Term insurance is also called a term life insurance policy, which provides you with high coverage at low premium rates. A term policy provides you financial coverage to the policyholder’s family against a fixed amount of premium for a specific “term” of the policy. In case of the unfortunate demise of the policyholders during this term, the chosen cover amount is paid to the nominee as a death benefit.
Now, you may think this is similar to life insurance. But there is some difference between these two. Let us look at those to clarify your doubt.
Difference between Life and Term Insurance
| Features | Term Insurance | Life Insurance |
| Coverage | Term insurance plan only offers death benefits to the dependents of policyholders | Life insurance offers both death and maturity benefits to the Policyholders and their family |
| Add-ons | Term Insurance provides you add-ons to increase your benefits | Life insurance also provides you add-ons to increase your benefits |
| Sum insured | Here, coverage is much higher. It depends upon your requirements and the number of persons included in your plan | Here, coverage is much higher. It depends upon your requirements and the number of persons included in your plan |
| Term Period | It ranges between 10 to 35 years. | between 5 years to 30 years. Whole life insurance gives coverage for the whole life of the policyholder’s life |
| Premium | Term insurance is the most affordable life insurance product available | Life insurance premiums are higher compared to term insurance plans in India. |
Why should you buy a Term Insurance policy?
(i) Financial Security
The primary benefit of a Term insurance policy is that it provides long time financial support to the policyholder’s family in case of any unfortunate event with the policyholder.
(ii) Death Benefit
In case of any unfortunate event with the policyholder, the Insurance company provides financial protection in the form of a death payout. The registered nominee receives the entire sum assured plus the bonus accumulated over time.
(vii)Tax Benefits
Term insurance premiums are eligible for a tax deduction of up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act 1961. Also, the payout received from an insurer is exempt from tax u/s 10(10D) of the Income Tax Act and the premium amount paid for riders such as critical illness can be claimed u/s 80D.
(viii)Riders
Riders such as accidental death benefit, Premium waiver benefit, critical illness, Terminal illness rider, a daily hospital cash benefit, Surgical care rider benefits, accidental disability rider and Income benefits are add-ons to your current Core Term insurance plan, which help customize the policy according to your specific needs.
(ix)Flexible premium payment option
Insurance holders can choose the frequency of premium payments as per their needs, like monthly, quarterly, half-yearly, or yearly.
(xi)Loan Facility
Some Term insurance Plans offer loans against the policy feature, which can help an individual to fulfil urgent financial requirements such as treatment for medical emergencies or help an individual to fulfil financial obligations which cannot be avoided.
(xiii)Investment Options
Term insurance provides financial protection to beneficiaries or through investment options like ULIPS, endowments, etc, that are used for Long term investment.
What benefits will you get from buying Term insurance online?
If you are confused about whether you should buy a term Life insurance policy online or offline, then have a look at the benefits you will get while buying it online.1. Plenty of options: – While taking Term Life insurance online, you will get plenty of options in a single place. You do not have to travel to the offices of different companies or the agents. Simply you have to open your mobile, laptop or tab; whatever you have and search for the best life insurance policy providers. After checking all the facilities, they are providing you can buy the best policy which suits your conditions.
Easy to compare: – As you get the list of all Term life insurance provider agencies in one place and their services, you can compare them easily and can buy the best policy which is fit for your requirements.
3.No middlemen or agents: – because of online term insurance, there is no need for agents anymore. Companies sell their policies directly to customers. This makes the process faster. Also, the policy cost also decreases, as the company does not have to pay any agent to sell their policies and the number of paperwork also decreases, again reducing the premium cost.
4. Transparency: – While buying term insurance online, companies provide all their detailed terms and conditions on their website. Even top insurance broker websites like policybazaar.com provide policies for many companies. So you do not have to visit many websites. On a single website, you can compare them all.
As no middleman is involved, no information will be hidden from customers for selling a particular policy. So, you can buy a policy only after comparing all the companies and after getting all the information.
5. Online Reviews: -Company websites provide reviews of their current policyholders. This can help you to get the proper fit policy according to your requirements. While buying a policy offline, this information you cannot get this, as you cannot visit all the policyholders physically.
6. Full clarity about the policy: – here you will get full information about the policy you are going to purchase. No agent is there to hide the information from you to sell the policy. Already existing customers’ review also helps you to take the right decision. If you are still not satisfied, many policy providers have live chat facilities on their websites, where you can clear all your doubts by talking to customer support.
7. Advance Insurance quote: – After filling in some details like your age, name and bad habit and education, etc. on the website, the company will send you a term insurance quote instantly, which contains details about coverage and premium that you have to pay. You can buy the policy only if you are satisfied completely with all the conditions.
8. Less time taking: – As you do not have to go anywhere while buying the policy, for paying the premium, or for getting any information; it is very less time taking than offline policy buying.
9. More convenient: -It is more convenient to buy the policy online than to buy it offline because here, you can do the inquiry anywhere in your comfort zone and at any time when you are free. There is no time bound.
10. Information available 24X7: – All the required information is available 24/7. You can get all information at any time, as you do not have to visit there physically.
11. Low premium: -As there is no need for any agent, no commission has to be given to them. Also, less paperwork is needed, and the company saves on postal charges and other office expenses while selling policies online. So, the premium amount also reduces significantly while purchasing term insurance online.
12. Discounts: – Many companies give discounts to customers who buy term insurance online from their website. This also allows you to buy the same policy with a lower premium value.
13. Instant policy activation: -Here, your policy will be activated instantly after filling in some details on the company’s website. You do not have to wait for processing for long.
14. Safe Transaction: -If you are getting second thoughts on whether to buy online or not due to the security threat in an online transaction, then do not worry at all. Here your money is completely safe. You have to do only one thing which is to check, whether the company is approved by IRDAI (Insurance Regulatory and Development Authority of India) or not.IRDAI registers the company which is safe and has saved transaction modes.
15. Pre and post-sell service: – When you buy a term policy online, the company provides you with a premium calculator, by which you can calculate the premium amount which you have to pay. Again, after buying, the company will send the premium receipt, soft copy of the policy bond and premium renewal reminder online.16.No geographical limitation: – As you do not have to visit the office, the company’s location does not affect your purchase. You can buy a term insurance policy from any company present in any geographical location.
Exclusions Of A Term Insurance policy?
Suicide:- Suicide is not covered in all term insurance policies. Insurers will not pay the policyholder’s family in the event of the policyholder committing suicide within a year of purchasing the policy
Death due to war:- Death due to acts of war is not covered under a term insurance plan.
Death due to actions by the insured:- Accidental death brought on by the actions of the policyholder, like extreme mounting, risk action adventure and sports, etc., are not covered as these are viewed as self-risks by the policyholder.
Death due to intoxication:-if the policyholder’s death is due to consumption of alcohol or narcotic substances, the insurer is not liable to compensate dependents.
Pre-existing Medical Condition:- when the policyholder buys a term life insurance policy but doesn’t disclose bad habits or pre-existing medical conditions that case insurer is not able to pay the coverage to the policyholder’s family
Types of Term insurance plans
Level Term Plans:-Level Term Plans are the most basic plans of term insurance. Under these plans, the sum assured is fixed throughout the policy term and the benefits are payable in the event of life policyholder’s death
Term Return of Premium (TROP) Plan:-A term plan with return of premiums (TROP) provides for a maturity benefit in case the life policyholders survives till the end of the policy term. It is the only term plan which provides maturity benefits after the policy term.
Decreasing Term Insurance Plan:-These plans are helpful for policyholders who have other liabilities to pay off
Increasing Term Insurance Plan:-These plans to allow the life assured to grow the value of the death sum assured every year while keeping the plan‘s premium the same
Convertible Term Insurance Plan:-A convertible insurance plan can be converted to other types of life insurance plans like endowment plans, pension plans at later stages
Factors you should consider while buying a Term insurance policy
Options for Riders:- Riders such as accidental death benefit, Premium waiver benefit, critical illness, Terminal illness rider, daily hospital cash benefit, Surgical care rider benefits, accidental disability rider and Income benefits are add-ons to your current Core life insurance plan, which help customize the policy according to your specific needs.
Claim Settlement Ratio:- This is the percentage of the total claims received during the financial year that the life insurance provider has settled.
The terms and conditions of the policy:- There are other terms and conditions of a life insurance policy that you need to consider as a policyholder.
Claim Process: – You must check the claim process before buying a life insurance policy. Simple the process, the faster you can pass your claim. So, it is better to buy a policy with a simpler claim process.
Eligibility criteria for buying a Term Insurance policy
| Features | Eligibility Criteria |
| Minimum age at entry | 18 years |
| Maximum age at entry | 65 years |
| Minimum Policy Tenure | 5 years (may vary with insurer) |
| Maximum Policy Tenure | No limit for term plan (may vary with insurer) |
| Who can Purchase? | Young individuals, Newly Married, Parents, SeniorCitizen |
| Are NRIs eligible? | Yes |
| Payout Options | Lump-sum Monthly Payout Annual PayoutLump-sum with monthly income Lump-sum with increasing monthly |
| Add-ons or Rider | Waiver of PremiumAccidental deathPermanent or partial disabilityFamily Income benefit And, critical illness |
| Documents Required | Photo Identity Address Proof Age ProofIncome Proof |
| Medical test | It is mandatory to undergo a medical test for a term insurance policy. It helps the company to be aware of any health conditions and risk factors related. |
Documents required for buying a Term Insurance policy
Make sure you have all the documents mentioned below with you, when you are applying for a Term insurance policy.
Age proof: –
You can submit any one among these documents as your age proof.
- Birth certificate
- Aadhar card
- Driving license
- Passport
- 10th certificate
- Voter ID
- PAN card
Identity proof: –
For identity proof, you can submit any of these.
· Aadhar card
· Voter ID
· PAN card
· Passport
· Driving licence
Address proof: –
As address proof, you have to submit your permanent address. You can use any of these documents for this purpose.
· Aadhar card
· Telephone bill
· Passport
· Rasan card
· driving license
· Electricity bill
· Voter ID
Other documents required while buying Term insurance are: –
- Passport size photograph
- Medical test reports (Either you have to undergo some medical test for that or you have to generate it on your own if the insurer does not tell for a medical test.)
- Proposal form after filling it properly
Apart from all these, some insurers may ask for some other documents according to their requirements.
Claim process of Term Insurance policy
Buying a term insurance policy is half the battle won. You and your family must be aware of the term insurance claim process.
How to File a Claim on Death?
In case of the policyholder’s unfortunate death, the family members/beneficiaries/nominees must inform the insurer as soon as possible. Delaying things will only make it difficult at the time of claim settlement. You can do the same via.
Online mode – Visit the insurance company’s official website and intimate a claim.
Phone Banking – Contact the insurance company via phone banking or email.
Branch mode– Physically visit the bank branch or Insurance office with the relevant documents.
- Claim Intimation:
- Upload Supporting Documents:
- Claim Settlement:
FAQ:
What are the key features of a term insurance plan?
following are the key features and benefits of a term insurance plan-
Cost-effective
Budget-friendly
Easy to buy
Rider available
Low premiums, high sum assured
Long-term protection
Is suicide covered under term insurance?
Generally, Suicide is not covered under term insurance. In case a policyholder commits suicide within 12 months of the insurance date of the policy, the nominee receives 80% of the total premium paid till the date of death after deducting taxes or charges.
Why is Term insurance Important?
Term insurance is important to ensure the financial stability of the surviving family members in case of the policyholder’s unfortunate death.
When Should I Buy Term life insurance?
There is no fixed right to buy a term life insurance. You can buy term life insurance at any point in your life. But Expert advises buying a term insurance plan early as soon as possible so you can get maximum benefits by paying low premiums.
How much Term insurance coverage do you need?
If you want to find out the ideal term insurance coverage, you need to follow export advice and decide your coverage is about 15 to 20X of your annual income. You can take a few aspects like your health condition, liability, the number of dependent family members, and others to decide the term insurance coverage amount you need.
What happens if the nominee dies before the policyholder?
In the event, the nominee of the term insurance policy dies before the policyholder. The policyholder could add another nominee if the policyholder kept the nominee’s details, the benefits payable to the legal heir or legal representative.
Can You Cash Out Term Insurance?
No, policyholders can’t cash out their term insurance policy because term insurance only provides protection.
How many times can I change the nominee in my term plan?
You can change the nominee of your term insurance plan as often as required or specified by the insurance company.
What type of Death is not covered under term insurance?
The term insurance plan does not offer coverage for some specific type of death, like driving under the influence of alcohol, pregnancy, and participating in activities like adventurous sports that involve certain risks.
Do term insurance premiums increase every year?
No, The term insurance premiums remain the same every year from the date of issue and remain the same premium till the end of the policy.
Can a Housewife take term insurance?
Yes, most life insurance companies nowadays provide term life insurance to housewife with affordable premiums.
What Are Term Insurance Riders?
Term insurance riders or add-on cover are optional benefits that a policyholder can add to their base policy to enhance their policy.
Is natural death covered under the term insurance policy?
Yes, natural death or death caused to health conditions is covered under term insurance.
Is it necessary to buy a rider with term insurance?
No, buying a rider with term insurance plans is not compulsory. Riders are provided optional benefits that a policyholder can add to their base policy to enhance their policy.
Is Term insurance covered under section 80C of income tax,1961?
Yes! Term insurance plan is covered under Section 80C of the income tax act,1961, with a limit of up to Rs. 1.5 Lakh.
What documents should I have to buy a term insurance policy online?
If you want to buy term insurance online, it is advised to get ready with documents like a passport, voter ID, Aadhaar Card, PAN Card, utility bills, proof of income like Form 16 of last year, etc.
What is the age limits to buy a term policy?
Most insurance companies provide term insurance plans for people from 18 years to 65 years of age.
I have diabetes. Can I get myself insured under term insurance?
if your diabetes is in control (with regular treatment and a healthy lifestyle), you will be eligible to buy a term life insurance policy. However, your application can be rejected if you have additional risks like hypertension, heart illness, etc.
What happens if I discontinue paying the premiums?
If you discontinue paying the premium, the policy will lapse after the grace period.
What is the Grace period in a term insurance policy?
Per the IRDAI, every insurance company offers a grace period of 15/30 days(30 days for yearly, half-yearly, and quarterly premium payment modes and 15 days for monthly premium payment modes). A policyholder can pay their due premiums within that period; otherwise, the policy will lapse.
What if my policy has lapsed?
If you cannot pay the due premiums within the grace period, the policy will lapse, and all benefits will be terminated. You must pay the insurance company all the arrears to revive your policy. Some insurance asks for a medical certificate at the time of revival.
If a person dies outside the Indian territory, will his nominee still receive the death benefit?
Yes, once the policy is in effect, the policyholder’s death will be considered, and the nominee will receive death benefits.
Can an NRI buy Term insurance?
Yes, the Life insurance company offer Term insurance plans specially designed to fulfil the needs of NRIs.
Will insurance company cover murder in the term insurance policy?
There are two different cases of such a situation.
The insurer will not settle the claim if the policyholder is murdered and investigations reveal the nominee was involved in the crime.
If the policyholder’s death is due to involvement in criminal activity, the insurer will not settle the claim.
What if the claim is rejected?
In case the term insurance claim is rejected, the nominee can re-apply for it. A written application needs to be submitted for the same. The nominee can go to the consumer court if the company doesn’t respond to the application.
I occasionally smoke with my friends. Do I need to disclose this information while buying term insurance?
If you have smoked in the past 12 months, you must disclose it to your insurance provider. If you don’t disclose it right away and reveal it later, you may be charged a high premium, or your provider may cancel your policy (denying any benefits).
What is the difference between term and life insurance?
The most common difference between term insurance and traditional life insurance plan is that a term insurance plan only provides a death benefit in case of demise of the insured within the term period, whereas a life insurance policy offers both death and maturity benefit to the insured.