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Buy Term Insurance Plan & Policy Online in India in 2025
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 policy, 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.
1 Crore Term Life Insurance Premiums for Different Age Groups
Here is a look at the ₹1 crore term life insurance plan for different age groups till the age of 60 years:
Note: The premiums illustrated are for customers purchasing policies from the direct portal. These are standard rates for healthy, non-smoker, non-drinker salaried male life, including GST. These rates are subject to change for direct journeys. The eligible sum assured and final premiums may vary and depend on actual underwriting.
How Do Term Insurance Plans Work?
Term insurance plans are a type of life insurance designed to provide coverage for a specified period, typically ranging from 10 to 30 years. Here’s how they generally work:
Meet Raman:
Raman is a healthy, non-smoking individual.
Securing Future:
He invests in a ₹1 crore term life insurance for 25 years to provide financial security for his wife.
Death During the Policy Term:
In the 15th year of the policy, Raman experienced an unfortunate death.
Death Benefit Payout:
His wife received a ₹1 crore death benefit from the insurance company.
After the Claim:
With this benefit, she can preserve her quality of life and meet her financial obligations.
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.
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.
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.
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 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.
Types of Term Insurance Plans in India
While the primary benefit of term insurance remains the same, based on a few features, Term Insurance can be classified into the following types:
1. Basic Term Insurance 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 Insurance Plan
A Term Plan with a Return of Premium option provides 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. Limited Premium Payment Term Insurance Plan
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. Increasing Term Insurance
With an Increasing term insurance 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 Insurance Plan
The premium remains constant throughout the term life policy duration, ensuring that both the premium and the death benefit remain unchanged. Level term insurance can last anywhere from ten to thirty years, depending on the policyholder's requirements.
6. Decreasing Term Insurance Plan
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 Insurance Plan
A convertible term insurance 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.
8. Group Term Insurance
Employers often provide Group Term Insurance as part of their employee benefits package. This type of insurance covers multiple people under a single policy, typically lowering premiums.
9. Joint Term Insurance
Joint Term Insurance is specifically designed for couples. Both you and your spouse can be covered under one policy. If either of you passes away, the surviving spouse receives the benefit. This type of insurance helps ensure financial security for the family.
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 death benefits received under the term insurance are also exempt from tax, subject to some T&C under Section 10 (10 D) of the Income Tax Act.
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.
Single Parent
If you are a single parent, your children depend on you completely. Term life insurance can provide peace of mind, knowing that your kids will have financial support if something happens to you.
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?
Assess Your Coverage Needs
Calculate the coverage you need based on your financial obligations, such as outstanding loans, future expenses (like children's education), and daily living expenses. A common rule of thumb is having coverage at least 10-15 times your annual income.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.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.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.Add Riders for Extra Protection
Choose policies that offer customisation options to suit your specific needs. This includes riders, which are additional benefits that can be added to your policy for extra protection. Common riders include critical illness cover, accidental death benefit, and waiver of premium. These can provide additional financial security in case of unexpected events.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.
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.Consider Inflation
Choose a plan that accounts for inflation. Some term insurance plans offer increasing coverage to help you keep up with rising costs over time.Why Selecting Right Sum Assured is Important When Selecting the Term Plan?
Choosing the right 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.
Financial Security for Beneficiaries
The primary purpose of a term plan is to provide financial protection to your loved ones in case of your untimely demise. A well-chosen sum assured ensures that your beneficiaries have adequate funds to maintain their standard of living and cover essential expenses, like mortgages, children's education, and daily living costs.
Coverage of Debts and Liabilities
If you have outstanding loans or other financial obligations, the sum assured should be sufficient to clear these debts. This prevents your family from being burdened with financial liabilities during a difficult time.
Inflation Protection
Over time, inflation can erode the value of money. When selecting a sum assured, it's important to consider the future cost of living and how inflation might impact the purchasing power of the payout. A higher sum assured can help mitigate this risk.
Balanced Premium Payments
While you want to ensure adequate coverage, the sum assured also influences the premium you will pay. Selecting a sum assured that is too high may lead to unmanageable premiums, while a sum that is too low might leave your family unprotected. Striking the right balance is essential.
Future Needs
Consideration should be given to future life stages, such as marriage, children's education, and retirement plans. Choose a sum assured that aligns with long-term financial goals rather than just current needs.
How Much Term Insurance Coverage Do You Need?
To determine the appropriate amount of term insurance coverage, consider children's education, marriage, pending liabilities, spouse needs, and regular expenses, which are some significant factors to consider when deciding on coverage requirements.
Now, let’s understand the methods on how much term insurance a person needs:
1. Expense Replacement
Calculate the total expenses, both day-to-day and future needs, and then deduct the present value of any savings and existing life insurance coverage, excluding tangible assets like homes and cars. This method aids in estimating the necessary insurance coverage to protect your family’s financial standing.2. Income Replacement
This method focuses on replacing lost earnings and utilizes a straightforward formula:
Insurance Cover = Current Annual Income x Number of Years left for Retirement
While easy to calculate, this method does not account for inflation, future income growth, or future expenses.
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. However, it’s important to note that this figure may not meet all of your actual insurance needs.4. Human Life Value
The Human Life Value (HLV) approach takes a more comprehensive view, calculating the insurance needed based on future earnings and the economic value of an individual’s life.
To apply this method, you must determine your current income, subtract expenses, insurance premiums, and taxes, identify how many earning years you have left until retirement, and factor in inflation and discounting.
You can use our online Human Life Value Calculator to get the estimation.
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?
The duration of a term insurance policy, often referred to as the "term length," can vary significantly based on individual circumstances, financial goals, and life stages. Here’s a breakdown of how to determine the appropriate term duration for your needs:
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
Choosing a longer term of 20-30 years is often beneficial, as it aligns with key financial milestones like buying a home, family planning, and children's education. A 15-20 year term may suit those facing significant obligations such as mortgage and tuition payments. For individuals with fewer debts or financially independent children, a shorter term of 10-15 years could be sufficient.
How to Buy Term Insurance Online?
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 life insurance premium 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:
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:
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.
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.
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.
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.
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.
BMI (Body Mass Index)
A skewed BMI index can directly mean you are at a health risk, increasing your premium.
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 offers extra coverage for dependents in the event of the policyholder's accidental death, providing the sum assured within 120-180 days post-accident. It addresses the financial burden of medical expenses and personal loss, making it a crucial addition to a primary insurance policy.2. Critical Illness Rider
A Critical Illness Rider provides financial support if the policyholder is diagnosed with a critical illness, such as cancer or heart disease. It helps cover treatment and household expenses, acting as an income replacement to ensure the policyholder’s illness does not disrupt family finances.3. Accidental Total and Permanent Disability Benefit Rider
This rider offers financial aid to policyholders who can no longer work in case of accidental partial or permanent disability. It pays a specific portion of the sum assured regularly for a few years, helping the family manage finances during challenging times.4. Waiver of Premium Rider
A Waiver of premium rider allows the policy to remain active if the policyholder can’t pay premiums due to a disability or critical illness. Premiums are waived, ensuring coverage continues until maturity when benefits are paid to the nominee.5. Terminal Illness Rider
A Terminal Illness Rider, also known as the Accelerated Death Benefit Rider, ensures the sum assured is paid upon diagnosing a terminal illness. It alleviates financial stress during treatment and allows the policyholder to arrange finances, medical support, or travel before death.6. Income Benefit Rider
In an Income Benefit Rider, if the policyholder dies during the term, this rider provides monthly payouts to the family, acting as an income substitute. It helps the family manage ongoing expenses and ensures they are not financially strained in the policyholder's absence.7. Hospicare Benefit Rider
This rider offers additional coverage for hospital stays, paying a fixed amount per day of hospitalization, extra for ICU stays, and a lump sum for surgeries. It helps mitigate financial stress associated with medical expenses during hospitalization.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:
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?
In term life insurance, payout options generally refer to how the death benefit is paid out to the beneficiaries upon the insured's death. The most common payout options include:
1. 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.
4. Lump Sum + Monthly Income
An option could be to receive a partial payment as a lump sum upfront, with the remainder provided as monthly payments over a fixed period. This approach would offer immediate funds for urgent needs while also providing ongoing financial support.
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.
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 30 days period during which the policyholder can review the policy terms and if dissatisfied they can 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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