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7 Things to Expect from your Term Insurance Plan


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July 29, 2021

By : Bajaj Allianz Life

A term insurance plan is one of the most important investment options that every individual should consider investing in. It helps account for life’s uncertainties by ensuring that the policyholder’s family stays financially protected even when they’re no longer around. However, many individuals still seem to be on the fence when it comes to buying term insurance.

If you’re one among them, getting to know what term insurance is all about can help you understand its relevance. So, here’s an overview of what you can expect from a typical term insurance plan.

 

7 things to expect from your term insurance plan

 

Term insurance benefits are many and varied. Here, we’re going to be taking a look at some of the most important things that you can expect from your term plan –

 

1. Financial support for your family

 

Being a life insurance product, a term plan is designed to offer financial support to the family in the event of the life assured’s demise. The lump sum pay-out, known as the death benefit, that the nominee receives from the insurance company can be used to meet their expenses or satisfy their life goals. Thanks to this financial backup, the policyholder and their family can rest assured that their lifestyle is secured and won’t be impacted whatsoever.

 

2. Simple to understand

 

A term insurance policy is one of the simplest financial products currently available to an individual. The concept of a term plan is extremely easy to understand. You get into a contract with an insurance service provider, where you receive a life cover in the form of a death benefit for a specific period of time.

The death benefit is a predetermined lump sum of money that’s paid out to your nominee in case the insured event occurs. And in exchange for the life cover, you’re required to make periodic payments, known as premiums, to the insurance service provider.

 

3. Low and affordable premiums

 

A term plan is one of the most economical and affordable life insurance product in the market. The premiums that you’re required to pay to the insurance service provider under a term insurance plan are cost-effective, making it easy to fit into your monthly budget.

You also get more bang for your buck too. If you’re a young, healthy individual in your 20s with no smoking habits, you can get a life cover of Rs. 1 crore for as low as a few hundred rupees a month. This makes a term plan more nominal than most of your monthly expenses.

 

4. Hassle-free purchase process

 

While it may seem quite daunting at first glance, purchasing a term plan is quick and easy. In fact, you can buy a plan online from the comfort of your own home within just a few minutes. Since the application process is completely paperless and can be done without having to physically visit a branch, you get to save a lot of your time and energy.

That’s not all. The premiums for term plans that are purchased online tends to be lower than the ones purchased through the offline mode.

 

5. Flexible tenure and payment options

 

One of the major advantages of a term insurance plan is the amount of flexibility that it comes with. It can be fully customized to fit the varying needs and requirements of policyholders. For instance, you get freedom to choose the policy tenure depending on the terms of the product. In addition to that, you can customize the premium payment frequency as well.

You can opt to pay your premiums on a monthly, quarterly, half-yearly, or annual basis, in accordance with your payment capacity. With almost all term insurance plans, you also get the option to pay premiums for just a limited period of time instead of for the entire policy tenure.

 

6. Option to upgrade using riders

 

The customizability factor of term insurance plans don’t just end with the tenure and the payment options. It also extends to the insurance coverage. The life cover of a term plan can be upgraded or enhanced beyond the basic sum assured through the use of add-on riders at nominal extra cost.

For instance, if the death benefit of a term plan is Rs. 1 crore, you can enhance it further by opting for an accidental death or disability add-on rider. In the event of an accidental death, the base sum assured of Rs. 1 crore and an additional sum assured under the accidental death or disability add-on rider is paid to the nominees.

That said, the premiums usually tend to go up if you opt for an add-on rider. And so, it is a good idea to use a term insurance calculator to find out just how much you would have to pay to the insurer before deciding to purchase a plan.

 

7. Tax benefits

 

The premiums that you pay towards a term insurance plan can be claimed as deductions under section 80C of the Income Tax Act, 1961 to the tune of Rs. 1.5 lakhs in each financial year, subject to conditions stated therein. This can help reduce your overall taxable income and therefore lead to lower taxes. Also, the death benefit that your family receives is also exempt from taxation under section 10(10D) of the Income Tax Act 1961, subject to conditions stated therein.

 

Conclusion

 

Now that you’re aware of the things that you can expect for a term policy, you may go ahead and purchase one for yourself right away. However, before investing always remember to use a term insurance calculator to determine the amount of premium that you would have to pay.

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2Above illustration is considering Male aged 25 years | Non-Smoker | Life Cover Variant | Policy term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | medical rates | Annual Premium Payment Mode | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only.

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The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.