Following are the key features of term insurance:
- High sum assured at low premiums: Get large coverage without paying hefty premiums.
- Flexible policy term: Choose a plan duration that suits your age and financial goals.
- Multiple rider options: Enhance your coverage with add-ons like critical illness or accidental death.
- Easy to buy online: Quick and hassle-free application process from the comfort of your home.
- Tax benefits: Enjoy tax deductions on premiums under Section 80C of the Income Tax Act.
Key benefits of a term insurance policy
A term insurance policy is one of the most affordable and effective ways to safeguard your family’s financial future. It ensures that your loved ones remain financially secure even if something unexpected happens to you. Here’s a closer look at the key benefits you can enjoy:
- Financial security for your family: The primary purpose of term insurance is to protect your family from financial hardship. In case of your untimely demise, the sum assured helps your loved ones meet essential expenses like rent, education, or household bills without worry.
- Secure your assets: If you have loans such as a home loan, car loan, or personal debt, term insurance ensures that your family isn’t burdened with repayments. The policy payout can be used to clear these liabilities and protect your valuable assets.
- Reduce lifestyle risks: Life is unpredictable, and income disruptions can affect your family’s lifestyle. A term insurance policy acts as a financial cushion, helping your dependents maintain their standard of living even when your income is no longer there.
- Protection against unexpected financial needs: Emergencies can strike at any time. Term insurance provides your family with a safety net to handle sudden medical expenses or other unforeseen costs without dipping into their savings.
- Affordable premiums: Among the different types of term insurance, one major advantage is affordability. You can get high coverage for relatively low premiums, making it an ideal choice for individuals who want maximum protection without financial strain.
- Income replacement: Think of term insurance as an income substitute for your family. The payout ensures they can continue meeting their financial goals — from education and healthcare to daily living expenses — even if you’re no longer around to provide for them.
- Tax benefits: Lastly, term insurance also helps you save on taxes. Premiums paid are eligible for deductions under Section 80C, while the payout to your nominee is generally exempt from tax under Section 10(10D), offering dual financial benefits.
In short, a term insurance policy gives you peace of mind knowing that your family’s dreams and security are protected, no matter what life brings.
Who should buy a term insurance policy?
● Young professionals:
Young professionals who are just starting their careers and families can benefit from term insurance. This will help ensure that their dependents are financially secure in the event of their unexpected passing.
● Parents:
Individuals with dependent children should consider term insurance to guarantee their children’s education.
● Breadwinners:
If you are the primary breadwinner in your family, term insurance can provide a safety net for your loved ones.
● Debt holders:
Those with significant debts, such as mortgages or loans, can use term insurance. This ensures that these financial obligations are taken care of, in case of an unfortunate death.
● Business owners:
Business owners can utilise term insurance to protect their business partners, cover business debts, and ensure business continuity in case of a partner’s death.
Types of term insurance plans
● Level term insurance:
Level term insurance is the most common type of term insurance, where the coverage amount remains the same throughout the policy term.
● Decreasing term insurance:
In decreased term insurance, the coverage amount decreases over time, often used to cover a specific debt like a mortgage.
● Increasing term insurance:
In increased term insurance, the coverage amount increases over time to account for inflation or other financial needs.
● Convertible term insurance:
This allows you to convert your term policy into a permanent life insurance policy.
● Renewable term insurance:
You can renew the policy at the end of the term without the need for a new medical exam. However, the premiums may increase.
● Term insurance with return of premium (TROP):
This plan offers dual benefits — life cover and a return of all paid premiums if you outlive the policy term. It’s ideal for those who want both protection and savings.
● NRI term insurance:
Designed specifically for Non-Resident Indians, this plan provides global coverage and allows policyholders to secure their family in India even while living abroad. It ensures peace of mind no matter where life takes you.
● Group term life insurance plan:
Offered by employers or organisations, this plan provides life cover to a group of people under a single policy. It’s an affordable way to offer financial protection to employees or members.
● Basic term plan:
This is the simplest and most affordable form of life cover. You pay fixed premiums for a chosen term, and your nominee receives the sum assured if something happens to you during that period.
● Basic protection plan:
This plan focuses purely on providing financial security to your family in case of your untimely demise. It doesn’t include savings or investment components, keeping it simple, affordable, and highly effective.
How does term insurance plan work?
Term insurance is a simple protection-based plan that works in the following way:
- Premium payment: You pay regular premiums for the chosen policy term.
- Coverage period: The plan offers life cover for a fixed duration, such as 10, 20, or 30 years.
- Death cover: If the policyholder passes away during the term, the nominee receives the sum assured.
- No maturity benefit: If you survive the term, there's no payout (unless it’s a return of premium plan).
- Affordable protection: A term insurance plan is one of the most cost-effective ways to secure your family's future.
When is the right time to buy term life insurance?
The ideal time to purchase a term insurance policy depends on your individual circumstances and financial goals. Here are some key considerations:
• Age:
Generally, the younger you are when you purchase a term policy, the lower the premiums will be. Starting early can lock in affordable rates.
• Life stage:
Consider purchasing term insurance when you have dependents, outstanding debts, or specific financial obligations.
• Health:
Your health can impact your eligibility for a term insurance policy and the premium rates you pay. Buying when you are healthy can lead to better rates.
• Financial goals:
If you have long-term financial goals, purchasing a term policy can help ensure that you meet your goals.
How much term life insurance coverage do I need?
The right coverage depends on your income, lifestyle, debts, and your family’s future needs. A common rule is 10–15 times your annual income. You can use a term insurance calculator to quickly estimate the ideal sum assured based on your personal details and financial goals.
Age (in Years)
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Recommended coverage (multiply annual income by)
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20 – 25 years
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20x your annual income – Suitable for young professionals starting out, ensuring future family protection and covering education or debts.
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26 – 30 years
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18x your annual income – Ideal for individuals planning major milestones like marriage or buying a home.
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31 – 35 years
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15x your annual income – Balances protection and affordability as financial responsibilities increase.
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36 – 40 years
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12x your annual income – Offers security for dependents, covering long-term goals and liabilities.
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41 – 50 years
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10x your annual income – Helps safeguard lifestyle needs and future expenses of dependents.
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51 years & above
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8x your annual income – Focuses on legacy planning and covering any outstanding obligations.
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Eligibility criteria and documents required to buy term insurance plans
Term insurance is a vital instrument for the financial security of your family. Before buying a term insurance plan, it's important to know the eligibility criteria and the documents required.
Eligibility criteria:
- Age: The minimum age to purchase term insurance is 18 years, and the maximum is 65 years. The age limit varies between insurers.
- Income: You should have a regular source of income to be eligible for a term insurance plan.
- Health: The insurer will ask for your medical history and may conduct a medical checkup to assess your health status.
Documents required:
- Age proof: You need to provide a birth certificate, passport, or PAN card as proof of age.
- Identity proof: Aadhaar card, passport, or PAN card can be used as identity proof.
- Income proof: Salary slips, bank statements, or income tax returns can be submitted as income proof.
- Address proof: Electricity bill, telephone bill or rental agreement can be submitted as address proof.
- Medical certificates: Medical certificates may be required if you have pre-existing medical conditions.
