the only instrument through which you can entirely protect your family’s financial well being in your absence. And the price for this cause is small as the premium of term plans are cheapest amongst all life insurance plans.
How much life coverage one should buy under a term insurance plan
An ideal term plan is a relative subject and depends on your financial situation, size of the family, your current earning, life style, current assets and liabilities. A fact finding exercise with help of a financial advisor or Insurance Company is required to assess your financial and future requirements based on which an ideal plan can be bought.
However, leading financial advisors or insurance journals suggest that one should take a term plan equivalent to 10 – 12 times of your annual earnings. For example – if your monthly salary is 1.00 Lac, then taking a life cover of 1.00 Crore and 20.00 Lakhs makes sense. This is simply because your family can get 1.00 Crores and 20.00 Lakhs in case something happens to you and also assuming that your family can earn approx 8% on the amount received, they will be able to comfortably carry on with their financial needs.
However, this is only a starting point and not a full proof idea. This is because; you should also account the other liabilities that you might have, like - your home loan and personal loan etc. You should add all these liabilities along with the above life cover figure and then decide the final live cover amount.
How to buy a term Insurance plan
Insurance companies in India are offering term Insurance Plan through their IRDA licensed Agents, Corporate agents and also online through their websites.
Online term insurance plans which eliminate the necessity of middlemen have become very popular as they are cheaper too. You can just visit the website of the Life Insurance Company, compare the plan suitable to you, fill up the risk questionnaire and pay online. If any medical checkup etc is required (this is required in case you have any pre existing disease or high life cover or your age) then the Insurance company organizes that in you city.
Please also note that the features and benefits are same either you buy through an agent or online.
Due to increasing awareness the Life Insurance Term Plans appeal to most of us because of the inherent benefits of life cover at the lowest possible premium, Income Tax Benefits and ultimately for the peace of mind with regards to safety of our near and dear ones.
The premium we pay is a small price compared to the benefits attached to a Life Insurance Term Plan.
In this blog, apart from covering the benefits of having a term insurance plans, we have also discussed the various kind of term plan available in the Indian Insurance market. We feel that readers will be attracted to the unparalleled benefits and importance of having a term insurance plan and make it a quintessential component of their respective financial plans. So without waiting any further, choose a term plan suitable to you and make secure the life of your family members dependent on you!
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