What is Term Insurance?

Term insurance is a type of insurance availed for a specific time or a fixed term. Unlike other types of life insurance policies, term insurance policies are less expensive as they do not have any cash value. Term insurances are useful and beneficial only if the policyholder expires within the timeframe when the policy is still active.

Almost all major insurance companies provide term insurance policies. These policies typically come for various terms of 10, 20, 30 or more years. Most of these policies contain a highly significant built-in feature that converts the term insurance to a permanent life insurance policy irrespective of the policy holder's state of health.

Why Should You Buy Term Insurance?

In comparison to other insurance products, term insurances are often overlooked as they neither offer significant returns nor any additional benefits apart from the 'Sum Assured' on the policyholder’s death. However, term insurances have several advantages like:

• Financial security - Term insurance policies can help build a financial safety net. Almost everything in this world is unpredictable. A term insurance policy ensures financial security to the policyholder’s dependents in the unfortunate event of his/her sudden demise.

• Basic insurance product - Most insurance plans come with a host of other add-ons. Customers typically end up paying a high premium unnecessarily. A term insurance plan, on the other hand, comes with a fixed and affordable premium and offers almost the same features.

• Greater returns - Term insurance policies are designed to fit everyone’s needs and they provide much more benefits than the sum invested. Thus, it results in higher returns without the hassle of managing investment funds. Both regular plans and TROP plans offer around 105% return on premium paid as a benefit upon maturity.

• Adequate coverage - Term insurance policies allow the customers to choose the sum assured so that it offers sufficient coverage. Most financial advisors opine that sufficient coverage equals 10 times of one's annual income. Inadequate coverage defeats the very purpose of being insured. Similarly, customers should also understand the importance of reviewing one's insurance cover and identifying areas to can cut down so that one isn't over-insured.

• Survival benefits - A regular term insurance policy does not have any survival benefits, However, many insurers have designed special plans, like TROPs (Term Return of Premium Plans), which offer survival benefits at maturity in the form of premium refunds.

• Policy term - Term insurances typically offer coverage for a fixed term, which indicates that one can subscribe to term insurance for a fixed duration during which their family is financially protected. This allows people to retire comfortably.

• Low claim rejection - Life insurances that have been active for more than 10 years have a record of low claim rejections. Therefore, buying term insurances is ideal as it ensures that the claims are honored.

• Flexibility - Term plans are generally quite flexible and one may even purchase the policies online. Moreover, many insurers do not require health check-ups if the sum assured is within Rs.50 lakh.

• Riders - The value of term plans can be enhanced by using riders for extra protection. Riders can be purchased from the insurance company at low costs. Accidental death benefits, partial or permanent disability, critical illness, waiver of premium, etc. qualify as riders.

• Low brokerage - Offline term insurance policies are known for a very low amount of broker commission. Brokerage is normally calculated as a certain percentage of the premium amount. Since term insurance premiums are usually low, the broker charges also get reduced. Moreover, online policies have no brokerage fees as well.

• Flexible payment options - Term insurance policies are known for allowing policyholders to select a payment plan as per their convenience. They can choose to pay their premiums on a monthly or quarterly or half-yearly, or annual basis.

• Choice of the plan - Most insurers allow policyholders to choose a plan according to their need. Customers can also choose a single or joint plan or even extend the coverage for dependents.

• Tax benefits - Premiums paid towards term plans may qualify for tax benefits under 80C of the Income Tax Act. The death benefit that the nominee receives under the term insurance policy is eligible for tax deductions under Section 10 (10D).

Online Term Insurance Plans

Some of the significant advantages of purchasing term insurance policies online are:

• Term insurance policies purchased through online portals benefit customers as they have a lower policy cost compared to the policies purchased in the conventional way. From the perspective of the insurer, online sales are more economical as the company need not bear the expenses of hiring life insurance agents and field officers. Therefore, the insurance companies pass on some extra benefits to the customers.

• The online application procedure is simple, hassle-free and quick.

• The customer need not depend upon an insurance advisor or agent to purchase the plan.

• The customer receives the same service, irrespective of how the policy is purchased, i.e., online or offline.

• Online plans typically have lower premiums because firstly, there is no intermediary in the deal. Secondly, an online buyer, who is expected to be educated and aware, is considered a low-risk customer for the insurance company.  

Customers planning on purchasing term insurance must keep the following in mind:

• The premium may vary in the future - The price quote that customers receive from the website based on the assumption that the customer carries normal risk in terms of health, occupation and family medical history. After the submission of all relevant documents, the insurer may request the customer for medical tests to decide the actual policy cost. If the medical reports indicate certain risks, the premium for the insurance may rise.

• Never let the policy lapse - Purchasing an insurance plan online is a great choice. However, customers should never let the policy lapse by missing payments. Since online policies do not involve insurance agents reminding the customer of the payment due date, it is easier to miss the dates. Automatizing the payment would be a smart move. Alternatively, customers can set up alerts on their mobile phone or computer to remind themselves of the payment date.

• Do not hide relevant facts during application - A tiny insignificant information like smoking habit can largely affect the insurance premium. However, nobody should hide such information in the application for insurance. If the insurer discovers that the customer had concealed such information, the claim can be rejected or the policy can be canceled.

Offline Term Insurance Plans

Offline term insurance policies are slightly more expensive than the online ones but provide a good amount of life insurance coverage nonetheless for relatively low premiums. Offline term insurance policies are more cost-effective as compared to endowment plans or money-back insurance policies. These are the advantages of offline term insurance plans:

Customers get the assistance of insurance agents while purchasing the policy.

Customers also get reminders from the insurance agents on the payment due dates, ensuring timely payments.

How do Term Insurances Work?

Term insurance policies are the most traditional forms of insurance.  The premium of most of these policies increases in small amounts, owing to the reduction in the value of money over the years and the increase in mortality risk of customers with increasing age.

These three situations can explain how a term insurance works:

Buying the policy: Customers need not pay a hefty amount of premium every year in order to buy a term insurance policy. Many term insurance policies can offer a sum assured of up to a crore for a  nominal premium of about Rs.10,000 per year.

Keeping the policy: Just like all other insurance policies, customers must pay the premium as and when due. The premium can be paid on a monthly, quarterly or even yearly basis, depending upon the customer's preference. Customers can also choose to pay a lump sum instead of paying at regular intervals.

Redeeming the benefits: Term insurance plans usually do not have any maturity benefits. The main objective of the term insurances is to provide life insurance cover. In case of the policy holder's death, the person named as the beneficiary will receive the sum assured.

Insurers often refer to these policies as pure protection plans that are devoid of any frills attached to them. You basically pay the premium and receive a fixed sum if something happens to you.

Types of Term Insurance Plans

The insurance companies offer a wide variety of term insurance plans with exciting features and huge benefits, in order to be the most appealing policy to the customers. These are the different types of term insurance policies:

Regular Term Insurance Plans:

These are no-frills insurance plans that provide coverage against a particular set of risks provided that a pre-decided premium amount is paid by the policyholder. These plans do not generally offer any benefits upon maturity. The policy premiums can be paid periodically or at once. The options for insurance coverage can be as high as the insurer decides to underwrite and the policy tenure can also be as high as 20 years. Upon maturity, both the insurance cover and the need to pay premiums for the cover ceases. These are the most basic forms of life insurance that typically have low premiums and high sum assured. These cost-effective plans ensure that the policyholder receives maximum benefits from the plan.

Group Term Insurance Plans:

These policies are generally offered by an employing organization, association, trusts or societies to a group of individuals. These policies provide coverage to each member insured under the plan. These plans are comparatively less expensive than the individual term insurance plans. The benefits offered by such plans are more or less similar to those of individual plans. However, the coverage for such policies expires the moment the employment or the membership ends.

A group term insurance plan, as the name rightly suggests, is meant for being used by a group to secure its members against adverse occurrences. Any group of people or companies can take up such plans for their employees. However, the policies may have one essential clause or mandate established by the insurer where the policy would require a minimum number of participants. For example, if the terms of a particular policy claim that at least 20 people should participate, then a small company with less than 20 employees will not be able to purchase the policy. Here are some features of group term insurance plans:

• Limited coverage - Group insurance schemes have similar benefits as individual policies but the list of diseases is much more exhaustive in individual plans. The coverage of group plans is limited on the basis of factors like time of membership, the number of dependents, annual salary of the policyholder, etc.

• Easy to participate in - Most of the group term plans are easy to secure. If someone wishes to be a part of a group term insurance plan through his/her employment, then a simple form can be submitted to the employer for the same.

• Medical underwriting is not required - The members of group policies are normally not required to go for medical check-ups to get coverage since the insurer pools the risk of all members and then adequately prices the risk.

• Policy ownership - The owner of the policy (the employer/other entity) retains the original insurance policy or the master contract. The 'members' covered under the plan receive a certificate of the insurance, which is not the actual insurance policy but a proof of the insurance.

• Riders - The coverage of group insurance plans can be increased through by using riders. Insurance companies often offer riders like accidental death benefit rider, critical illness rider, partial and permanent disability rider, etc.

Convertible Term Plan

Such plans allow the policyholder to convert the policy into a permanent policy during its tenure. Some insurers offer this facility as an additional benefit rider. Some insurers offer it as a standalone plan. As long as the terms and conditions are met, one can easily convert a term life policy into a permanent policy. Here are the main features of convertible term insurance plans:

• Convertible insurance plans generally have higher premiums due to the built-in costs for the conversion facility. Even before the policyholder converts a term insurance policy into whole-life insurance, the plan will seem more expensive. However, the coverage offered by the two will be more or less similar.

• An advantage of a convertible term insurance policy is that the policyholder is not generally required to undergo a medical examination while switching the policy from term to permanent. This is particularly beneficial because if the health of the policyholder has deteriorated after buying the convertible plan, the person will still be able to get whole life coverage which wouldn't be possible otherwise.

• If the policyholder makes timely payments for all premiums, he/she may keep the policy active with the option of converting it later on in life.

• One should buy a convertible policy in case they are unable to afford a whole life insurance policy at the moment. In the future, even when the person is able to buy a whole life insurance, their health may disqualify them from doing so. On the other hand, by choosing the affordable insurance policy, one can create a path to the lifetime conversion option in case the insurance needs and the health condition changes over time.

• While buying convertible insurance, one must ensure that they are aware of the timeframe within which they should convert the plan. Such customers should also keep an eye on the investment aspect of the plan.

• For a convertible term insurance policy, each year that one waits to convert makes the conversion rate shoot up by 10%-15%. This is mainly because one will move up into higher rate bands as they grow old. If someone is sure that they will go for a conversion, it is better to do it while the policyholder is young and within a low rate band.

TROP

TROP or Term Return of Premium plans are like standard term life insurance policies, but with a slight variation. The difference lies in the manner of providing survival benefits. In the case of TROPs, on survival, policyholders get back the total amount of premiums paid, excluding tax. This method ensures that the funds spent on the policy are returned to the policyholder after a specific interval. Here are the features of TROPs:

• Similar to regular insurance plans, TROPs offer a refund of the total amount of premium paid upon the policy’s maturity if the policyholder survives till the maturity.

• TROP plans generally allow policyholders to add riders or additional benefits to their existing policies to increase the coverage.

• TROPs have a slightly higher amount of premium as compared to the regular term insurances, owing to the premium repayment facility.

• TROPs offer tax benefits on the premiums paid.

• Some insurers offer returnable TROP plans - if the policyholder decides to discontinue the payment of the premiums and return the plan, the premiums already paid will be returned. However, the amount will be subject to certain deductions for medical examination costs and charges for stamp duty. The insurance advisor must be approached for clarity before investing in a TROP plan.

• The policyholders have the option of stopping the premium payments towards TROP plans after a predefined duration, normally three years. The policy is then moved into 'paid-up' status. The death and maturity benefits, in such a case, will be reduced by a proportion of the total premium paid to the total premium payable under the plan.

However, before investing in a TROP policy, one must keep the following in mind:

• A customer must read all the policy-related documents very carefully to understand the inclusions and exclusions under the policy.

• In case of an unforeseen event, the sum assured by the plan should be adequate to help the family survive the tough phase. Therefore, the plan coverage must be chosen judiciously.

• Customers should buy insurance from a reputed company. There are many players in the private and public market and customers must not fall for marketing messages or advertisements. Instead, one should use their best discretion while selecting the insurance provider.

• People looking to buy a plan should compulsorily check the claim settlement ratio of the concerned insurance company and also ensure that the company has a good customer service department or grievance cell.

• Before finalizing a plan, people must understand the premium payment frequencies and the flexibilities offered by the scheme to be well-equipped to make the purchase.

Joint Term Insurance Plans

These are schemes that allow the person insured to include his/her spouse under the coverage of the same policy. This comprehensive financial protection solution provides multiple benefits for couples and ensures that family stability remains intact in times of hardships. These policies are conducive for married couples who have dependent children. These are the main features of joint term insurance plans:

• Some of these plans pay out on the grounds of the first claim, implying that in case of the death of one of the members, the sum assured is paid out and the policy is ended immediately.

• Some of these plans offer payment in case of the death of both the insured members.

• Some of these policies offer a payout to the surviving member of the policy at the first death. The surviving member receives a regular payout as an income for a fixed duration.

• These plans offer tax benefits on premiums paid as well as on the payouts received.

• Some of such plans provide additional payments in case of accidental deaths while some have inbuilt terminal illness coverage.

Online Term Insurance Plans

The digitally advanced modern world has created significant changes in every dimension, especially in the way of conducting business transactions these days. Most insurance companies now offer term life insurance policies online without involving mediators. All the relevant information related to the policy is hosted on the website of the insurance company. Customers can readily find all the required information on the websites, compare various schemes and accordingly choose the best-suited plan.

How to Choose a Term Insurance Plan?

The insurance market is swamped with various options for term insurance policies, with varying terms, benefits and amounts assured. It might be difficult to browse the excessive data available and make the correct choice.  A customer must understand which policy fits him/her best and meets their requirements. The following points can help one in choosing a term insurance plan:

Reliability: While choosing an insurance policy, customers must consider the insurance company’s reputation. A term insurance policy is a long-term investment. Policyholders should not be fall in trouble in the case the company ever shuts down or meets with some difficulty. It is advisable that customers check the company’s FICO score to gauge its stability and reliability.

Claim Settlement Ratio: An insurance company’s claim settlement ratio indicates the number of claims settled by the company out of every 100 claim requests received. Companies that have a high claim settlement ratio are more reliable. They are undoubtedly more preferable than the others because a higher settlement ratio is favorable. The claims settlement ratio of all insurance companies is published each year by the IRDA.

Riders: The riders are add-on benefits provided by the insurance companies in addition to the regular policies. One must consider these riders while selecting a policy because a policy which provides basic coverage, as well as additional benefits, is much more secure. Moreover, insurers providing a wide range of riders are believed to be better.

Cost: The amount to be paid as a premium for the protection offered is another key factor in choosing a term insurance policy. These policies typically have a tenure of up to 20 years. Thus, the amount that is paid annually as the premium is highly significant. Companies that offer generous protection for low premiums are preferable.

Inflation: Term insurance policies usually last for 10-20 years. Inflation can erode the value of the INR and result in lower returns during maturity. Therefore, inflation is another important factor to be considered while selecting a term insurance policy.  In order to stay in line with inflation, consider the plans in which the cover increases by 5-10% annually.

Policy comparison: Potential buyers must always compare insurance plans online in order to get a clear idea of the options available. Many neutral third-party financial websites offer the facility to compare the available policies offered by various companies.

Engage an insurance advisor: If you feel that you are not able to select a plan by yourself, seek the aid of an insurance advisor. Expert insurance advice and suggestions will enable you to select the right policy.

Policy terms and conditions: All potential buyers must read the terms and conditions of the policy thoroughly before committing to it. One should understand the minute details regarding the inclusions and exclusions under the plan so as to avoid confusions in the future.

Eligibility Criteria - Term Insurances

All potential buyers should meet the eligibility criteria in order to purchase the policy. The following decides the eligibility:

• Policyholders should be at least 18 years old while purchasing the plan.

• The tenure of the policy decides the maximum entry age.

• The maximum age of the policyholder at the time of maturity can be 75 years; however, this could vary from one insurer to another.

• The minimum age for maturity is determined based on the minimum tenure offered and the minimum age at entry.

• The sum assured is another factor in determining the eligibility as many plans have a fixed minimum sum assured.

• Some insurers may ask the customers to undergo a medical check-up before taking the policy.

Documents Required for Term Insurance

All insurance companies require a set of relevant documents while customers apply for term insurance plans. These are the documents that most insurers ask for. They might differ from insurer to insurer.

• PAN card

• Identity Proof (passport, Voter ID card, Aadhaar card, driving license, a letter from a public servant or an authority verifying the person's identity)

• Age Proof (passport, birth certificate, driving license, school leaving certificate, PAN card, etc.)

• Address Proof (utility bills, ration card, bank account statements, Voter ID card, passport, etc.)

• Income Proof (Income tax returns, Income Tax assessment order, employer’s certificate)

• Recently clicked passport-sized photos.

Term Insurance Premium Calculator

Insurance companies that provide term insurance are often asked many questions regarding the premium amount for a particular policy. As the premium amount is essential for choosing a policy, many companies have a premium calculator on their websites which enables the policyholders to estimate the premium they'd be paying for specific policies. The premium calculator is available for all individuals who wish to get an estimate of the premium that needs to be paid.

The premium calculator for most of the insurance companies asks for details such as your gender, birth date and whether you smoke or not. The coverage amount that you require must be entered as well.

Premium amount that needs to be paid will be displayed on the screen after you have filled in all the details. The premium amount is estimated based on the maximum policy term given by the insurer.

Any additional benefits incorporated as part of the policy is displayed below the due premium amount. Some insurers offer an estimate of the total premium amount payable based on the insurance plan selected and the type of plan and coverage it provides. The premium calculator is a unique way for individuals to get an estimate of their premium contribution if they want to opt for a specific term insurance policy.

Exclusions for Term Insurance Plans

Term insurance schemes cover a list of distinct events and circumstances. The list can be exhaustive depending on the chosen plan. However, there are several exclusions that the term insurance policies don't cover.

The exclusions are listed below:

Suicide: Suicide is an exclusion in every term insurance policy. Insurers won't pay the dependents if the policyholder commits suicide within a year of buying the policy. If the policyholder purchased group insurance and committed suicide, he/she still won't be eligible for compensation.

Death due to war, terrorism or any natural calamities: Death caused due to natural calamities and war or war-like operations aren't covered under term insurance plan as well.

Death due to actions by the insured: Accidental death caused due to the negligence of the policyholder (such as participating in extreme adventurous sports) isn't covered since these are viewed as voluntary risks taken by the policy owner.

Death due to intoxication or narcotics: If the policyholder dies due to consumption of alcohol or narcotic substances, the insurance company isn't liable to compensate for the dependents of the policy owner.

Term Insurance Claim Procedure

If the assured policyholder passes away, their dependents are required to file a claim to receive the sum assured. The claim procedure is usually considerably simple and easy to follow.

Follow this step-by-step guide to file your term insurance policy claim:

Step 1: Inform the Insurer About The Claim

The first step for filing a claim requires you to intimate the insurance company regarding the claim. You should contact your insurance provider through any of the channels available, i.e., phone, email or by visiting the nearest branch. After you've informed the insurer regarding the claim, the claim settlement procedure is initiated.

Step 2: Submit Required Documents

After informing the insurer about the claim, you'll be required to submit the requisite documents to support your claim. Documents that are usually required for supporting a claim include the policy document, proof of filing the claim, the death certificate and medical records of the policyholder. You might be required to submit additional documents for further verification of the claim.

Step 3: Claim Settlement and Payout

The final step of the claim process is the decision concerning the claim and subsequent claim settlement. After you have submitted the necessary documents to the insurer, the claims department verifies the documents and the claim documents before deciding on the settlement. The insurance company would honor the claim if everything is in order and they can also deny it if there is a disparity in the documents provided by the policyholder.

Term Insurance Renewal Process

When your term insurance policy is close to expiry, you must ensure that you renew it on time. Term insurance policies can be easily renewed online with a few clicks. Some basic steps involved in the renewal process is described below:

Review your policy

The initial step of the renewal procedure is to review the current insurance policy. This could give you a chance to review the cover and discounts offered by the policy and make the necessary changes. Since many of us might not use our insurance cover for a long time, it is essential to make changes to your cover as your priorities change.

Provide policy details

Visit the official website and click on the 'Policy Renewal' tab. After you have clicked on the tab, you'll be asked to give your policy details such as your date of birth, policy number, name, etc.

After completing this step, you'll be required to confirm the information that you have given.

Make the payment

The final step of the renewal method is to make payment of the policy premium. These days, you can make the payment for policy renewal through many channels such as cheque, by credit card/debit card, ATM, SMS, online banking, mobile wallets, bank collection centers, bank auto-debit facility or at your nearest branch.

How Much Term Insurance Do I Need?

No set formula can be applied to answer how much insurance is enough. However, the closest we can get to the answer is to take into consideration the factors which have the highest impact on the sum assured. These factors include things such as how much you can afford to pay as the premium, what is the adequate sum assured for you and your family and whether it's available.

Points to Remember about Term Insurance Plans

Purchasing a term insurance plan is the most economical way of safeguarding yourself and your dependents. There are multiple benefits and features linked with term insurance policies which make such policies stand out from the rest of the insurance alternatives. Let’s take a look at the must-know features of term insurance policies.

An economical approach to financial security

Most of the insurance companies provide term life insurance plans at competitive premium rates since these plans offer coverage only for a fixed duration.

These policies are cheaper since most of the times, the insured survives through the policy term and the company doesn't pay anything in return. However, with TROP the premiums paid are returned if the policyholder survives. A simple term insurance plan can be compared with a vehicle insurance policy that compensates only when the policyholder meets with an accident.

Term insurance plans can offer better returns on investment

Even though term plans are opted extensively by groups and individuals worldwide, a significant few are still reluctant to purchase it because of zero returns on the survival of the policyholder. However, some insurance companies provide a Term Return of Premium (TROP) schemes, under which the insured person is paid all the premiums that he/she has paid during the policy tenure. Usually, TROP schemes are valued higher than normal term-insurance plans.

Monthly income for the dependents

At the time of application, buyers can judge whether they should pay the death benefits as a lump sum or in installments to the nominee. However, if the nominees decide to take the entire amount as a lump sum, they can get the same at a reduced value.

Enhancement of insurance coverage

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

Choose your premium term and policy term

Your term insurance plan enables you to choose the tenure during the inception of the policy. It’s an outstanding feature which helps you to select the plan based on your financial position. This specific feature of term plans makes it a better risk management planner for debts and loans.

Factors Which Affect Term Insurance Premium

There are many factors which affect the premiums quoted on your policy. Some of the factors are listed below

Age: Age plays a significant role in the premium you pay for your policy. The lesser the age of the policy owner, the lower is the premium paid. Premiums keep increasing as you grow older. It's always recommended to purchase a life insurance policy when you're young.

Medical History of the Family: If your family has the medical history of critical illness such as cancer, diabetes, then you'll be considered to have a higher risk as compared to people who don't have a family history of any life-threatening condition. A high-risk applicant is charged higher premiums as compared to a lower-risk person.

Your health: Insurers also consider the state of health of the applicants when they apply for the policy. If you've been suffering from any chronic ailment in the past or if your prevailing medical condition indicates future health issues such as high blood pressure, your policy premium rates could get affected. Applicants who are healthy are usually required to pay lower premiums.

Weight: Obese or overweight people need to shell out more premium payments since they have higher chances of acquiring medical issues in the future.

Smokers: Non-smokers are usually eligible for discounted policy premium rates as compared to smokers. This is because smokers experience a higher risk of cancer or other health hazards as compared non-smokers.

Alcohol consumption: Just like smoking, alcohol consumption can also lead to health issues. Which is why, insurers usually inquire about the applicant's lifestyle during the application process since heavy alcohol consumption is linked to many health complications, which increases the applicant’s risk for claiming the insurance.

Lifestyle habits: People who indulge in high-risk adventure sports for leisure are considered to be high-risk applicants and they are required to pay higher premiums. However, several insurers have designed policies which cover the loss/damages caused due to such activities.

Applicant’s Gender: Insurance companies usually offer lower premium rates for women applicants as compared to men. This is because women typically have longer lifespans as compared to men.

How To Buy Term Insurance Online

Buying a term insurance plan has become easier than ever. With the internet, you can buy your term insurance easily. Term insurance, like other types of insurance, can now be bought online. While the process of buying term insurance online could differ amongst different companies, the general procedure is as given below:

• Log in to the insurer’s website and click on the tab/links which read term/life insurance. You must ensure that the insurer you have selected offers insurance plans.

• After you click on the term insurance tab, you'll be required to provide details such as the sum assured, the preferred policy tenure and the tenure for which you wish to make premium payments.

• After entering your preferences, the website will show the policy premium amount based on the data.

• If you are pleased with the premium amount, you can select the bank and make payment for the premium.

• After you have made the payment, you'll receive an acknowledgment receipt.

• The insurance company should ideally respond to your application within 1-3 weeks for informing you regarding your application status.

• If the application is accepted, you'll be sent the policy document online through the mail and a hard copy of the policy document is sent to your registered address.

Why is Term Insurance Important?

Term life insurance plans are also known as protection plans. These insurance plans have become popular in the last few years due to the benefits offered by them. Here are some reasons why term insurance are essential:

Offer risk cover: Term insurance plans are classified under pure risk cover plans since they offer protection for the death of the policyholder. Protection is offered in the form of death benefit and there's usually no maturity benefit linked with term plans. While many people might consider this an undesirable expense, these plans also offer much needed financial support to the dependents if the policyholder dies.

Term insurance offers affordable protection: Term insurance offers risk cover at a highly affordable price. These days, you can get 25-year term insurance for a nominal premium amount of Rs.2508 per annum, this can offer you a risk cover of up to Rs.10 lakhs. Buying term insurance online can cut costs further.

A must-have for sole income earners: Term insurance plans are of invaluable importance for the sole income earners. If the policyholder, who is also the sole earning member of the family dies his/her dependents face the financial brunt. With the help of term insurance, families of such individuals won't become financially volatile after the demise of the policyholder. The benefits offered by the term insurance serves as a financial cushion for taking care of the immediate expenses.

Dependents are protected from short-term liabilities: When the sole income earner dies, the family members or dependents often feel the brunt of liabilities of that individual. With the loss of the single earning family member, finances can get affected adversely. The benefits assured by a term insurance plan could help the dependents in paying off imminent loans or debts such as home loans, tuition fees, personal loans, car loans, etc.

How To Select The Correct Tenure for a Term Plan

One of the main reasons why term plans are preferred over different types of insurance plans is that it provides affordable coverage and the tenure is flexible. But how can you decide the tenure of the policy? The right term for a term plan differs from individual to individual, depending on their financial situation. While deciding the tenure of a term insurance plan, you should consider the financial liabilities that your family might have to face if you die and how long it would take for such liabilities to be paid off. Some of the main factors that you need to acknowledge while selecting the tenure of your term insurance plan are:

Liabilities: Liabilities can occur in many forms and they must be paid on or before the time for avoiding penalty. When you select the tenure for your term insurance, it is desirable to consider the time you'll take to pay off such liabilities.

Commitments or Dependents: If you have dependents such as financially dependent children, the tenure of your plan should ideally be of the duration till your children can support themselves. You must also take into account milestone life events such as weddings or starting a new career while determining the term of your policy. Ideally, these events should fall within the term of the policy so that if you aren't around to financially provide for your family.

Affordability: Long-term plans are relatively more expensive than short-term insurance schemes. While choosing the tenure of your plan, you should first consider whether you are financially comfortable paying the premiums over an extended period or not. Long-term plans offer coverage for a longer duration but are more expensive as compared to the short-term plans. Short-term plans are comparatively more affordable and also provide extended coverage.

Whole Life vs. Term Insurance

Term insurance is a type of life insurance where the insured pays premiums for a fixed term. If the insured dies before the tenure of the policy, the beneficiary can receive the death benefit. Term insurance policies are also classified as pure life insurance policies since they only offer protection. On the other hand, whole life policies are comprehensive life insurance policies where the policy cover extends until the insured person dies. Whole life policies also offer survival and maturity benefits, in addition to death benefits. These policies sometimes offer premium investment options as well.

Term Plan Vs. Endowment Policy Vs. ULIP:

The features and benefits of term plans, endowment policy, and ULIPs are listed and contrasted below:

• The premium for a term plan for a sum assured of 1 crore is about Rs.9,000 whereas, for endowment plans, it is higher. ULIPS usually don't offer a fixed sum assured.

• Premium payment options are identical for all the insurance plans.

• While ULIPS have an inherent risk because of the investments made in equity and debt markets, term insurance plans are considered to be safer as compared to ULIPs.

• If you choose term insurance which has a Return of Premium option, then after the policy matures, you can get 100% of the premium back.

Term Insurance FAQs

Does every insurance company offer riders?

No. Riders are offered at the discretion of the insurance company so it can differ for different insurance companies.

Can I take more than one term insurance plans?

Yes, you can take more than one term insurance plans.

What if I want a sum assured that is over ten crores?

When the sum assured is high, the decision of providing the policy rests with the insurance company.

Are there any circumstances under which my claim could be rejected?

Yes. If your claim falls under the exclusions mentioned in the policy document, the claim won’t be honored by the insurance provider.

What are some of the exclusions?

The exclusions of the policy are listed below:

Suicide

Suicide is an exclusion in every term insurance policy. Insurers won't pay the dependents if the policyholder commits suicide within a year of buying the policy. If the policyholder purchased group insurance and committed suicide, he/she still won't be eligible for compensation.

Death due to war, terrorism or any natural calamities

Death caused due to natural calamities and war or war-like operations aren't covered under the insurance plan as well.

Death due to actions by the insured

Accidental death caused due to the negligence of the policyholder (such as participating in extreme adventurous sports) isn't covered since these are viewed as voluntary risks taken by the policy owner.

Death due to intoxication or narcotics

If the policyholder dies due to consumption of alcohol or narcotic substances, the insurance company isn't liable to compensate for the dependents of the policy owner.

What do insurers mean by healthy lifestyles?

Healthy lifestyle refers to the condition where the policyholder doesn't indulge in activities that could be harmful to their health.

What are the benefits that I get for assuming a healthy lifestyle?

You can avail special discounts on the insurance policies if you have a healthy lifestyle

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

Yes. Even if you are an NRI, you can still acquire term insurance coverage.

Does the term insurance have a free-look period?

Yes. Term insurance also offers a free-look period of 15 days. If you're not satisfied with the insurance policy, the premium amount will be refunded by the insurance company.

Do I need to pay penalties if I fail to make the premium payment?

Late payment policies might differ amongst different companies, but generally, if payments are made within the grace period, the insurance company doesn't charge any interest.

What is accidental death benefit?

The accidental death benefit is an add-on to term insurance policies. With this add-on benefit, the dependents will receive a fixed amount of money if the policyholder dies due to an accident.

What is the age limit for a term insurance policy?

Different insurers and policies have distinct age limits for term insurance policies. The age limit usually ranges from 55 years to 70 years.

What is the monthly income paid out to the dependents under term insurance?

The Sum Assured depends upon the policyholder’s monthly income after taxes. The death benefit paid out is usually 12 times the monthly income. This amount is inflated at 5% throughout the tenure of the policy.

Do I need to declare myself a smoker at the time of applying for the policy if I smoke occasionally?

If you have smoked even once in the last year, you must declare yourself a smoker while applying for a term insurance policy. If you don't declare yourself as a smoker, you have the risk of losing policy benefits.

How can I cancel my insurance policy?

Canceling your insurance policy could be done by informing the insurer within fifteen days of the commencement of the policy.

What is the eligibility criteria while applying for term insurance?

To be eligible for applying for term insurance, the individual should be:

• An Indian citizen

• Above 18 years old

• Must have the ability to pay the premium amount

Can I transfer my term insurance plan to a different insurance company during the policy term?

No, you can't transfer your term insurance policy to another insurance provider during the policy term.

Can the dependent/nominee re-apply for a claim if it has been rejected already?

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

What is a term insurance policy?

Term insurance is a type of insurance availed for a specific time or a fixed term. Unlike other types of life insurance policies, term insurance policies are less expensive as they do not have any cash value. Term insurances are useful and beneficial only if the policyholder expires within the timeframe when the policy is still active.

What are the primary reasons for buying a term insurance plan?

A few common reasons for buying a term insurance plan are listed below:

• Offers financial protection to the family

• Covers for your liabilities

• Can be availed easily and is highly affordable

• Offers tax benefits

Should I choose a term insurance plan even if my employer already provides insurance?

Yes, it is recommended that you get a term insurance plan even if your employer gives you insurance coverage. This is because the insurance cover provided by your employer expires after you change the job.

What are the documents necessary for buying term insurance plans?

The following documents are required for buying term insurance plans:

• Age Proof

• Residence Proof

• Photographs

• Identity Proof

• Salary Proof

What are the maturity benefits provided under term insurance schemes?

Except for TROP plans, term insurance plans don't offer any maturity benefits.

Can I get a loan on my term insurance policy?

No, the policyholders aren't eligible for loans since the policy doesn’t come with maturity benefits and it doesn't attain its surrender value.

What happens when moving to a different country a few years after choosing the plan?

The term insurance plan remains active even when you move to a different country. However, you should inform the insurance provider about the change in address.

Is there any advantage to purchasing a term insurance plan when the applicant is young?

Usually, term insurance plans can be availed at lower prices for young people.

How Can I renew my term insurance plan?

When your term insurance policy is close to expiry, you must ensure that you renew it on time. Term insurance policies can be easily renewed online with a few clicks. Some basic steps involved in the renewal process is described below:

Review your policy

The initial step of the renewal procedure is to review the current insurance policy. This could give you a chance to review the cover and discounts offered by the policy and make the necessary changes. Since many of us might not use our insurance cover for a long time, it is essential to make changes to your cover as your priorities change.

Provide policy details

Visit the official website and click on the 'Policy Renewal' tab. After you have clicked on the tab, you'll be asked to give your policy details such as your date of birth, policy number, name, etc.

After completing this step, you'll be required to confirm the information that you have given.

Make the payment

The final step of the renewal method is to make payment of the policy premium. These days, you can make the payment for policy renewal through many channels such as cheque, by credit card/debit card, ATM, SMS, online banking, mobile wallets, bank collection centers, bank auto-debit facility or at your nearest branch.

What are the factors which affect term plan premiums?

Term insurance premiums are affected by the applicant’s age, family’s medical history, health condition, weight, lifestyle habits such as smoking, alcohol consumption, gender etc.

Can I purchase term insurance online?

Yes, many insurers have an online presence. Many insurance providers also let their customers renew their policies online.

How Can I buy insurance online?

To purchase insurance online, you need to visit your insurer's website and provide details such as your sum assured, term etc. You can use the premium calculator on the website to estimate the premiums that you will be required to pay. After you have selected your preferred premium, you can proceed to make the payment. You'll be receiving an acknowledgment of the payment after making the payment. The approval usually takes three days.

Are terrorist attacks covered under the term insurance plans?

Yes, term insurance plans generally offer coverage against death caused after a terrorist attack. However, the extent of coverage may differ from insurer to insurer. You can check with your insurance company regarding this kind of specific coverage.