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.
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.
Benefits of a term insurance policy
• Financial security:
Term insurance offers peace of mind, as it provides coverage for your family’s financial needs.
• Low premiums:
Premiums for term insurance policies are generally lower compared to other types of life insurance, making it a budget-friendly option.
• Estate planning:
Term insurance can play a crucial role in estate planning, ensuring a smooth transition of assets to your heirs.
• Tax benefits:
In many cases, the death benefit from a term insurance policy is tax-free, providing an added financial advantage to your beneficiaries.
• Customisable coverage:
Term insurance allows you to choose the coverage amount and term length that aligns with your specific needs.
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.
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.
