Which term insurance coverage should I purchase?

It is critical to thoroughly consider your financial commitments as well as the necessities of any dependents in the case of your demise to pick the best term insurance, amount of coverage, and term plan tenure. You can consult a certified insurance advisor or financial counselor to help you choose the best term insurance plan for your specific scenario.

What are the advantages of purchasing term life insurance online?

Buying a term insurance plan online has various advantages, including convenience, reduced costs, and a simplified process allowing you to compare policies at your fingertips, get quotes and secure term insurance coverage anywhere, anytime, from the comfort of your home.

What types of death are covered under the term plan?

The types of death covered by a term insurance plan vary depending on the policy and its terms and conditions. However, term insurance policies typically cover death due to natural reasons, such as disease or illness, including accidental death. For more details, you can visit this page .

Why should I purchase a term insurance plan?

There are numerous reasons to consider purchasing a term insurance plan, including affordability, financial security for your loved ones, tax benefits , flexibility, and peace of mind.

What are the minimum and maximum age limits for buying a term insurance policy?

The age limits for buying a term insurance policy vary depending on the specific policy and insurer. Generally, the entry age is 18 years to 60 years, while certain insurers may offer term plans till age at entry of up to 65 years.

Who is responsible for paying the premiums of the term insurance plan?

The policyholder is responsible for paying the premium for a term insurance plan. The policyholder is an individual who acquires or buys the term plan either for themselves or another individual in exchange for the premiums.

Who should buy a term insurance plan of Rs 1 crore?

You may choose to buy a Rs 1 crore term insurance policy if you have significant financial responsibilities such as repaying large debts, securing your child’s future, meeting long-term goals and if you believe that your family’s requirements and liabilities need the amount, if and when you are not around.

Is it worth adding a critical illness benefit rider to your term insurance plan?

Yes, a critical illness benefit rider might be worth the cost. Critical illness treatment can be costly, and the diagnosis can have an impact on your earning potential. A critical illness rider being added to the base term plan may provide you with financial security if you are diagnosed with a covered critical illness.

Are term insurance plans tax-efficient?

Yes, a term insurance plan may aid you save money on taxes each year, thanks to the provisions outlined in Section 80C of the Income Tax Act of 1961. Under the old tax regime, the annual premiums you pay for your term plan can be deducted from your taxable income up to a maximum of Rs. 1.5 lakhs per annum, subject to the restrictions mentioned therein. In addition, the death benefit payout received by the nominee is tax-free, and the maturity benefit received under the return of premium plans is also tax-free under Section 10(10D) of the Income Tax Act of 1961, subject to satisfaction of Section 10(10D) conditions.

What is the cost of a term life plan?

The actual cost of the term life insurance is determined based on various factors, including your age, profession, coverage level, and term plan tenure. A term insurance calculator can help you estimate the premium that you will have to pay for your desired term plan.

Is there an additional premium for a term insurance Return of Premium (TROP) plan?

In contrast to a standard term policy, term insurance with a Return of Premium (TROP) plan provides policyholders with maturity benefits. As a result, their premium may be comparatively higher than that of a term life insurance policy that does not include maturity benefits.

Is it worth purchasing term insurance with a return of premium (TROP)?

Term insurance with Return of Premium (TROP) is a form of term insurance that provides benefits when the term plan matures. If you outlive the tenure of the term insurance plan, you will be eligible for the maturity benefit. The insurer will refund all premiums you paid for the plan on maturity. Term insurance with a return of premium may be worth it for individuals seeking a term plan with a refund of paid premiums on maturity.

Will my invested premiums be refunded if I surrender my term insurance with a Return of Premium (TROP)?

While you will not get any benefits at maturity if the term plan is surrendered (because it would be terminated immediately), you will earn a surrender benefit if you surrender the term plan with return of premium. If the policyholder does not surrender and continues the term plan until maturity, and the policy has acquired a surrender value, the policyholder will get a reduced paid-up maturity benefit if the life insured survives till the plan’s maturity.

Can I opt for the return of premium for an existing term plan?

No, when you purchase a term insurance plan, you can select the type of coverage you want. You cannot convert a standard term plan into a term plan with a return of premium. These are two distinct types of term plans that have different structures, premiums, and terms and conditions.

What determines your term insurance premium?

Your term insurance premium may be affected by some of the following factors, amongst others: Age Occupation Gender Current health conditions Individual health records Family medical records Desired level of coverage Choice and number of optional riders

What should be the ideal tenure of my term life insurance coverage?

The term insurance tenure differs from individual to individual, but in general, the longer the tenure, the better. You may get adequate term insurance coverage till retirement without any dependents or responsibilities to worry about. Purchasing a term plan with a shorter tenure may result in lower premiums. However, after a few years of expiry of the term plan tenure, you may need to purchase a new term plan with a higher premium cost due to your increased age and other factors.

Which types of deaths aren't covered under term insurance plans?

The specific list of exceptions may differ from one insurance company to another. Most term life insurance plans commonly exclude the following types of deaths: Suicide within the first year of buying the term insurance Death due to self-inflicted injuries. Death due to the life insured committing any breach of law with criminal intent. Besides the above-mentioned exclusions, you may check the policy documents of your term policy for more information on specified exclusions.

Does term life insurance cover death due to pandemics?

All new and existing term life insurance policies cover deaths caused by COVID-19 provided necessary medical disclosures have been made by the prospect during the application stage.

How much term insurance coverage should you have?

The term insurance coverage you choose is determined by several factors, including your earnings, dependents, liabilities, and other considerations of financial planning. A term insurance calculator can help you to determine how much coverage you may need based on given factors.

What is the time limit within which an insurer has to settle a death claim for a term plan policy?

The death claim process begins once the term insurance company is informed about the death claim and the necessary documents for raising the death claim are filed. Term insurance companies must pay the death claim within fifteen days from the date of receiving the last necessary document. It is a mandate issued by the Insurance Regulatory and Development Authority of India (IRDAI). In the event of further inquiry or investigation, the insurer must finish the investigation within 45 days of receiving the claim intimation.

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What is a Term Insurance?

This is a simple and traditional form of life insurance ^[1]. Term insurance is basically a financial agreement between the insurance company and the policyholder. Here the life assured i.e. the insured, pays premiums for a pre-specified time frame against which the nominee is entitled to get a pre-defined amount i.e. the sum assured as death benefit if the life assured dies within the policy term. However, a traditional term insurance doesn’t pay anything if the insured, survives the policy term.

Why Do You Need a Term Insurance Policy?

A term insurance policy is designed to provide financial security to the family when the life assured is no more. Suppose, Mr A, a 35-year-old, has a family of a homemaker wife and two kids below 10 years of age and is the sole income earner. Mr A also has a home-loan with a huge outstanding amount. Now, if he suddenly dies at 40, there’s no regular income for the family anymore. His kids are under 15, and awaiting higher studies. At this point, Mr A’s sudden demise can make it quite difficult for his family to make ends meet, clear dues and carry on with the children’s education. This is where a life insurance term plan may emerge as a saviour. If Mr A had bought a policy with a sufficient sum assured, his death benefit would help the family maintain the existing lifestyle, repay all the dues and keep a corpus aside for the life goals like the children’s education, marriage or retirement savings. Hence, for your financial protection; you may find it worthy¹^[2] to purchase a term life insurance.

Who Should Buy a Term Insurance Policy?

A term insurance policy may act as a financial cushion for a family when an earning member succumbs to a sudden death. The sum assured paid to the nominee can be utilized to sail through the financial crisis by taking care of household needs, repaying debts, and funding life goals. So, if you are someone who has dependent parents or an immediate family, liabilities, and life goals to be fulfilled, term life insurance may be a worthy choice to consider.²^[3] It may help you create a financial shield for your loved ones that would help them sustain if you are suddenly not there anymore.

Who Should Buy a Term Insurance

How Does a Term Plan Work?

Now that you know what a term plan is, it’s time to understand how it functions³^[4] before you decide to purchase one. A term insurance policy is basically a contract between two parties—the insurance company and the insured (policyholder). Here, the insured pays premiums, a pre-fixed amount payable in a specific schedule for the specified term of the policy, typically 10, 20, or 30 years. The premium, in a monthly, quarterly, half yearly or yearly payment schedule is charged by the insurer, to provide the insured with a death benefit or any other applicable benefit in exchange. The amount of premium is calculated depending on the policyholder’s age, gender, medical history, occupation, lifestyle, and habits alongside the chosen sum assured, policy term, and riders and usually remains fixed throughout the policy term. If the insured dies before the expiry of the policy, his/her nominee receive the entitled sum assured as a death benefit. But no payment is made by the insurer if the life assured survives the policy term and the coverage of the policy ends with its expiry date. However, the coverage period can be extended, by renewing the policy, but at a revised premium based on the age of the insured at the time of the policy renewal. The premium thus, gets increased as the age increases.

What is a Term Insurance Calculator?

While it’s important to have a sufficient coverage amount in your term insurance policy, it’s equally crucial to figure out if you can afford to pay the premiums for the entire policy term to enjoy the insurance benefits in full. So, to ensure that you choose a term insurance plan that offers coverage matching your needs, without being harsh on your pocket, you need to make the calculations right. Here, a term insurance calculator may be helpful. A term insurance calculator⁴^[5] is an online tool that helps in calculating the coverage amount needed, based on inputs of one’s income and savings. Some calculators also help in estimating the premium payable for a specified amount of coverage and the details of the policyholder. The term insurance calculator may be accessed from websites of insurance companies or financial platforms free of charge. Based on the calculated coverage and corresponding premium payable, it may be easier to gauge which of the available term insurance plans is the best-fit choice for you. Based on the calculations, some of the term insurance calculators also suggest which plan matches your requirements and affordability best.

Benefits of Buying Term Insurance

With a bunch of benefits, term insurance may be one of the worthy investment choices for those looking to financially secure their loved ones’ future. Here’s how⁸^[9]:

Extensive Coverage at Low Premiums:

Since there are no maturity benefits to be paid, insurance companies offer term insurances for much lower premiums. Hence, you may be able to get a large and extensive coverage, keeping it easy on your pockets too.

Tax Deductions for the Policyholder:

Premium payment for term insurance entitles the policyholder to get tax benefits. Under Section 80C of the Income Tax Act, 1961, he/she can get a tax deduction of up to Rs 1.5 lakhs annually for the premiums paid. However, this can only be availed under the old tax regime.

Tax-free Benefit:

The death benefit received by the nominee of the policyholder in the event of the unforeseen is completely tax-free under Section 10(10D) of the Income Tax Act, 1961.

Peace of Mind:

Everyone looks forward to keeping the loved ones safe from any financial struggle, even when he/she is no more. Term insurance may put the worries to an end by offering a scope to secure the family’s financial future.

What Are Term Insurance Riders?

Term insurance riders⁹^[10] act as an additional layer of protection that are available as options to enhance the coverage of a basic term plan. At an additional premium payment, these optional benefits are designed to extend the coverage to specific areas and take care of emergency situations better. For example, a critical or terminal illness rider may ease the financial stress of such a disease; an accident cover can provide bigger financial help in an accidental death; or a waiver of premium rider can spare you from paying premiums in case of sudden disability due to an accident or a disease. Here, the amount of extra premium payable for the riders depends on the life assured’s age, sum assured, policy term, and payment schedules.

How Does a Term Plan Secure the Financial Future of Your Family?

A term insurance plan may help you provide a financial cushion¹⁰^[11]to your family from hardships due to untoward circumstances. As you pay the premiums throughout the policy term, the nominee remains entitled to get a pre-defined sum assured if you die before the policy expiry. This lump sum amount received as a death benefit may be used by your loved ones in the moment of crisis to sustain the existing lifestyle, pay outstanding dues, and keep a fund aside for life goals like higher studies or marriage of your children.

How To Decide Timeline of a Term Insurance Policy?

While you plan to invest in a term insurance policy, there remains one more concern¹¹^[12]: How long should you extending coverage for your term life insurance? Usually, the insurance companies offer plans with policy terms ranging between 5 and 40 years^[12], or till the policyholder is 99 years old. But experts recommend picking a policy term based on your retirement age and liabilities. So, how does that work?

Suppose you are in your 20s and have at least 40 more years to retire. Experts believe that a policy term of 35–40 years may be helpful here to keep your loved ones secure. Moreover, premiums may be relatively lower at this time because of your age^[12].

At your 30’s and 40’s, you may have started a family. That involves a new set of liabilities and life goals and, in turn, the need for building a corpus to fund them. Experts suggest a policy term of 35–40 years at this stage, depending on your income level, financial needs, and retirement plans ^[12].

If you are in your 50s and 60s, liabilities are likely to have lessened, with children becoming settled and financially independent. As per the experts, here the coverage should focus on retirement goals, and the policy term should ideally be around 15 years^[12].

What is Term Insurance

How Much Term Insurance Cover Do You Need?

One of the key decisions while choosing a term insurance plan is determining the amount of coverage, i.e., the sum assured your nominee will receive as death benefit in unforeseen circumstances. According to experts, the amount that suffices to financially protect the life assured’s family should be based on his/her income, household expenditures, outstanding liabilities (if any), and the respective life goals. Thus, an ideal amount ¹²^[13]may be estimated as at least 10 times the annual income. Another way of arriving at the figure¹³^[14] may be by adding 150 times the monthly household expenses, current outstanding liabilities, amount needed to fund specific life goals, amount planned as a retirement corpus, and deducting the total worth of liquid assets from it.

How To Choose a Term Insurance plan?

Buying the best term insurance plan fitted to your financial needs and affordability needs a careful estimation. For that, there are certain things that need to be kept in mind. Wondering how to choose a term insurance plan?¹⁵^[16] Here’s a checklist that you may consider:

Coverage:

To protect your loved ones financially if you are suddenly not around, well-calculated term life insurance coverage may be helpful. The maximum amount you can choose as term plan coverage is 20–25 times your gross salary. According to experts, the life cover should ideally be chosen based on one’s financial needs, current lifestyle, and liabilities.

Policy Term:

Experts suggest that the ideal policy term should extend till your retirement age or till your children are 25 and financially independent. You may benefit more from such a policy.

Riders:

Carefully check the plan for available rider options to enhance your coverage and ensure comprehensive protection. Coverage for accidental death and critical or terminal illness may be a crucial pick. Another important one is the waiver of premium for disability or pre-specified illness.

Claim Settlement Ratio:

It’s extremely important to check the insurance company’s claim settlement practice while choosing an insurance term. It would be wise to save your nominees from hassle in case of unfortunate circumstance. The company’s claim settlement ratio (available on the IRDAI website) reflects the percentage of settled claims out of total claims registered in a year. Hence, high ratio, ensures better credibility.

Pre-payment Options:

You may want to pre-pay the term life insurance premiums before you retire to save yourself from financial burdens post-retirement. Check the term plan for payment schedule and prepayment options while choosing to purchase the policy.

Importance of Sum Assured In Term Insurance

A sum assured in term insurance is the pre-decided amount that the nominee is entitled to receive if the life assured dies within the policy term. A term insurance, the purest form of life insurance, has no other payout than this sum assured, payable as a death benefit in the event of the unforeseen. Designed to financially protect the loved ones of the policyholder in his absence, thus the sum assured in a term insurance plan is crucial¹⁶^[17], as it can be utilized by the family to sail through the crisis, repay debts, sustain the existing lifestyle, and fund life goals.

When Should You Buy a Term Insurance Plan?

Term insurance is a crucial component that helps in building a financial strategy. By opting for term insurance you lay a foundation towards your long-term financial planning^[25].

As suggested by financial experts, buying a term insurance at an early age like in your 20s is preferred as it optimizes the benefits¹⁷^[18]. Here’s how:

One is usually in good health in their 20s and believed to have higher life expectancy. Hence, you’ll get relatively lower premium for your term insurance.
In your 20s, you have at least 40 years till your retirement, considering the retirement age here as 60 years, and no or less liabilities. So, buying an increasing life-cover at a cheaper cost at this stage may be beneficial as it would grow with your income and affordability.
In your 20s, you may have parents either retired or about to retire. It may be a good idea to get a term insurance to financially protect them if you are suddenly no more.
Starting early on a term insurance brings you tax benefits from an early age. Premium payment of a term insurance plan fetches tax deductions up to Rs 1.5 lakhs per annum under Section 80C of the Income Tax Act, 1961. This can be availed through the old tax regime.

What Are The Payout Options in Term Insurance?

A term insurance is the simplest form of life insurance. The policy pays only the sum assured to the nominee as the death benefit if the life assured dies within the policy term. If the insured survives the policy term, no amount is payable despite all the premiums being paid. If the insured dies before the policy expires, the nominee may file a death claim with insurance company. Here, the nominee can choose to take the death benefit payout in two options: either as a lumpsum or as installments or annuities payable at regular intervals, depending on the family’s financial situation. The lump sum payout may be helpful in building a corpus while installment or annuity payouts may act as a guaranteed income stream. However, the payout rules vary from insurer to insurer.

Term Insurance Claim Settlement Process

In case of a term insurance, the only claim to be settled is the death claim in the event of the life assured’s death within the policy term. Therefore, to get the sum assured as the death benefit, you would need to complete the following steps¹⁹^[20]:

Claim Intimation

In the event occurrence of the unforeseen, the nominee may intimate the insurance company about the life assured’s and file a claim by submitting a filled-in claim form. Details like the policy number, name of the claimant, date, place and cause of the death are to be intimated through the form.

Document Submission

The next step is submitting the necessary documents like the death certificate, original policy papers, claimant’s statement, his/her identity plus address proofs, medical records of the deceased, an FIR copy and the post-mortem report (for accidental deaths) to get the claim processed.

Once the claim is raised and the relevant documents are submitted, it’s upon the insurance company to decide and settle the claim. As per the recent guidelines by Insurance Regulatory and Development Authority of India (IRDAI)²⁰^[21], the insurer has to settle the claims within 15 days if no probe is required and within 45 days in case of deaths that needs an investigation.

How to Buy a Term Plan?

Are you looking to financially secure your loved ones through a term plan? To purchase the correct term insurance plan in India for your budget and needs, following the steps below may be helpful²²^[23]:

Step	Description
Estimate Your Needs	Calculate the current household needs, outstanding liabilities and fund needed to fulfil the life goals and retirement plans, even if you are not around. The life cover you choose should sufficiently cover all these in future.
Opt for Increasing Coverage if Needed	If you are young, a term policy plan with an increasing coverage option may benefit you more^[6]. The bigger coverage as you age and grow in terms of income and liabilities can be helpful.
Pick the Right Insurance Company	Detailed research about the available insurance companies, their rules, customer services and claim settlement practice may benefit you. This can lead to making a well-informed decision of an insurance company. Also, ensure that you read the policy and understand its features thoroughly.
Compare Premiums	Compare plan options in terms of premiums payable to find the best term insurance plan suited to your needs and budget. A term insurance calculator can be helpful here.
Choose the Policy Term	Decide how long you want your life to be covered. Carefully pick the policy term based on your preferred age of retirement, when your children will be financially independent, and your life goals.
Review Claim Settlement	The claim settlement ratio is an indicator of insurer's reliability. The higher the ratio, the better. This simply means that in cases of claim settlement the procedure will be hassle free^[23].
Select Riders Wisely	Enhance the term insurance coverage through optional riders. Check each rider for inclusions, exclusions, rules, and additional premium payable.
Online Purchase	You can purchase term insurance online from the insurer’s website. Compare plans, finalize your pick, and make an online payment to buy the policy at a relatively low premium.
Seek Expert Advice	Seek expert guidance to make the term insurance process smoother. Experts can assist you with the complexities of selecting and purchasing a plan.
Get the Documents Ready	Collect documents required for KYC (Know Your Customer) and income details. Ensure all documents are in order before proceeding with the policy purchase.
Medical Examination	Depending on your age, gender, occupation, and lifestyle, you may need to undergo a medical examination. Keep test records handy.
Payment of Premium / Premium Deposit	Once the Insurer communicates the decision of acceptance of proposal, premium needs to be paid. Insurers shall ensure that explicit consent is obtained from the prospect/policyholder for deduction of amount towards premium payment from bank account. Risk Cover shall commence only after receipt of premium. No premium deposit/ proposal deposit is required to be paid to the insurer along with the proposal form except in case of policies issued basis declaration of good health

Key takeaways

It’s now time to highlight the key takeaways²³^[24] regarding the term insurance.

Term insurance is the simplest form of life insurance, that may provide coverage for a long range of period like 10-40 years.
The only payout in a term insurance is the death benefit. In case of unfortunate circumstances if the insured is no more, here the nominee would receive financial support to navigate in difficult times.
Premiums in a regular term insurance usually stays fixed for the policy term.
Some policies offer the option of converting your term insurance to whole life insurance at the time of expiry.