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Written By

Fathima Tabasum

Reviewed By

Ashok Manwani

10 Year Term Life Insurance Plan in India

We can't prevent every hardship in life's uncertainties, but we can secure our family's financial future with insurance. When choosing term insurance, the policy term is crucial as it defines the duration of coverage. This should align with your life stage, needs, and financial goals.

While lifelong coverage is ideal, a 10 year term insurance plan may be suitable when short-term protection is needed. It offers a practical solution for those with temporary financial obligations. Let's explore the benefits, considerations, and significance of a 10 year plan for both short-term security and long-term peace of mind.

10 Year Term Insurance Plan Overview

Feature	Description
Policy Term	Fixed for 10 years
Purpose	Provides financial security to the family in case of the policyholder’s demise
Riders/Add-ons	Options like accidental disability and critical illness riders are available
Premium Payment Options	Monthly, quarterly, half-yearly, or annual
Tax Benefits	Premiums paid are eligible for tax deductions under Section 80C of the IT Act

What is a 10 Year Term Insurance?

A 10 year term insurance is a term plan with a policy tenure of 10 years. It provides financial coverage for 10 years and is best suited for short-term financial protection.

If the insured person passes away during the term policy, the policy pays out a death benefit to the beneficiaries. This death benefit is typically a lump sum of money that the beneficiaries can use for any purpose, such as paying off debts, covering living expenses, or funding future needs like education.

Unlike whole life cover insurance, term life insurance doesn't accumulate cash value and is a pure protection plan that provides just the insurance cover. Once the tenure is over, the policy expires. It's a straightforward and cost-effective option for those seeking short-term financial protection.

Features and Benefits of 10 Year Term Life Insurance Plan

A 10 year term life insurance plan offers several advantages for those seeking cost-effective coverage. Below are the key features and benefits of choosing a 10 year term life insurance policy:

Coverage Duration

This policy provides coverage for a term of 10 years. The death benefit is paid out if the insured passes away within this period.

Premium Payments

Typically, premiums are fixed and remain constant throughout the policy term.

Renewability

Some policies may offer the option to renew for another term after the initial 10 years, often at a higher premium based on age.

Convertibility

Allows you to convert the term policy to a permanent policy (e.g., whole life or universal life) without a medical exam, usually before the term expires.

Death Benefit

Pays out a lump sum to the beneficiaries upon the insured’s death during the term.

No Cash Value

Unlike permanent policies, term life insurance does not build cash value or savings.

Affordable Premiums

Generally, term life insurance is more affordable compared to permanent life insurance.

Temporary Needs

Ideal for covering specific financial responsibilities that may diminish over time, such as a mortgage or education expenses.

High Coverage Amount

Often allows for a higher death benefit compared to the premium amount paid.

Additional Benefits

Some policies may include riders for critical illness or disability, providing extra protection.

How Does a 10 Year Term Insurance Policy Work?

A 10 year term insurance policy is a life insurance plan that provides coverage for a period of 10 years. Here’s how it works:

Premium Payments

The policyholder pays regular premiums (monthly, quarterly, or annually) to keep the policy active throughout the 10 year term.

Coverage Period

The policy offers financial protection for 10 years. If the policyholder passes away during this period, the insurance company pays a death benefit to the policyholder’s beneficiaries.

Death Benefit

The death benefit is a lump sum paid to the policyholder's family or beneficiaries if the policyholder dies within the 10 year term. This money can cover expenses, pay off debts, or support the family financially.

End of Term

If the policyholder survives the 10 years, the policy typically ends without payout. The policyholder may have the option to renew the policy, but the premiums might increase based on age and health at that time.

Illustration of 10 Year Term Insurance

Mr. Sujoy, a 35-year-old, decides to purchase a 10 year term insurance policy to ensure his family is financially protected in case something happens to him. To find the best options for his needs, he utilises a term insurance calculator and selects a policy with a 1 crore term coverage amount. Sujoy pays ₹15,000 annually for 10 years to keep the policy active.

Scenarios of 10 Year Term Insurance

Scenario 1

Scenario 2

Death During the Policy Term

If Sujoy passes away during these 10 years, the insurance company will pay ₹1 crore to Sujoy’s family or beneficiaries. This amount can be used to cover living expenses, pay off any outstanding loans, or ensure financial security for the family.

Outliving the Policy Term

If Sujoy survives for 10 years, the policy ends. There is no maturity benefit, but he may choose to renew the policy for another term, although the premiums may increase due to the policyholder's age.

Why Should You Choose a 10 Year Term Insurance?

Affordability

A 10 year insurance plan, even for higher sum assured, typically offers more affordable premiums compared to longer-term options, since it is for a lower term. This makes it a budget-friendly choice for individuals seeking essential coverage for the required term without a significant financial commitment.

Short-Term Obligations

A 10 year term insurance is suitable for covering short-term financial obligations, like paying off a mortgage, covering education of children, supporting dependents until they become financially independent. Thus, aligning the coverage period with specific milestones optimises the benefits of the term plan.

Optimising Risk Mitigation

A well-planned short-term coverage provides protection during critical life stages, thus minimizing financial risks associated with unexpected events during those stages. It ensures that dependents are safeguarded during the most vulnerable periods.

Premium Stability

Since you have planned the coverage for this period of 10 years, you can buy a level term plan, thus keeping your premiums stable for the tenure. This predictability can be beneficial for budgeting purposes, especially for people who prefer a simple and consistent financial plan.

Career or Business Focus

A 10 year term plan is suited for those in dynamic careers or entrepreneurs focused on short-to-medium-term business objectives. During their most volatile and aggressive times when the dependencies are most pronounced, they can plan a high coverage to take care of the financial liabilities in case they meet an unfortunate demise.

Death Benefit

In the event of the policyholder's death during the 10 year policy term, the designated beneficiaries will receive the guaranteed sum assured. You can select between a lump sum payout or instalment payments, depending on what you believe will best support your family's needs.

Tax Deductions

Premiums paid for the 10 year term policy are eligible for tax deductions under Section 80C of the Income Tax Act, 1961.

Surrender Benefit

If you discontinue premium payments before the end of the policy term, you may be entitled to a surrender benefit, provided that at least 2-3 years' worth of premiums have been paid in full.

Rider Protection

The policy allows for adding riders, which offer enhanced protection against accidental death, disability, critical illnesses, and other risks.

Loan Facility

Some insurers offer a loan facility with their 10 year term insurance policies, allowing you to borrow against the sum assured to meet urgent financial needs.

Who Should Consider Buying a 10 Year Term Insurance?

A term plan for 10 years is suitable when there's a need for financial protection for a specific period, such as until a mortgage is paid off or when children are financially independent.

Those Looking for Temporary Financial Protection

A term plan for 10 years is suitable when there's a need for financial protection for a specific period, such as until a mortgage is paid off or when children are financially independent.

People Looking to Cover Debt Repayment

Consider an individual who has taken a home loan of 1 crore and plans to repay it over a period 10 years. Individual can buy a 10 year term plan, thus ensuring their debt is covered if something happens to them during this repayment period. Thus, people looking to cover their debts for a certain tenure can opt for 10 year term insurance.

Business Owners

A 10 year term plan is valuable for business owners who want to provide financial security for their families in case of untimely death, especially during the critical early years of the business when the credits are high.

Seeking Extra Protection

10 year term insurance can be added to other insurance policies, like whole life or endowment insurance, to enhance overall coverage during certain years of increased liabilities.

Life Changes

Significant life changes, such as losing a job, changing careers, getting divorced, or preparing to welcome a new baby, can create financial uncertainty, making temporary life insurance an essential safety net.

How to Calculate Premium for 10 Year Term Life Insurance?

Calculating 10 year term insurance premiums involves several factors. Here’s a step-by-step guide to help you understand the process:

The coverage amount is often based on your annual income, debts, future expenses, and additional financial responsibilities.
Your age and health status significantly impact the premium. Younger and healthier individuals typically pay lower premiums.
Since you are looking at a 10 year term, the premiums will be calculated based on this duration.
Factors such as smoking, occupation, and hobbies can affect your premium. Riskier lifestyles usually lead to higher premiums.
Additional benefits like critical illness riders can increase the premium.

The Premium Calculation Formula:

Premium = (Base Premium + Rider Premium + Loading Factors)

Understanding the Cost of Premiums for 10 Year Term Insurance Plans

Let’s take the example of Rishab, a 30-year-old marketing professional who wants to secure his family’s financial future. He decides to buy a 10-year term life insurance policy with a coverage of ₹50,00,000.

10 Year Term Insurance Plan Details for Rishab:

Age: 30 years
Health Status: Non-smoker
Policy Term: 10 years
Sum Assured: 50 Lakhs

Insurers calculate the base rate based on age, health status, and sum assured. In Rishab’s case, lets assume that the base rate is ₹1.5 per thousand of the sum assured. Here is how the premium is calculated:

Base Premium = (Sum Assured / 1,000) × Base Rate

Base Premium= (50,00,000/1,000) × 1.5 = ₹7,500 per year

While Rishab is satisfied with the base coverage, he enhances his policy by adding an accidental benefit rider. This rider will provide an additional sum assured where the premium rate is increased to 10% - 20% of the base premium.

Rider Premium = Base Premium × 10% = 7500 × 0.1 = 750

His job involves regular travel, which is which is considered high-risk, leading to a 20% loading factor increase in the base premium.

Loading Factor = Base Premium × 20% = 7500 × 0.2 = 1500

Total Premium Calculation:

Premium = (Base Premium + Rider Premium + Loading Factors)

Premium = (7500 + 750 + 1500)

Premium = ₹9,750 per annum

Rishab pays ₹9,750 every year for the next 10 years. If he passes away during term his family receives the coverage amount of ₹50,00,000. If he survives the term, there is no payout.

Disclaimer: The above calculations are only for illustration purposes. For an accurate calculation, it's best to use an online premium calculator provided by insurance companies or consult with a financial advisor as they consider all the specific details and current rates.

Exploring if a 10 year term life policy is suitable for current life stage

Is a 10 Year Term Life Policy the Right Choice for You?

Deciding whether a 10 year term life insurance policy is the right choice depends on your needs and circumstances. Here are some factors to consider:

Coverage Needs

Assess your financial obligations and the needs of your dependents. A 10 year term policy may be suitable if you have short-term financial obligations to cover, such as a mortgage or children's college expenses.

Affordability

Term life insurance policies are generally more affordable compared to whole life policies. Consider whether the premiums for a 10 year term policy fit within your budget.

Future Plans

Think about how your financial responsibilities may change over the next decade. If you anticipate needing coverage for a longer period, consider a longer-term or a different type of policy.

Health Considerations

Your health and age can also impact the cost of insurance. If you anticipate a decline in health or expect significant changes in your life within the next 10 years, it may be worth considering a longer-term or permanent policy.

You should review your overall financial situation and future goals, and consult with a financial advisor or insurance agent to determine the most suitable life insurance policy for your needs.

A 10 year term life insurance policy is ideal for individuals seeking short-term financial protection for their families. It offers an affordable alternative to permanent life insurance, making it suitable for those with budget constraints. This policy is best for individuals with specific financial commitments expected in the next 10 years.

As life stages and circumstances evolve, policyholders can reassess their needs, making it an adaptable solution. While it may not suit everyone's long-term goals, 10 year life insurance serves as a practical and accessible choice for those prioritizing immediate protection and financial security.

FAQs about 10 Year Term Insurance Plan

All

Policy Features & Types

Lifecycle & Renewal

Eligibility

Can we extend the death benefit of a 10 year term plan after the expiry of the term of 10 years?

No, the death benefit is available only for the policy's tenure and cannot be extended beyond that.

What happens if the policyholder passes away after the period of 10 years?

Since the policy has a term of 10 years, the death benefit is applicable only for 10 years, beyond which the policy expires, and no benefit is paid if death happens beyond the coverage period.

What happens if I outlive my 10 year term plan?

If you outlive the term, the coverage expires, and there is no payout. However, some policies offer conversion options to endowment plans with certain terms and conditions.

Can I add riders to my 10 year term plan?

Yes, riders like accidental death or critical illness coverage can be added to enhance the protection offered by a 10 year term plan, though they may increase the premium.

What does a 10 year level term insurance mean?

A 10 year level term insurance is a term insurance providing life cover for 10 years at a fixed premium and life cover.

What is a 10 year decreasing term insurance?

With a 10 year decreasing term insurance, you have a death benefit cover for 10 years. However, the sum assured and the premium keeps decreasing over time as the policy reaches maturity.

What are the implications of renewing a 10 year term insurance policy after it expires?

Renewal typically comes with higher premiums due to increased age and potential health changes. It’s important to know the renewal terms and how they might affect your financial planning.

Can you cash in a 10 year term life insurance policy?

No, Since term life insurance doesn’t have a cash value component, you can’t cash it out. This type of policy only provides a death benefit that your beneficiaries receive if you pass away during the policy’s term.

Who benefits most from a 10 year term insurance plan?

A 10 year term insurance policy is ideal for individuals concerned about their family’s welfare and needing short-term protection. It’s suitable for those anticipating expenses like a child’s education or marriage in 10 years. Additionally, it’s a good option for those who can’t afford the higher premiums of permanent life insurance but have commitments in the next decade.

Do you need to take a medical exam for a 10 year term life insurance policy?

A 10 year term life insurance policy doesn’t require a medical exam; this means you can get coverage without providing blood samples, but this depends on the insurer to insurer.

Is a 10 year term policy more expensive for a smoker?

Yes, smokers generally face higher life insurance premiums, regardless of the term length.

How does a 10 year term life insurance policy work?

A 10 year term life insurance policy is straightforward. You make regular premium payments, and in return, you are covered for 10 years. If you pass away during this period, your family or nominee receives a death benefit. Typically, term life insurance policies don’t offer a maturity benefit.

Who is eligible to purchase 10 year term insurance plans?

Individuals aged 18 to 65 years can purchase term insurance. Eligibility conditions and benefits vary across insurers. It’s important to note that premiums increase with age due to higher health risks, so investing in a term plan is advisable as early as possible.

What if I forget to pay premiums for my term plan?

Insurers typically offer a grace period of 15 to 30 days from the date of the first unpaid premium to make the payment without losing benefits. After this period, you must revive your policy before the term ends to continue enjoying the benefits. Revival of lapsed policies usually incurs interest on the unpaid premium amount.

Do premiums for a 10 year term insurance policy increase every year?

No, 10 year term life insurance policy premiums do not increase yearly. The premium amount is locked in for the entire duration of the policy term.

Should I buy term or health insurance?

Ideally, you should consider having both options available. Term insurance ensures your family is financially secure if something happens to you, while a health insurance policy helps cover medical costs while you're alive.

If your priority is to safeguard your family’s future in your absence, term insurance is the way to go. But if you're more concerned about handling hospital bills, treatments, or unexpected health issues during your lifetime, health insurance is essential.