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5 Term Policy Features & Benefits

In today’s world, life insurance is of utmost importance, regardless of one’s age. Life insurance not only provides insurance coverage to the insured, thereby offering financial assistance to their family members and nominees in case of an unforeseen event, but it also provides several tax benefits. Furthermore, according to a recent UN report, India also has the world’s largest youth population, and this shift in culture and impetus on financial prudence is expected to drive positive change in the insurance industry [1].

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins

In the recent past, young adults have also started to realize the importance of purchasing life insurance plans. According to reports, the insurance penetration in India surpassed 3.4 percent in FY16, and the insurance industry is expected to reach US$ 280 billion by 2020. In FY17, the insurance penetration reached 3.69 percent, and in FY19, the gross premiums written in the country reached US$ 82.8 billion, with US$ 58.5 billion coming from the life insurance sector. Furthermore, the life insurance industry in India is also expected to grow 12-15 percent annually, for the next three to five years [2].

Various factors, including demand for retirement products like annuity, and growing urbanization are expected to drive the growth of the life insurance sector in the country. Furthermore, the life insurance industry also accounts for nearly 75 percent of total insurance premium.

Types of Life Insurance Policies

Life insurance policies can be term insurance plans, Unit-Linked Insurance Plans (ULIPs), traditional endowment plans, money back plans, retirement plans, whole life plans and annuity plans.

What is Term Insurance Policy

Term insurance, also known as pure life insurance is a plan which provides coverage for a specified period of time, and guarantees payment of a specified benefit on death. In the event of demise of the insured during the policy period, the death benefit is payable to the nominee or beneficiary. Furthermore, the premiums for term insurance plans are lowest as compared to all other life insurance plans, considering there is no investment component, and the entire premium is used to cover the risk and expenses.

However, if the policy term expires while the policyholder is alive, there is usually no maturity benefit, while there may be few term plans that have the option of returning the premiums paid by the insured. Traditional term policies mostly offer guaranteed death benefit. Furthermore, the premium to be paid by the policyholder is set by the insurer, and depends on factors such as the policyholder’s health, age and Mortality rate (life expectancy).

Types of Term Insurance Policies in the industry today –
1. Level Term:

The most common and simplest form of all the term insurance plans is the level term, where the sum assured remains the same during the entire term of the policy. In case of death of the insured during the policy term, the nominee receives the benefits.

2. Increasing Term:

Increasing term plans are of two types:

a. Plans which auto increase by a percentage every year

b. Plans which increase on certain key events like marriage, new home, child birth etc.

3. Mortgage or Decreasing Term:

This plan is suitable for policyholders who have taken mortgage or personal loans. Thus, policyholders can lower the sum assured basis the outstanding loan.

Important Features of Term Insurance Policy
Term plans are affordable

Pure term plans are mostly affordable as compared to other insurance plans. These plans offer life cover for the sum assured for a specified period of time, known as the policy term. In the event of death of the insured during the policy period, the insurance company provides the death benefit to the nominee or beneficiary. However, considering term insurance plans have no savings component, there is no maturity benefit that is payable to the insured after the expiration of the policy term. However, some term plans come with return of premium option.

The premium paid by the policyholder only includes mortality charges, along with basic administration cost for the policy issuance. Thus, term plans are cheaper as compared to other life insurance products, such as ULIPs or money back plans. Their affordability, and the protection they provide to the policyholder makes them an attractive option for individuals and families.

It is easy to purchase term life insurance policy:

The prospective life assured has to decide the amount of sum assured, depending on their financial objectives, loans or debts etc. Furthermore, various online calculators also help to figure out the ideal sum assured. A term plan can be bought in two ways.

1. Offline:

Individuals can approach an intermediary, such as a broker or an agent to buy term insurance offline.

2. Online:

Online term plans can be bought directly from the website of the insurance company or through web aggregators website. Furthermore, buying term insurance online is cheaper than buying them offline, as the insurance company saves on the commissions paid to the intermediary.

Term plans with return on premiums:

While pure term plans do not offer maturity benefits, and only provide insurance coverage for the policy term, there is an option, known as term plan with return of premium. This plan offers maturity value, which is return of all premiums paid, provided the policyholder survives the term. Considering the fact that this plan provides both death and maturity benefits, these are comparatively more expensive than the basic term insurance plans.


Rebates are offered by life insurance companies for choosing a higher sum assured. Furthermore, for females and non-smokers, special discounted premium rates/rebates are also offered by the insurance companies.

Term Insurance Benefits

Term policies have several advantages and benefits, which makes them an attractive option for those looking to buy insurance cover. These include:

• Simplicity:

 Unlike plans such as endowment plans and ULIPs which combine insurance cover with savings or investment components, term insurance plans are easy to understand. Term life insurance policies are simple and easy to understand, where the life assured has to pay the premium, and get insurance cover for the term they choose.

• Tax Benefit:

 Under Section 80C of the Income Tax Act, 1961, the premium paid for term life insurance is eligible for deduction. Furthermore, maturity benefit, death benefit and surrender benefit are eligible for tax benefits as per Section 10 (10D) of the Income Tax Act 1961. The above deductions and exemptions are subject to the provisions stated in the Income Tax Act 1961.

• Competitive Pricing:

 Life assured can easily compare term insurance plans with respect to their price, thus creating a competitive market for term policies.

• Low Premiums:

 The premiums paid for term life insurance plans are significantly lower than the premiums paid for other kinds of life insurance plans, as it doesn’t involve a savings or investment component.


It is important for individuals to secure their life, and the lives of their spouse and children. Term policies enable families to meet their financial goals, or pay off liabilities in the event of the demise of the insured.






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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

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. 


*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | 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. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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