Term life insurance

We all can undoubtedly accept the fact that uncertainties can knock the door anytime. We cannot take control of the uncertain events, but can definitely follow some steps to protect us and our family from such events. Term insurance plan is one such tool that provides life cover against unforeseen events along with death benefits for a defined period of time. Apart from providing life cover, a term insurance also provides financial security to the insured. Hence, a term plan is basically designed with a primary purpose to financially secure you and your family in case of sudden demise (of insured) or uncertain events.

In order to cater various financial needs of the insurance seekers, the market is flooded with an array of insurance schemes and plans to choose from. Even a simple and basic insurance policy can provide the insured with an excellent opportunity to give a financially secured future to their family and loved ones, and that too, in the most economical way.

What exactly a term life insurance is?

Basically, a term insurance is a life insurance product aiming to provide financial assistance in case of uncertain events of life or sudden demise of the insured during the policy term. The plan is designed to take care of the financial needs of insured’s family even in their absence. The cover takes care of your family’s lifestyle and other needs despite constantly rising inflation rate. Also, it helps you minimise existing liabilities to keep a better balance of income and expense.

• It is a pure insurance policy plan
• An insurance company pays sum assured to the nominee if the insured individual dies during the plan term
• Minimise taxable liabilities and save on administration and other charges
• Get maturity cover of 20 times of annual income.

However, while choosing a policy plan, there are certain things to be kept in mind while choosing the best term life insurance plan. When researching the market, an educated choice needs to be made. And to do so, here are some guiding factors to help you choose the right plan according to specific needs and financial budget.

Know your current life stage – This is an important factor to be considered while planning to buy life insurance plan. This is because number of dependent family members may vary at different stages of life. For instance, if you are young, there are certainly parents and siblings to take care of, but as life moves, spouse and children are added to the list. Maturity cover and other benefits should be chosen accordingly.

Understand your needs – As the market is flooded with an array of insurance options, it is significant to pen down our specific needs in order to make the right choice. Understand your financial needs and then research the market accordingly. Evaluate your budget and then look for a plan with lower premium, though don’t compromise on policy benefits.

Know the plan – Depending on specific needs and requirements, each plan is packed with different features and benefits, therefore it is important to know and understand the features and benefits of the plan you chose. Look for factors such as premium costs, policy term, sum assured, death benefits, free-look period, and premium frequency.

Research the company’s market value – Though most people dominate this factor, but this is crucial too. It is important to evaluate insurance company’s market value and years of presence because this helps you determine the claim settlement ratio. Also, years of market presence is a sign of good customer service and a strong reason to trust a company.

Key features to look into a term life insurance plan:

Policy term – Life insurance plans come with flexible term (or tenure) options, usually for 5 years and maximum up to 25 years. If you choose a single premium payment policy, then the policy term ranges from 5 to 15 years.

Tax benefits – Term life insurance is liable for tax deductions under Section 80 C and Section 10 (10D) of the Income Tax Act, 1961. Additional deductions can be made against premiums paid for the Critical Illness benefits under Section 80 D.

Plan choice – Term life insurance plan provides flexibility to choose the policy on single life basis or joint life basis. Where, single life policy provides life cover just for the insured party, generally the breadwinner of the family, and joint life term plan refers to a policy providing coverage to both husband and wife’s life.

Entry age – Minimum eligible age for entering into a term life insurance plan 18 years, while maximum is capped to 65 years with optional add on benefits. The premium cost also increases with the increasing age, thus it is best to opt for a plan at comparatively younger age.

Survival benefits – Though every term life plan doesn’t necessarily have survival benefits, the demand from investors has encouraged various insurance companies to launch or introduce term insurance policies with survival benefits. Plans that offer survival benefits are called Term Return of Premium (TROP), where the premiums paid are refunded at the end of term tenure. However, such policy plans comes at relatively higher premiums that the standard plans.

Death benefits – If the policy holder dies during the policy tenure, then the death benefits are assigned to the nominee of the insured by the insurance company. Various payment options are offered by the insurers for the selected term life insurance such as lump-sum payment, lump-sum + an annuity (monthly, quarterly, or annually), or simple annuities.