When it comes to safeguarding yourself and your family against the uncertainties of life, there is little you can do. Life insurance, however, is one way to ensure that your loved ones can remain on the right track to fulfil your life goals even in your absence. Term insurance, which is the most affordable kind of life insurance, is a preferred choice for people looking for a purely protective cover. If you are unsure of how to get started and buy term insurance online or offline, this guide can help you out. To make things clear, let us begin with one of the most fundamental things you should know - term plan meaning.
A term plan is an affordable life insurance policy that helps you secure the financial future of your family. When you opt for a term policy, your nominees are eligible for a death benefit in the event of your unfortunate demise during the tenure of the plan. That is the central idea behind the term plan meaning. Now that you have understood this basic premise, let us move on to discuss why term insurance is important.
Why should you buy term insurance?
The primary reason to buy term insurance is to protect your family in case something untoward happens to you. If you are the main or the sole breadwinner in your family, chances are that your loved ones may not have the financial support needed to fulfil their life goals in your absence. A term plan can help you ensure that this need is met, since the death benefits paid out by the insurance company can help your family tide over those tough times.
Additionally, here are more reasons why you should buy term insurance online or offline -
• A high life cover for affordable premiums
Life insurance premiums for term plans are the most affordable, since they are pure life covers. In addition to this, term plans also offer high amounts of sum assured, effectively giving you the advantage of a high life cover for low, affordable premiums. The earlier you purchase a term plan, the lower your premiums tend to be. Therefore, that is another reason to buy a term plan.
• Tax benefits
Term insurance also offers tax benefits to the policyholder. The premiums you pay for the term plan are deductible from your total taxable income up to Rs. 1,50,000, as stated under section 80C of the Income Tax Act, 1961. Moreover, the death benefits are also exempt from tax, subject to the provisions of section 10(10D) of the Income Tax Act 1961. The above exemptions and deductions are subject to the provisions contained in the Income tax Act 1961.
• Income replacement for your family
In addition to helping your family attain their life goals in your absence, the payouts from the insurance company can also act as a source of income replacement for your nominees. This can help them fulfil not only their major life goals, but it also takes care of their day-to-day requirements in your absence.
How do you calculate the desired term insurance coverage?
Before you buy term insurance online or offline, you need to know how much of a life cover you require to purchase. Term insurance coverage is not a one-size fits all concept. Therefore, if you are looking for the factors to take into account before you calculate your coverage, here is what you need to consider -
• Your age
The premium charged for a term plan is lower when you are younger. Therefore, generally, if you purchase a term plan early in life, you have the luxury of purchasing a desirable cover.
• Your family’s expenses
The ultimate goal of a term plan is to secure your family’s financial future in your absence. Therefore, your term insurance cover should be adequate to meet your family’s annual expenses later in life.
• Your family’s life goals
Even in the unfortunate event of your demise, you will want your loved ones to continue with their life goals. For this reason, you need to factor in the goals they have and get an insurance cover that is sufficient to meet those life goals.
• The term insurance premium
The term insurance premium can also be influenced basis the amount of cover you purchase. Higher covers naturally mean more premiums. So, ensure that you are capable of meeting the premium costs for the cover you purchase. That way, the risk of policy lapse reduces.
So, now that you know what factors influence your insurance cover, how do you go about calculating the desired coverage? Well, one of the easiest ways to do this is to use a term insurance calculator.
A term insurance calculator helps you determine the estimated amount of insurance cover that you need to meet your needs. You need to go through the following steps to calculate the desired coverage for yourself and your family –
1. Enter your Age
2. Enter your annual income, which reflects your earning capacity. Your annual income helps the tool calculate the right insurance amount for you.
3. Next, you will need to account for the number of working years you have ahead of you. This could be a rough estimate of the number of years you plan to work for in the near future.
4. The term insurance calculator also takes into account the percentage of your income that you spend on yourself. This helps the tool get a fair idea of the amount you and your family will need to sustain the quality of life later in life.
5. After this is done, you need to enter the details of the estimated increase in your income each year. It is best to have a conservative estimate here.
6. With these details, you can use the term insurance calculator to calculate your required term insurance coverage.
This way, you can calculate the insurance cover you need. Once you have figured that out, you will need to make a choice between the different types of term plans available. To make a smart decision here, you need to first understand what the types are.
Types of term insurance plan in India
Depending on the premiums and the sum assured, these are the different types of term insurance plans in India.
• Level term insurance plans
Level term insurance plans, which are the most commonly availed type of term plans in India, come with fixed premiums throughout the term of the policy. The sum assured also remains fixed here.
• Increasing term insurance plans
In an increasing term insurance plan, the sum assured increases every year by a predefined percentage. There would not be any increase in premiums during the policy term.
• Decreasing term insurance plans
A decreasing term insurance plan is based on the loan tenure; your liabilities tend to decrease. Therefore, the sum assured decreases across the term on a predetermined basis. The term insurance premium, however, remains constant.
• Term insurance with return of premium plans
While regular term plans do not offer benefits for survival of the maturity period, these term plans with the return of premium feature provide benefits to the insured person if they survive the term of the policy. In case of survival, the premiums paid are returned to the policyholder, subject to the deduction of applicable taxes.
You can buy the term plan of your choice based on the details mentioned above. After choosing your base plan, you may also want to add a term insurance rider to it at a nominal extra cost. Let us see what riders are.
Term insurance riders
Riders are an add-on to the basic term policy, and they provide additional benefits at a nominal additional cost. Adding riders to your term plan gives you additional benefits during contingencies like critical illness or disability. Here is a preview of some popular riders.
• Accidental death benefit rider
Here, an additional sum assured under the rider is paid out over and above the base policy sum assured if the policyholder loses his/her life in an accident.
• Critical illness rider
This rider ensures that the life assured receives a lump sum amount upon diagnosis of a critical illness covered under the rider, so they can get the medical treatment needed to treat the illness.
• Waiver of premium benefit rider
If a policyholder is unable to pay the premium due to any contingency such as death, critical illness or permanent total disability due to an accident after purchasing the policy, this rider ensures that all future premiums are waived off.
• Accidental permanent total/partial disability rider
Here, a sum is paid to the life assured in the case of a permanent/ total or partial disability arising from an accident.
Step by step guide to buy term insurance online
Now that you know all about the types and the riders for term plans, you are perhaps curious about how you can buy term insurance online. The process is quite simple and quick. Here is a systematic guide –
Step 1. Log in to the insurer’s website
The first step to buy term insurance online is to log into the online portal of the insurer. If you do not have an account yet, start by signing up.
Step 2. Submit the required details
Next, you need to submit all the relevant information like the sum assured needed, the term of the policy, and the duration of premium payment. Additionally, you also need to enter personal information like your date of birth, gender, and annual income etc.
Step 3. Choose the variant of the plan
If your insurance company offers varied options under a single product, then you will need to choose from those alternatives based on your specific needs. For instance, there may be different premium frequency variations like annual, semi-annual or monthly premium payments.
Step 4. Submit the documents needed
You will then need to submit certain essential documents to complete the process. These include your ID proof, age proof; address proof, and your recent passport size photographs. The soft copy of these documents can be submitted online.
Step 5. Pay the premium
You can then proceed to pay the premium, which is the final step in buying a term plan online. Most insurers offer different payment options like debit or credit cards and internet banking.
Benefits of buying term insurance online
Buying term insurance online is easy. It is also extremely beneficial in many ways. Here is a closer look at some of the benefits of buying term plans online.
• They are more affordable due to the savings on distribution cost, documentation, logistics, and stationery.
• They are safe and secure, since the payment gateways greatly reduce the risk of frauds.
• With online plans, you can compare different features, benefits, and premiums of a policy before making a purchase.
• Online term plans also make the whole process faster and guarantee a quick and hassle-free purchase of a term plan.
Buying a term insurance plan is easy. The earlier your purchase a plan, the sooner your family’s financial future can be secured. Additionally, you also get to enjoy the benefits of lower premiums. So, check out your options and purchase a plan for yourself, thereby securing the life goals of your loved ones.