What is Term Insurance?
Term insurance is a type of life insurance that provides coverage for a specified period of time, known as the policy term. It provides financial protection to your loved ones in case of your untimely demise during the policy term. Unlike other types of life insurance plans, term insurance focuses solely on providing death benefits and does not include any savings or investment components.
The Best Term Insurance Plans in India
There are many term insurance plans available in India, but choosing the right plan that can secure your life can be quite a challenge. Hence, here we have listed some of the best term insurance available in India which can be best for you
1. HDFC Life Click 2 Protect 3D Plus
This plan offers comprehensive coverage, multiple payment options and the flexibility to customize the policy as per your requirements. It offers additional benefits like critical illness rider, accidental death benefit rider and waiver of premium rider.
2. ICICI Pru iProtect Smart
ICICI Pru iProtect Smart is a popular term insurance plan that offers a host of options including coverage for critical illnesses, accidental death benefit and monthly income benefit. It offers flexibility in choosing the policy term, premium payment options and the option to enhance coverage through riders.
3. Max Life Smart Term Plan
This plan offers comprehensive life cover with various additional benefits such as coverage for critical illnesses, accidental death benefit and monthly income payout options. It offers flexibility in premium payment terms and the option to enhance coverage with riders.
4. Tata AIA Sampoorna Raksha
Tata AIA Sampoorna Raksha is a term insurance plan that offers comprehensive coverage, flexibility in premium payment terms and the option to enhance coverage through riders. It offers a range of payout options and the option to receive the death benefit in the form of a lump sum or regular income.
5. SBI Life eShield
SBI Life eShield is a cost-effective term insurance plan that offers financial protection and customization options. It offers benefits such as accidental death cover, critical illness cover, and the option to increase coverage at key life stages.
It is important to evaluate your specific needs, consider the coverage, features and benefits offered by various term insurance plans, and choose the one that best suits your needs and budget.
Why do I need term insurance?
Term insurance is an important financial instrument that provides protection and financial security to your loved ones in case of your untimely demise. It offers a simple and affordable way of ensuring that your family’s financial needs are taken care of even in your absence. Here are some of the major reasons why you need term insurance:
1. Financial protection for your family
In case of your unfortunate demise, term insurance acts as a safety net to your family members by providing a lump sum amount, which is known as death benefit. This financial cushion can help them cover various expenses such as daily living costs, outstanding loans, mortgage payments, education expenses, and more.
2. Income replacement
If you are the primary earning member of your household, your sudden absence can leave a significant financial burden on your dependents. Term insurance guarantees that your family’s income requirements are met even in your absence, giving them a reliable source of financial support to maintain their standard of living.
3. Loan Repayment
Term insurance can help repay any outstanding loan or debt including home loan, car loan, or personal loan. It frees your family from the obligation of handling these financial burdens and enables them to lead a debt-free life.
4. Children’s Education
Education is an important aspect of your children’s future. Term insurance can secure their education by providing funds to cover their educational expenses, ensuring that they have the opportunity to fulfill their dreams and aspirations.
5. Business Continuity
If you are a business owner, term insurance can play a vital role in ensuring the continuity of your business. It can help cover business liabilities, provide funds for succession planning and protect the interests of your business partners or shareholders.
Why should you buy term insurance?
Buying term insurance offers several benefits and serves as a prudent financial decision. Here are some compelling reasons why you should consider buying term insurance:
Term insurance is one of the most cost-effective life insurance options available in the market. The premium for term insurance policies is generally low as compared to other types of life insurance plans, which makes it accessible to individuals with various budgetary constraints.
2. Higher coverage amount
Term insurance allows you to opt for a higher coverage amount, ensuring that your family receives an adequate amount in case of your demise. This coverage amount can be customized based on your specific financial needs and responsibilities.
Term insurance offers flexibility in terms of the term of the policy. You can choose the policy term that suits your financial goals and the period for which you want to provide financial security to your loved ones. This flexibility allows you to tailor the policy to suit your needs.
4. No Maturity Benefit
Although some may consider the lack of maturity benefit as a drawback, it actually works in favor of term insurance. By focusing on providing only the death benefit, term insurance keeps the premium affordable and ensures that the policy fulfills its primary objective of providing financial security to your family.
5. Tax Benefits
Term insurance offers tax benefits under section 80C of the Income Tax Act, 1961. The premium paid for term insurance policies is eligible for deduction from your taxable income, thereby reducing your overall tax liability.
Benefits of Buying a Term Insurance
Buying a term insurance plan offers a host of benefits providing financial security and peace of mind to you and your family. Here are some of the key benefits of buying a term plan:
1. Comprehensive financial protection
Term insurance provides comprehensive financial protection to your loved ones in the event of your demise. This ensures that your family can maintain their lifestyle, meet their financial obligations and achieve their long-term goals even when you are not around.
2. Customizable Coverage
Term insurance allows you to customize the coverage amount based on your specific needs and responsibilities. You can choose a coverage amount that takes into account factors such as your income, outstanding loans, future expenses and financial goals.
3. Augmentation through riders
Term insurance plans often come with additional riders that can enhance the coverage and provide additional protection. Riders like Critical Illness Rider, Accidental Death Benefit Rider, Disability Rider and Waiver of Premium Rider provide additional benefits and ensure more comprehensive coverage.
4. Financial stability for dependents
By providing a lump sum amount in the form of death benefit, term insurance ensures that your dependents have the financial stability and resources they need to maintain their quality of life. It acts as a financial safety net during challenging times.
5. Peace of Mind
Knowing that your family is financially secure in your absence brings peace of mind. Term insurance takes away the worry and uncertainty of the future, allowing you to focus on other aspects of your life with confidence.
Features of Term Insurance
Term insurance comes with various features that make it a preferred option for individuals seeking pure life coverage. Here are some of the key features of term insurance:
1. Death Benefit
The primary feature of term insurance is the death benefit, which is the sum assured paid to the nominee in case of demise of the policyholder during the policy term. The death benefit provides essential financial support to the family during difficult times.
2. Policy Term
Term insurance allows you to choose the policy term, which is the period for which the policy remains in force. Policy terms can range from a few years to several decades, giving you the flexibility to align the coverage period with your specific needs.
3. Premium Payment Options
Term insurance offers flexibility in premium payment options. You can choose between regular premium payment, where premiums are paid throughout the policy term, or single premium payment, where the entire premium is paid upfront.
4. Renewability and Convertibility
Many term insurance plans offer an option to renew the policy at the end of the policy term or convert it to a different type of life insurance plan, such as endowment or whole life insurance. These characteristics provide continuity and adaptability to your evolving life circumstances.
5. No Maturity Benefit
Unlike other life insurance plans, term insurance does not offer any maturity benefit if the policyholder survives the policy term. It is designed only to provide financial security to the family in case of demise of the policyholder.
Types of Term Insurance
Term insurance can be classified into different types based on certain factors and differences in their features. Here are the common types of term insurance:
1. Level Term Insurance
This is the most basic and straightforward type of term insurance. In level term insurance, the coverage amount and premium remain the same throughout the policy term. It provides assured death benefit to the nominee/beneficiary in case of demise of the policyholder during the policy term.
2. Decreasing term insurance
In decreasing term insurance, the coverage amount decreases with time during the policy term. Term insurance is typically used to cover specific financial liabilities that reduce gradually over time, such as mortgages or loans. As the outstanding balance decreases, the coverage amount also decreases.
3. Increasing Term Insurance
In increasing term insurance, the coverage amount increases with time during the policy term. This form of insurance is specifically designed to reduce the effects of inflation and ensure that coverage keeps up with the rising cost of living. The premium for stepping up term insurance is usually higher than for level term insurance.
4. Convertible Term Insurance
Convertible term insurance provides the option to convert a term insurance policy into a permanent life insurance policy, such as whole life or endowment insurance, within a specific time frame without the need for a medical examination. It provides flexibility to the policyholder to switch to a different type of insurance policy when their needs or circumstances change.
5. Renewable Term Insurance
Renewable term insurance allows the policyholder to renew the policy for additional periods after the initial policy term expires. Renewal can usually be done without the need for a medical exam. Renewable term insurance provides continuity of coverage, but premiums may increase at each renewal.
6. Term insurance with riders
Term insurance can be enhanced by adding riders, which are additional benefits or features that can be included in the policy for an additional cost. Common riders include critical illness rider, accidental death benefit rider, waiver of premium rider and income benefit rider. These riders provide additional protection and coverage beyond the basic death benefit.
It is essential to carefully evaluate your financial needs, future goals and budget while choosing the type of term insurance that best suits your needs. Consider factors such as the coverage amount, policy term, flexibility, and any additional benefits offered by the specific type of term insurance you are considering.
Term insurance is an important tool to safeguard your family’s financial future. It provides affordable coverage for a specified period, providing a lump sum payment to your beneficiaries in the event of your death. By choosing the right plan and buying it early, you can ensure that your loved ones are financially secure, even when you are not around. Keep in mind the importance of regularly reviewing and adjusting your coverage as your needs change. Term insurance provides peace of mind, knowing that your family’s well-being is protected.
Frequently Ask Questions
1. How to choose the best term insurance plan?
Consider factors like coverage amount, policy term, premium affordability, claim settlement ratio and additional benefits like riders. Compare various plans from reputed insurance providers and choose the one that best suits your needs.
2. What is term insurance rider?
Term insurance rider is an optional add-on feature which enhances the coverage of your term insurance policy. It offers additional benefits like critical illness coverage, accidental death benefit, waiver of premium etc. Riders can be customized based on your specific needs.
3. When should I buy a term insurance plan?
It is advisable to buy term insurance as early as possible. The younger you are, the lower the premium rates. By buying early, you can secure a higher coverage amount and safeguard the financial future of your loved ones.
4. What factors affect term insurance premium?
Factors such as age, gender, lifestyle habits, health conditions, occupation, sum assured and policy term can affect term insurance premium. Generally, younger individuals with good health and non-risky occupations pay lower premiums.
5. How long should the term insurance policy be?
The term of the insurance policy depends on your specific needs and financial goals. Consider factors such as your age, outstanding loans, dependent’s age and future obligations. Choose a policy term that covers these achievements and provides financial security to your loved ones.