Digit Glow Term Life Insurance
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1 Crore coverage starting at just ₹1,309*
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Same-day issuance for healthy individuals
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No hard copies or queues required for claims
Buy Term Insurance Plan & Policy Online in India in 2024
Life is uncertain, and one can never foretell what the future holds for us. We cannot be certain about anything in life, whether we will be successful, get married, or have kids, but there is just one thing that is guaranteed: Death.
We cannot control life's unpredictability, but we can prepare for the unexpected just as we plan to lead a good life. The most crucial factor towards achieving this objective is ensuring your family is financially secure even after you are gone.
While most of the products in our investment basket are directed toward the objective of wealth creation, Life Insurance has a much broader purpose. It is financial support to the family in the unfortunate event of the breadwinner's demise. Term Insurance is the most fundamental kind of life insurance.
Table of Contents
What is Term Insurance?
Term insurance is a type of life insurance policy that provides coverage for a specified duration known as the “Term” of the policy. It offers financial protection to the policyholder's beneficiaries in the event of the policyholder's death during the term.
Unlike other types of life insurance, such as whole life insurance or endowment policies, term insurance does not accumulate cash value over time. Instead, it focuses solely on providing a death benefit to the beneficiaries.
Term insurance policies are typically more affordable compared to permanent life insurance options, making them an attractive choice for individuals seeking cost-effective coverage for a specific period, such as during their working years or mortgage repayment period.
How Do Term Insurance Plans Work?
A term insurance plan provides life cover for a specific period. You need to pay premiums regularly to keep the coverage active. If you, the policyholder, pass away during this period, your nominee gets the promised payout. You can also add extra benefits to increase your family’s financial protection. Here are the main steps:
Why Do You Need Term Insurance?
Features and Benefits of Term Life Insurance
Let's talk about the most common Features of Term Insurance:
High Coverage at Low Cost
Term insurance is a straightforward life insurance policy offering significant coverage for relatively low premiums. This means you can secure a large sum assured to protect your loved ones at an affordable cost. If your financial situation changes, you can adjust the coverage amount, increasing or decreasing it to match your current needs.
Flexible-Premium Payment Options
You can choose how you pay your premiums. Whether annually, every six months, quarterly, or monthly, this flexibility allows you to align your premium payments with your financial situation, making it easier to manage your budget.
Protection Against Critical Illnesses
Term insurance goes beyond just providing a death benefit; it also offers coverage for life-altering critical illnesses such as heart attacks, cancer, and kidney failure. This coverage can be invaluable, helping you cover the high costs of treatment and potentially lost income due to illness, ensuring financial stability during difficult times.
Extended Financial Security
A term insurance policy can secure financial protection for a long duration, often up to 30 years or more. This long-term coverage ensures that your loved ones will be financially supported in your absence, providing peace of mind about their future well-being.
Support for Disabilities
In the unfortunate event of an accident leading to disability, a term plan with a disability rider can provide essential support. This includes covering future premiums and offering financial assistance to your family, helping maintain their standard of living even in challenging circumstances.
Financial Stability for Your Loved Ones
Term plans offer a lump sum benefit if an unfortunate event occurs, ensuring your family has a steady income stream. This lump sum can cover daily living expenses, pay off debts, or fund future goals, providing a safety net for your loved ones.
Extra Benefits with Riders
You can enhance your term insurance coverage with additional riders for disability cover, critical illness cover, and accidental death cover. These add-ons provide extra layers of protection, offering financial support for daily expenses, loan payments, and clearing debts, ensuring comprehensive coverage.
Tax Benefit
Term insurance policies offer the advantage of tax deductions on premiums paid up to INR 150,000 annually under Section 80C of the Income Tax Act, 1961. Moreover, the payouts, including bonuses and surrender values, are tax-exempt under Section 10(10D), providing a dual benefit of protection and tax savings. There is no cap on the exemption limit for the payout received.
Premiums Returned on Survival
If you opt for a return of premium plan and survive the policy term, you will receive all the premiums you paid back without interest. This feature ensures you get a financial return if you outlive the policy, essentially offering coverage at no cost over the policy term.
Types of Term Insurance Plans in India
1. Basic Term Plan
This is the simplest form of life insurance. You pay a small amount of premium regularly, and if anything happens to you during the term of the policy, the insurance company will give a significant amount of money to your family. It's like a financial safety net, ensuring your loved ones are cared for financially if you are not around.2. Return of Premium Term Plan
A Term Plan with Return of Premium option provides a life coverage during the policy term, Imagine paying premiums regularly for insurance to protect your family. If you outlive the policy term, you get all the money you paid back. You get peace of mind knowing your family is protected, and if the insurance isn't used, you don't lose the money you paid.3. Term Insurance With Limited Premium Payment Term
This is for those who don't want to keep paying premiums for a long time. You pay premiums for a shorter duration but remain insured for a longer period. It's like paying for a subscription upfront and enjoying the services long after your payments have ended.4. Term Insurance With Increasing Sum Assured (Increasing Term Insurance)
With this plan, your insurance coverage grows over time. It's particularly useful because as life goes on, your financial responsibilities and the need for a larger safety net might increase. You start with a certain amount of coverage, and it gets bigger as the years pass, helping you keep up with the cost of living and inflation.5. Level Term Plans
The premium remains constant throughout the term life policy duration, ensuring that both the premium and the death benefit remain unchanged. This insurance can last anywhere from ten to thirty years, depending on the policyholder's requirements.6. Decreasing Term Insurance
This type of insurance is tailored for people whose financial responsibilities decrease over time. This policy includes a feature that enables the benefit amount to decrease monthly or yearly. Generally, the size of the policy also decreases over time until the coverage period ends or until the policy pays out.7. Convertible Term Plans
This plan offers flexibility. It starts as a basic term plan but allows you to switch to a whole-life policy later without going through medical exams again. It's perfect for those who have limited financial resources now but anticipate a need for longer-term coverage in the future. You do not need to pay a fee while converting but can expect higher premiums.Who Should Buy a Term Insurance Policy?
Any individual with financial dependents, such as a spouse, parents, retirees with liabilities, or business people with financial liabilities, must invest in a term insurance plan.
Young Professionals
Young, freshly employed individuals usually think they don't need Term Insurance since they don't have any dependents. However, this thought might not be correct. At a young age, with a healthy body and no liabilities, your premium would be much less than it becomes in the later stages of life and it remains the same for the entire term.
Newly Weds
Post-marriage, we start a new life and build a new lifestyle. We don't have just an emotional dependency on each other, but there is a financial dependency too. So, while we are still lost in the roses and chocolates, do take time to purchase a gift that will secure your partner's future life. Buy a term plan.
Tax Payers
Term Insurance premiums fall under tax exemption under section 80C of the Income-tax. The payouts from term insurance are also exempt from tax, subject to some T&C under section 10(10 D) of the Income Tax Act. Hence, term insurance is a wise investment when it comes to securing life and saving tax.
Home Loan Borrowers
The purchase of a home is a huge expense; if done through a Home loan, it’s a huge liability. Unfortunately, if the primary earner passes away, it would be difficult for the dependents to repay the home loan. Life Insurance provides this assurance that the burden of a loan would not come on the family members in such unfortunate circumstances.
Parents
Parents are vital in securing their children’s financial future through activities like paying for education and saving for university; mitigating these burdens with a term insurance plan ensures their dreams remain within reach, even in unforeseen circumstances.
Working Woman
Working women are pivotal in their families' financial well-being, and a term insurance plan safeguards their family's lifestyle and aspirations, covering any debts and serious health conditions and providing peace of mind.
Retirees
For retirees, term insurance is key to ensuring their partner’s financial comfort and healthcare needs in the later stages of life, maintaining their living standards without worry.
Housewives
Housewives also significantly contribute to their family's financial stability; term insurance guarantees that, in their absence, the household and childcare costs are manageable, preserving their family's way of life.
Self-Employed
Self-Employed individuals can protect their family's future and business obligations with term insurance, ensuring financial continuity and household stability after they're gone.
Non-Resident Indian
NRIs can support their family back home through a term insurance plan. This plan offers a safety net against the economic challenges of medical care and travel, ensuring peace of mind across miles.
Discover the Most Suitable Term Plan as Per Your Need
Choosing the right sum assured is crucial for selecting the best term life insurance plan to protect your family’s financial future. Here are the available options for sum assured amounts that might suit your needs:
50 Lakh Term Insurance
50 Lakh Term Insurance Plan is suitable for individuals who are just starting in their professional careers or have a limited financial burden. It can cover basic family needs and provide a safety net for your loved ones in case of an unfortunate event.
1 Crore Term Insurance
A 1 Crore Term Insurance Plan is ideal for individuals with a growing family or those who have taken moderate loans (like a car or small home loan). It ensures that your family maintains their lifestyle and that financial obligations are met without burden.
2 Crore Term Insurance
Opting for a 2 Crore Term Insurance Plan is wise for individuals with substantial financial responsibilities, including larger home loans or education loans for children. It provides a comfortable financial cushion, ensuring your family’s future is secure, and they can achieve their dreams without compromise.
5 Crore Term Insurance
A 5 Crore Term Insurance Plan is targeted at high-income earners who wish to leave a substantial financial legacy for their families. It's also suitable for those who have significant liabilities and wish to ensure their family can maintain a high standard of living, even in their absence.
10 Crore Term Insurance
Choosing a 10 Crore Term Insurance Plan is for those with large estates, multiple financial obligations, and a desire to offer their family an extensive financial safety net. This amount can help preserve wealth and support large-scale investments or business interests that the family may have.
How to Choose the Right Term Insurance Plan?
1. Claim Settlement Ratio of the Insurer
When choosing Term Insurance, the key element is the Insurer's Claim Settlement Ratio, which shows the proportion of claims settled to claims received. Opt for an insurer with a high ratio to ensure quick and efficient claim processing for your dependents, securing your family's financial well-being. Assessing the total claims settled can also reflect the insurer's dedication to fulfilling its commitments.2. Solvency Ratio
The Solvency Ratio gives an idea of whether your insurance provider has enough financial buffer to settle all claims in case of any extreme situation, such as natural disasters. The Insurance Regulatory and Development Authority of India (IRDAI) mandates a minimum solvency ratio of 1.5, indicating the insurer's ability to meet its long-term obligations.3. Critical Illness Cover
Adding a critical illness rider to your term insurance is crucial as it covers the financial impact of severe health conditions like cancer or major surgeries. This benefit offers a direct payout upon diagnosis, easing the financial strain of high treatment costs and helping maintain your family’s standard of living.
Including this cover in your term plan enhances protection and secures your family’s well-being beyond just life coverage.
4. Additional Covers Available
Comprehensive family protection with term life insurance can include:
- Waiver of Premium: Life coverage continues without the need for future premium payments if the insured is disabled.
- Accidental Death Benefit: Increases the sum assured paid to beneficiaries on accidental death, often matching the original coverage amount for extra financial security.
- Income Benefit: The family receives a regular monthly income instead of a lump sum, ensuring ongoing financial support.
5. Premium Cost
The premium cost of a term insurance plan is significant but should not overshadow the value of the protection offered. It's essential to look for plans with favourable terms and comprehensive coverage, including crucial riders, at fair rates.
Term insurance can be more cost-effective by opting for convenient payment methods and tax benefits under sections 80C and 80D.
Why Selecting Right Sum Assured is Important When Selecting the Term Plan?
Choosing the right amount of coverage for your term insurance is crucial for your family’s financial safety. This amount, known as the sum assured, protects your family if something unexpected happens to you.
A higher sum assured ensures your loved ones have sufficient funds to cover debts, education, and living expenses. Here’s a look at the 1 crore term life insurance plan for different age groups:
Note: The premiums illustrated are standard rates for healthy, non-smoker individuals. These rates are subject to change for direct journeys. The eligible sum assured and final premiums may vary and depend on actual underwriting.
How Much Term Insurance Coverage Do You Need?
In the unfortunate demise of the family's breadwinner, the insurance proceeds must be sufficient to cover the family's complete financial liabilities. Even in the policyholder's absence, the family's lifestyle must stay safe.
Children's education, marriage, pending liabilities, spouse needs, and regular expenses are some significant factors to consider when deciding on coverage requirements. This is the basic premise behind determining how much term insurance a person needs.
Here are a few methods that consider these factors and help you determine an indicative figure for your Term Insurance coverage requirement:
1. Expense Replacement
A method commonly suggested by most financial planners, the Expense Replacement method takes into account all the expenses of an individual, like day-to-day expenses, future expenses like children's education, marriage, financial requirements of dependents like spouses, parents, siblings, etc., loans and debts.
After arriving at this expenditure figure, we deduct the present value of our savings, like investments and any other life cover. Here, we do not consider assets like homes and cars in the calculation since we want our family to use them as utility and not depend on their monetary value.
This final figure gives us an idea of the insurance coverage amount required by a person.
2. Income Replacement
This method is based on the premise that the insurance proceeds must be sufficient enough to replace the lost earnings of the deceased breadwinner of the family. So, by this method,
Insurance Cover = Current Annual Income x Number of Years left for Retirement
It's a simple method that gives you a close idea of the required sum assured, but a significant drawback is that it does not factor in the inflation, income rise, and the major expenses on the way.
3. Underwriter's Rule
A common thumb rule for calculating the minimum amount of cover needed by a person, the Underwriter's rule states that the sum Assured = 10 x Annual Income. So, if your annual income is 10 lacs, you should have a life cover of 10 x 10 = 1 crore, i.e., 10 times the annual income.
While this formula has become widely prevalent due to easy calculation, it is believed to give a minimum figure as an indicator for the required sum assured.
4. Human Life Value
The Human Life Value (HLV) approach in term insurance is a method used to calculate the amount of life insurance coverage needed to protect your dependents financially if you were to pass away. It essentially estimates the economic value of a person’s life based on their future earnings, expenses, liabilities, and assets. So that the family wouldn’t suffer in case of the untimely death of its breadwinner.
Lets see how human life value is calculated.
To find how much insurance someone needs, the major factor widely used across the insurance industry is the Human Life Value or HLV. Basically, it is the present value of all future income a person would expect to earn for their family.
Steps to Calculate HLV?
The exact method of calculating HLV is a bit complex and involves the following steps:
- Step 1: Determine your current income.
- Step 2: Subtract your expenses, insurance premiums, and income tax payments.
- Step 3: Identify the number of earning years remaining before your retirement.
- Step 4: Find the inflation and discounting factor rate.
You can use our online Human Life Value Calculator for the above calculation.
To keep calculations simple, we usually apply the basic thumb rule as follows to calculate HLV:
For example, for a 30-year-old earning 10 lac annually, the ideal life cover would be 25 x 10,00,000= 2,50,00,000.
When Should I Buy a Term Plan?
Buying a term insurance plan is an important financial decision, and the timing of your purchase can have a significant impact on the cost of premiums and the benefits of the coverage. Here’s a breakdown of when to buy a term plan at different stages of life, and how the premium tends to vary with age:
In Your 20s (Age 20-29)
For fresh graduates and young professionals, it’s smart to secure lower premiums. If you are single or just starting your career, this is a great time to get long-term coverage at a lower cost. Additionally, if you have student loans or other debts, a term plan can help ensure these are covered in case of unexpected events.
In Your 30s (Age 30-39)
This stage is perfect for married couples, new parents, and homeowners. It’s a time when many start families, buy homes, and take on financial obligations. Ensuring financial protection for your dependents, like children or a spouse, is crucial in case of an unexpected event.
In Your 40s (Age 40-49)
This stage is ideal for parents with older kids and those approaching retirement. You might still have financial duties like paying off a mortgage, supporting college-bound children, or assisting elderly parents. Even though premiums are higher, it’s crucial to ensure your family is protected.
In Your 50s (Age 50-59)
This stage is perfect for those nearing retirement, with dependent children or debt. It's a good time to reassess your insurance needs, especially if your children are grown or your debt is cleared. Since insurers evaluate health risks more strictly, it's wise to secure a policy sooner if you are in good health.
In Your 60s and Beyond (Age 60+)
This stage is ideal for those with minimal or no debt, aiming to cover final expenses like funeral costs or leave a small financial legacy. Opting for shorter-term policies, such as 10 or 15 years, can help keep costs lower.
How to Decide the Term Insurance Policy Duration?
Mortgage Coverage
It's crucial to ensure that your life insurance policy spans the duration of your mortgage. This means if you are committed to a 30-year mortgage, securing a 30-year term life insurance policy is sensible. This alignment guarantees that in the unfortunate event of your passing, your family won't have to worry about continuing mortgage payments, thus securing their living situation.Children’s Education
Planning for your children's education requires foresight. If your children are currently in elementary school, a policy term of 20-25 years is recommended. This timeframe ensures that funds will be available to cover their higher education expenses, from undergraduate to potentially graduate studies, providing them a solid foundation without the burden of student loans.Debt Repayment
When considering other debts beyond a mortgage, such as personal loans or credit card debt, selecting a term that matches your repayment timeline is wise. This strategy ensures that your debts won't become a financial burden to your family, maintaining their financial stability.Spousal Support
If your spouse depends on your income, it's important to choose a policy term that allows for enough time for them to become financially independent. This might mean covering the timeframe until they can re-enter the workforce, complete education or training programs, or reach a financial milestone that ensures stability.Dependents’ Self-Sufficiency
For those with dependents, the goal should be to maintain coverage until they no longer rely on your financial support. This often aligns with them completing their education and establishing their careers. Tailoring your policy's term to these life milestones ensures they have the support they need during their formative years.Retirement Planning
Life insurance can also be a strategic part of retirement planning. Choosing a term that extends until your anticipated retirement age, say 65, means your spouse or dependents would have financial support in replacing your income, should something happen to you before then. This is especially critical if your retirement savings aren't sufficient to support your loved ones in your absence.Income Replacement
If your family heavily relies on your income, ensuring your policy covers the span until your planned retirement is crucial. This approach acts as a safeguard, providing your family with the necessary financial resources to maintain their lifestyle and meet future goals without your income.Age Considerations
- Opting for a longer term, such as 20 - 30 years, is typically advantageous. This period often encompasses many of life's significant financial milestones, such as buying a home, starting a family, and saving for children's education.
- A term of 15 - 20 years may be more fitting, considering that this is a peak period for financial obligations, including mortgage payments, tuition fees, and saving for retirement.
- A shorter term, like 10 - 15 years, might be adequate. At this stage, many have fewer debts, and their children may already be financially independent. The focus could shift towards covering final expenses or leaving a financial legacy for their heirs or charities.
Things to Keep in Mind When Buying Term Insurance
1. Compare Plans
Individual financial necessities vary greatly. It's essential to compare a wide range of term insurance plans to pinpoint the one that aligns perfectly with your family’s future financial needs, health conditions, existing debts, and other critical factors.
Grasping the variation between term insurance and traditional life insurance is crucial for a well-informed decision. Look into the coverage options, premium rates, term lengths, and the flexibility to adjust the policy as your life circumstances change.
2. Check Claims Settlement Ratio
The claims settlement ratio is a critical indicator of an insurance company's reliability and efficiency in handling claims. A higher ratio signifies a greater probability of your family receiving the claim without unnecessary hassle. This metric is vital for assessing if an insurer stands by their promise, ensuring your loved ones' financial safety in your absence.3. Check Persistency Ratio
Delving into customer feedback and grievances provides insights into the insurer's service quality and customer satisfaction levels. The persistency ratio, in particular, reveals the insurer's success in retaining its clients over time, serving as a testament to its service excellence and policyholder satisfaction. A high ratio suggests a loyal customer base, indicative of reliable and consistent service quality.4. Check Solvency Ratio
This financial metric is crucial for evaluating an insurance company's capability to meet its long-term obligations, including claim settlements. A solvency ratio of 150% or above is generally considered healthy, indicating the insurer's strong financial foundation and its ability to withstand financial crises while ensuring claims are paid.5. Understand Policy Benefits
Fully understanding the benefits your policy offers is essential to avoid surprises later on. These benefits should cater to your specific financial requirements and objectives, including the provision for your family's future, debt repayment, and other financial obligations. Ensure clarity on what the policy covers and any exclusions or limitations.6. Select Insurance Riders Carefully
Riders enhance your coverage by offering additional protection for scenarios such as critical illness, disability, and accidental death. Thoughtfully chosen riders can significantly bolster your financial security, ensuring comprehensive coverage beyond the basic term plan. Consider your and your family's unique needs when selecting riders.7. Choose Payout Option
Deciding on the payout structure is crucial. Whether you prefer a lump sum payment, ensuring your family has immediate access to funds, or a combination of lump sum and regular income, which provides sustained financial support, depends on your family’s anticipated needs and financial planning goals.8. Check Online Availability
In today's digital age, having access to online policy management and customer support is indispensable. Ensure the insurance provider offers robust online services, including easy policy management, claim filing, and prompt query resolution. Efficient online support enhances your experience and satisfaction over the policy term.How to Buy Term Insurance Online?
The five easy steps to buy term insurance plans in India are as follows:
Step 1
Choose the most suitable sum assured and policy term as per your needs.
Step 2
Compare the available term life insurance plans based on premiums and benefits.
Step 3
Consider adding riders like critical illness cover or accidental death benefits to the policy.
Step 4
Fill out the application form with personal details accurately.
Step 5
Make the premium payment online to activate your policy.
Why Should You Buy Term Insurance Online?
Buying term insurance online offers several advantages:
Easy Comparison of Plans
Buying term insurance online allows you to quickly compare different plans and understand their benefits, ensuring that you make an informed decision.
Lower Premiums
Online term insurance plans often have lower premiums compared to offline plans.
Quick and Simple Process
The online buying process is quick and straightforward, saving you much time.
Convenience
You can compare, choose, and pay for the most suitable plan at your convenience without physical meetings or paperwork.
Comfort and Flexibility
The entire process can be carried out from the comfort of your home at any time that suits you, making it highly convenient.
Accurate Information
Opting for an online purchase reduces the risk of misinformation and inaccuracies that can sometimes occur when buying through a sales agent over the phone. This method ensures that all the information you receive is precise and reliable.
What are the Eligibility Criteria for Term Life Insurance?
Eligibility criteria for term life insurance typically include age, medical history, lifestyle and residence location. Here are the concise eligibility criteria for term insurance:
Documents Required for Buying Term Life Insurance
Residence/Identity Proof Documents for Term Plan
Age Proof Documents Required for Term Insurance
Income Proof Documents Required for Term Insurance Policy
Note: Each section requires one or two documents as proof for term insurance, depending on the insurer's requirements.
How Term Insurance Calculator Can Be Helpful?
A term insurance calculator is a helpful online tool designed to assist individuals in determining the premium amount for a term insurance policy. Users provide details such as:
- Age
- Income
- Desired coverage amount
- Policy term
- Lifestyle habits (smoker or non-smoker)
- Health conditions.
Based on this information, the calculator estimates the premium required to secure the specified coverage. It’s a convenient way to assess your insurance needs without the need for medical exams.
Benefits of Using a Term Insurance Calculator
The benefits of using a term insurance calculator are:
Tips on Choosing the Best Term Plan
Assess Your Specific Needs
List your specific needs, including understanding your current income, the number of dependents, future life goals such as a child's marriage or spouse’s retirement corpus, and EMIs payable is crucial. This helps in determining the amount of coverage you need to ensure financial security for your family in your absence.Determine the Required Coverage
Before exploring various term insurance plans, decide on the coverage amount. This should be based on your financial obligations, future goals, and the lifestyle you want to secure for your dependents.Evaluate Claim Settlement Ratio
The claim settlement ratio is a critical factor. It indicates the number of claims settled by the insurance company out of the total claims received. A higher ratio suggests a reliable insurer who is more likely to honor claims.Solvency Ratios and Premium Rates
Solvency ratios reflect the insurance company’s financial health and its ability to meet long-term obligations. Premium rates should be affordable and provide good value for the coverage offered. Compare these across different insurers to find the best option.Look for Customisation Options
Choose policies that offer customization options to suit your specific needs. This can include riders for critical illness, accidental death, or waiver of premium, which enhance the basic term plan.Customer Satisfaction and Ratings
High customer satisfaction scores and excellent service ratings are indicators of a company’s reliability and quality of service. Research customer reviews and ratings to ensure you choose an insurer known for good customer support.Mixing Insurance with Investments
Insurance should primarily provide financial protection. Mixing it with investment products can dilute its effectiveness. Focus on pure term insurance for adequate coverage and keep investments separate.Tax Benefits
Term insurance premiums and additional riders can help you save on taxes. Under Section 80C of the Income Tax Act, premiums paid for term insurance are eligible for tax deductions, providing financial relief.What are the Factors Affecting Term Insurance Premiums?
When you buy a Term Insurance plan, your premium is calculated based on several demographic and lifestyle factors, such as age, gender, present or past medical ailments, habits like smoking or drinking, and hereditary diseases.
Here are the most common factors that affect a Term Insurance premium:
1. Age of Policyholder
Age is a primary factor affecting your Term Insurance premium. It's accepted that the younger we are, the fewer the risks of developing any critical medical condition that might result in any unfortunate event. This risk increases with age; hence, the insurance provider's financial risk also increases, directly affecting the premium.2. Policy Term/Duration
The Term Insurance premium directly depends on the period and increases with the increasing term, considering the older and the riskier years of life.3. Medical History
Medical History is also one of the significant factors affecting Health Insurance premiums since a higher risk to life can mean higher chances of claims to the company. The family medical history is also analysed since there are many diseases like stroke, diabetes, and cancer that can be passed down to the next generation.4. Current Health Condition
Term Insurance usually involves a medical checkup before you can buy the policy. This is done to check if the prospective policyholder does not suffer from any ailment like hypertension, diabetes, or any health condition that poses a life risk and thus increases the policy's premium.5. Occupation
Your premium is also affected by your profession. People in risky professions, like soldiers, pilots, and people working in the mining industry, are directly exposed to chemicals or other hazardous activities and are more exposed to risk, thus charging higher premiums.6. BMI (Body Mass Index)
A skewed BMI index can directly mean you are at a health risk, increasing your premium.7. Lifestyle Habits
A non-smoker who also doesn't consume alcohol has a lower premium than one who does. Also, if you are inclined towards adventure activities like scuba diving, skydiving, etc., your premium would be higher since these activities put life at risk.What is a Term Life Insurance Rider?
Term insurance riders enhance the financial protection provided by the base policy. They offer additional benefits to beneficiaries in case of specific events, such as accidental death, disability, or critical illness.
These riders can provide crucial support during challenging times. Note that adding riders to a policy usually comes with an extra cost on top of the premiums for the primary policy.
Types of Term Insurance Riders
1. Accidental Death Benefit Rider
Accidental Death Rider provides extra coverage to the dependents in case of accidental death of the life assured. This is over and above the basic coverage the insurer already provides in the base plan.
In fatal accidents, the medical interventions that go into saving the victim's life hit the family's finances. In many cases, the victim eventually dies, and the family then deals with the personal loss in addition to this financial loss.
To cover these scenarios, in cases where the life assured does not immediately pass away after an accident, the Accidental Death Benefit rider provides the Sum assured to the nominee within 120-180 days from the accident date. Hence, accidental death benefits are among the most significant riders that must be added to the primary insurance policy.
2. Critical Illness Rider
A Critical Illness Rider provides financial coverage in case the life assured is diagnosed with any critical illnesses mentioned in the policy document. Some critical illnesses are cancer, heart ailments, and tumours.
The Critical Illness Benefit is provided to the life insured to meet treatment and household expenses in times of need. It acts as an Income Replacement plan and ensures that the illness does not affect the policyholder's treatment and family finances.
3. Accidental Total and Permanent Disability Benefit Rider
This rider takes care of the finances in case the life assured suffers an accidental partial or permanent disability and becomes unfit to continue working in any occupation.
For example, loss of both eyes and legs, arms or one arm and a leg, can be a permanent disability. Such kind of disabilities leave a person incapable of leading a normal life where they can take up a job and earn for their family.
In such cases, the policyholder is paid a specific portion of the Sum Assured regularly for a few years, which takes care of the finances for the most challenging years of the family.
4. Waiver of Premium Rider
This rider ensures the policy stays active even when the policyholder is unable to pay premiums due to a physical disability.
The premiums are waived with this rider, and the policy continues till maturity. On maturity, the benefits are paid to the nominee.
This rider can be availed in cases where:
- The life insured has been disabled for six months or more.
- When life insured is diagnosed with any of the critical life-threatening ailments.
5. Terminal Illness Rider
Also known as an Accelerated Death Benefit Rider, this rider ensures that the Sum Assured is paid to the policyholder upon diagnosis of any terminal illness.
What are Terminal Illnesses?
Terminal Illnesses are ailments with a high likelihood of death within six months.
In these types of illnesses, in addition to the eventual personal loss of the family member, the finances are also hit badly during the treatment.
A Terminal Illness Rider provides much-needed financial freedom when necessary to put finances in order, obtain medical support, or travel.
This rider occurs only after the diagnosis and short life expectancy confirmation.
6. Income Benefit Rider
When you buy insurance, you have taken an essential step towards securing your family's future. Under usual circumstances, insurance pays off the death benefit as a lump sum in case of the policyholder's demise.
However, with the Income Benefit Rider, if the policyholder dies during the policy term, the family receives a certain monthly payout, which helps them manage their finances better.
Income Benefit Rider acts as a substitute for monthly income in the absence of the policyholder so that the family doesn't struggle to pay bills.
7. Hospicare Benefit Rider
The Hospicare Benefit Rider, also known as the Hospital Cash Benefit Rider, is an optional add-on cover that can be added to your insurance plan to enhance its coverage. This rider provides:
- A fixed amount is paid for each day of hospitalization.
- Additional fixed amount if admitted to the Intensive Care Unit.
- Lump sum payment for surgeries, with amounts varying based on the surgery’s severity.
- This rider can help manage the financial stress associated with hospital stays by covering various expenses.
Benefits of Adding Riders to Your Term Insurance Policy
Term insurance riders are extra benefits you can add to your basic term insurance policy for more protection. Here are some of the key benefits of including riders in your term life insurance plan:
- Riders allow you to tailor your term insurance policy according to your specific needs and concerns. You can choose riders that address your particular worries, such as critical illness or accidental death.
- Certain riders provide a lump sum payment or additional coverage in case of specific conditions, such as critical illness, disability, or accidental death.
- Adding riders to your term insurance policy can be more cost-effective than purchasing separate insurance policies for each additional coverage. It consolidates your insurance needs into one policy, potentially reducing the premium cost.
- You can add or remove at different stages of the policy term, allowing you to adjust your coverage as your needs change over time.
- Some riders ensure your insurance continues even if you temporarily can't pay premiums due to a disability or job loss.
- Some riders let you receive part of your sum assured early to help with medical costs in the event of a critical or terminal illness.
- Like your primary policy, you might get tax savings on the money you pay for these extra benefits.
Some Relatable Real-Life Examples for Better Understanding
Aravind, 35, and Priya, 30 (Married Couple)
Aravind and Priya, both successful IT professionals, are repaying a mortgage for their dream home. Their jobs include insurance covering the outstanding mortgage balance if either of them passes away during the loan term, leaving other financial needs unaddressed.
So they decided to buy term life insurance, knowing their loved ones would be secure even if the unexpected happened.
Rohit, 34, Family Man (Sole Breadwinner)
Rohit, aged 34, is a devoted husband and father of two who is responsible for his family's financial well-being. His father is close to retirement, while his parents-in-law are also approaching retirement.
To safeguard the financial future of his loved ones, he plans to obtain term life insurance with the flexibility to adjust the coverage as the family's dependency needs evolve, providing safety for their future.
Sneha, 23, (Single Woman)
Sneha, a young professional with no dependents to worry about, is considering applying for a home loan. She recognizes the value of purchasing term life insurance to secure her future while she is young and can benefit from lower premiums due to her age and health.
Plus, she knows that once she gets married, she can easily update her policy to include her spouse as the nominee. This proactive approach ensures Sneha stays ahead in her financial planning.
How Term Plan is Different From Other Life Insurance Plans?
Term Life Insurance Vs Whole Life Insurance
Term Life Insurance Vs Endowment Plan
Term Life Insurance Vs Pension Plan
Term Life Insurance Vs Unit Linked Insurance Plan (ULIP)
Term Life Insurance Vs Savings Plan
What Do You Need to File a Claim?
To file a claim for term insurance, you must gather several important documents. Here is a list of the typical documents required:
What Happens Once You Make a Claim?
When you make a claim on a term insurance policy, the process generally involves several key steps:
How Long Does it Take for the Claim Approval?
Verification and Investigation
Once the documents are submitted, the insurance company will verify them. This may involve an investigation to confirm the authenticity of the claim. This step can take anywhere from a few days to a few weeks, depending on the complexity of the case.Claim Processing
After verification, the insurance company processes the claim. According to the Insurance Regulatory and Development Authority of India (IRDAI), insurers are required to settle claims within 30 days of receiving all necessary documents. If further investigation is needed, the insurer must complete it within 90 days.Approval and Payout
If the claim is approved, the payout is made to the nominee as per the policy terms. The entire process, from claim intimation to payout, generally takes 30 to 60 days.
If there are any discrepancies or missing documents, the process might take longer. It’s always a good idea to keep in touch with the insurance company and provide any additional information they might need promptly.
What are the Payout Options in Term Life Insurance?
1. One-Time Payment / Lump-Sum Payment
This is the most straightforward option. The beneficiaries receive the entire death benefit as a single payment, allowing them immediate access to the funds to cover expenses such as funeral costs, outstanding debts, and living expenses.2. Fixed Monthly Payout
Instead of a lump sum, the death benefit can be paid in instalments over a specified period. This can provide a steady income stream for the beneficiaries, helping them manage their financial needs over time rather than receiving all the money at once.3. Increasing Monthly Payout
With increasing monthly payouts, beneficiaries receive a single lump-sum payment from the entire sum assured amount. Additionally, the nominee receives a monthly income, increasing by 10% annually for 10 years, determined by the insured individual when purchasing the insurance.How to Avoid Claim Rejection?
1. Suicide
Most insurance policies include a suicide clause, stating that if the policyholder commits suicide within the first one or two years, the claim won’t be paid. If the insurer suspects the application is an attempt to exploit this, they might reject it.2. Participation in Hazardous Activities
If you participate in high-risk activities like skydiving, scuba diving, or motor racing, insurers may either reject your application or charge you higher premiums due to the increased risk.3. Self-Inflicted Injuries
Policies often exclude coverage for death due to self-inflicted injuries. If there's evidence that the applicant has a history of self-harm or attempted suicide, the insurer may deny coverage.4. Criminal Activities
Death resulting from criminal activities is usually not covered. If you have a criminal record, insurers may reject your application to reduce their risk.5. Substance Abuse
Abusing alcohol, drugs, or other substances increases health risks and the chance of premature death. Insurers may deny coverage if you have a history of substance abuse.6. Pre-existing Medical Conditions
Severe or multiple pre-existing conditions like diabetes, heart disease, or cancer make you a higher risk for insurers. They might reject your application or offer coverage with exclusions and higher premiums.7. War and Terrorism
If your profession or location is at high risk for war or terrorism, the insurer may deny coverage to avoid large potential claims.8. Non-Commercial Aviation
Engaging in aviation activities, like being a pilot or frequently flying in non-commercial aircraft, increases the risk of accidents. Insurers may reject your application or raise premiums if you’re involved in such activities.Terminologies Related to Term Insurance
Policyholder
The Policyholder is the person who buys the insurance and pays regular premiums.
Coverage
The amount of money the policyholder can get from the insurance.
Life Assured
The person whose life is insured. This may or may not be the same person as the policyholder.
Nominee
The person who receives the death benefit or sum assured in case of an unfortunate demise of the policyholder. The policyholder chooses the nominee when taking the policy; however, they can always be changed during the policy term.
Sum Assured
This is the amount of money a nominee receives in case of the policyholder's demise, and it is one of the major factors determining a policy's premium.
Policy Term
The Policy Term is the period during which a policy is active. An insurance policy's benefits and life cover are valid during this period, which differs across policies.
Insured
The person who is covered by the insurance policy.
Insurability
Factors that affect a person’s health or life expectancy, making them more or less likely to get injured or sick.
Premium
Premium is the amount of money you pay to the insurance company in return for the insurance. It can be paid in various modes: annual, half-yearly, or even monthly.
Death Benefit
The total amount an insurance provider gives to the nominee in case of demise of the life assured. This mostly equals the Sum Assured; however, it might be more when riders are added.
Add-on Benefits (Riders)
Add-on benefits or Riders are additional coverages on your policy that cover specific conditions like critical illness, accidental death, etc. They come at an additional cost over and above your standard premium.
Claim
In the case of the life assured's demise, the nominee should file a claim with the insurance company. It is an intimation to the insurance company about the unfortunate event and the demand for insurance coverage payment.
Maturity Date
The date when the insurance policy ends, and any benefits are paid out.
Maturity Claim
The amount received by the policyholder when the policy ends, if it includes a maturity benefit.
Surrender Value
The amount of money the policyholder gets if they end the policy before the maturity date.
Vesting Age
The age at which the policyholder starts receiving regular payouts from an insurance-cum-pension plan.
Accelerated Death Benefit
A rider that allows the policyholder to receive a portion of the death benefit while still alive if diagnosed with a terminal illness.
Accidental Death Benefit
An additional benefit paid if the insured dies due to an accident.
Beneficiary
The person or entity designated to receive the death benefit from a life insurance policy.
Grace Period
The time period after the premium due date during which the policyholder can still make a payment without losing coverage.
Lapse
The termination of a policy due to non-payment of premiums.
Underwriting
The process by which an insurance company evaluates the risk of insuring a person and determines the premium.
Free Look Period
A period during which the policyholder can review the policy terms and cancel the policy without penalty.
Exclusions
Specific conditions or circumstances for which the policy does not provide coverage.
Conversion Option
A feature that allows the policyholder to convert a term policy into a permanent policy without undergoing a medical exam.
Reinstatement
The process of restoring a lapsed policy by paying the overdue premiums and meeting other requirements.
FAQs about Term Insurance Policy in India
Is there an age limit to buying a term insurance plan?
What are the types of deaths covered in term insurance?
The following types of deaths are considered valid by an insurance provider at the time of claim settlement:
- Natural Death
- Death due to any critical illness
- Accidental Death
- Death due to natural calamities like earthquakes, floods, etc.
- Suicide is covered if it happens after 12 months of buying the policy. However, if it occurs within 12 months, a certain proportion of the sum assured is paid to the nominee. This depends from one insurer to the insurer.
What types of deaths are not covered by insurance?
- Any Death that involves self-harm or self-infliction of injury like suicide is not covered under insurance.
- Death due to driving under the influence of alcohol or drugs is not covered.
- Death due to participating in hazardous activities
- Death due to the involvement in illegal activities when either the life insured was involved in any criminal activity or the nominee is criminal, and it is discovered that the life insured was killed with the nominee's involvement.
Can I buy more than 1 term insurance policy?
Can I change the nominee in my term plan, and how many times can I do so?
Should we take riders along with term insurance?
Do we get any return in term insurance?
Can I get term insurance if I'm not in a job?
Can husband and wife both take term insurance?
What is the difference between term insurance and accidental insurance?
Why should I buy term insurance when I already have life insurance from my employer?
What would happen if a person has two term insurance policies?
Can Non-Resident Indians (NRIs) buy term plans in India?
Does the premium remain the same throughout the tenure of a policy?
What if I do not want my term cover once I have taken it?
On maturity, can a fresh policy be availed at the rate of the old premium?
What is the contestability period in life insurance?
If I stop smoking today, or maybe 6 months before taking a Term Insurance Policy, will I get a Non-Smoker rate?
What is the best kind of life insurance policy?
What is the difference between term insurance and life insurance?
Under which sections of the Income Tax Act can policyholders claim term insurance tax benefits?
Term insurance offers tax benefits under various sections of the Income Tax Act.
- Section 80C of Income Tax Act: Term insurance policyholders can claim a deduction of up to ₹1.5 lakh in premiums paid annually. This section also covers other investments like the Public Provident Fund, National Savings Certificates, ELSS, and tax-saving FDs.
- Section 80D of Income Tax Act: While this section primarily applies to health insurance plans, term insurance policyholders with additional covers (such as Critical Illness or Surgical Care) can also save taxes on premiums paid.
Is term insurance refundable?
What is the policy term?
Does term insurance have maturity?
What expenses are covered in my term plan?
How long should be the term of the plan?
Choosing the longest possible term insurance duration, depending on individual needs and responsibilities, is generally a good idea. Consider your current age, expected retirement age, your children's age, and any significant financial liabilities.
For example, if you are 30 years old and think you will only need life insurance for the next 30 years, opting for a 40-year tenure is still recommended.
How to get low premiums on term insurance plans?
What happens at the end of the policy tenure?
Is there any age limit to getting a term insurance plan?
Why is term insurance essential at every stage of life?
What is the rule of term insurance?
Do you get your money back at the end of the policy term?
What are the advantages and disadvantages of each premium payment option?
- The Single Premium Payment Option entails paying the full premium upfront, avoiding monthly hassles. However, due to its size, it can strain budgets.
- Regular Premium Payment Option allows for periodic payments (monthly, quarterly, half-yearly, or yearly), making it budget-friendly, though it might incur extra charges.
- Automatic payments ensure timely contributions and help avoid missed payments by requiring enough funds in your account to prevent late fees or coverage lapses.
- Lump-sum payments may attract discounts, benefiting upfront payers, but require careful financial consideration to prevent strain.
Which is the most common type of term insurance?
Who can be a nominee in term insurance?
How to claim term insurance after death?
Please ensure that you remember the following steps to claim the assured sum as a nominee of the term insurance policyholder:
- Step 1 - As a nominee, notify the insurance company about the claim
- Step 2 - Keep your documents handy to ensure a smooth claim process.
- Step 3 - The insurance company will carefully evaluate your claim.
- Step 4 - Claim settlement
Do I need to buy term insurance even if I am covered under my company's group policy?
What are the eligible investments and expenses under Section 80C for tax deductions in India?
Other Important Articles Related to Term Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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