Types of Term Life Insurance Plans in India

What is Term Insurance & How Does it Work?

Different Types of Term Insurance Plans

Plan Type Premium Coverage Benefit Who It’s For
Level Term Plan Low Fixed Death Benefit Only Couples with young children
Term Insurance with ROP Medium Fixed Maturity & Death Benefit Individuals wanting a premium refund
Increasing Term Plan High Increasing Inflation Protection Those expecting higher financial responsibilities
Decreasing Term Plans Low Fixed Covers financial debts like loans, mortgages, etc. Those who have taken a lot of credit
Convertible Term Plans High Fixed Can be converted to endowment plans Those individuals whose financial requirements and responsibilities change over time.
No-Cost Term Insurance Plans Low Fixed It provides protection for a specific time frame, usually between 10 and 30 years, and is less expensive than whole life insurance. Those who require low-cost and short-term insurance coverage.

Factors to Consider While Buying Term Insurance Plans

How to Choose the Right Term Insurance Plan?

Tax Benefits of Different Types of Life Insurance

The table below shows the tax benefits on various types of life insurance:

Section Tax Application
Section 80C Under this provision, one can save up to ₹1.5 lakhs in tax on his income upon paying term insurance premiums.
Section 80D One can save some premium for any health insurance plan to meet the medical expenses of treating any kind of disorder.
Section 10(10D) This provision exempts tax on the amount received by heirs of policyholders after their death.

FAQs about Types of Term Insurance

Why should I buy a term insurance policy at an early age?

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Buying term insurance early is smart because the premium stays low, and you avoid potential health issues that could raise costs later. This ensures you remain covered through crucial financial years, providing peace of mind for your loved ones if the unexpected happens.

Which type of term plan has the least premium burden?

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Decreasing term insurance typically offers the lowest premium since the coverage amount reduces over time. It could be used on debts that lessen over time, such as mortgages.

Does the term insurance plan offer tax savings benefits?

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Yes, most insurers provide tax benefits in term insurance plans under Section 80C of the Income Tax Act. Thus, one can reduce his taxable income for any given year with an amount equal to the premiums paid towards the policy. Death benefits received by beneficiaries are usually tax-free under Section 10 (10D).

What if I live past the policy tenure?

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If you outlive the term of the term insurance policy, the coverage ends. In general, there's no benefit payment or cash value. With some return of premium options, if you outlive the term, your premiums may be refunded to you.

What are the three types of term coverage?

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The three notable term life insurance are level term plans, increasing term plans, and decreasing term plans.

How many term insurance plans can I purchase?

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You can buy more than one term insurance plan from different insurers or even more than one policy from the same insurer. But the total sum assured should be in harmony with your financial needs and not more than what is considered sufficient by the underwriters.

Is it possible to change the assured amount for the term insurance plan?

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Generally, most term insurance policies do not allow for increasing the assured amount after the policy is issued. However, few insurers offer riders options for increasing coverage at certain intervals with approval and possibly additional premiums.

Can I opt for riders for the different types of term insurance policies?

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Yes, you can select riders to add to your term insurance policy. Some of the most popular riders include critical illness coverage, accidental death benefits, and premium waivers, which offer additional benefits at an extra cost.

Is a medical test compulsory before purchasing a term insurance plan?

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You may need a medical check-up depending on your age, medical history, and coverage amount. Most insurers provide "no-medical-exam policies," but these might cost you more in premiums.

Which type of term insurance plan is cost-effective?

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Decreasing term insurance is commonly the most inexpensive option to purchase since it provides lower premiums as the death benefit decreases with time. In reality, it is also applicable to paying off specific debts that decrease as time elapses, such as a mortgage.

Am I allowed to switch from a level term to a decreasing term insurance?

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Direct conversion from a level term to a decreasing term insurance policy usually is not permitted. You can cancel a level term policy and get a new decreasing term policy, but this may result in underwriting and increased premium rates.

What is the age limit for term insurance?

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The age range for term insurance varies among insurers, but one usually finds that the minimum purchase age is often 18 years, and the maximum is 65 years. Other insurers would provide coverage up to age 70, depending on policy terms.

How many years is best for term insurance?

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Typically, the best term for insurance depends on any present financial responsibility. The most common periods are 10, 20, or 30 years. However, a 20-year term is one of the most popular as it will cover most of your critical financial responsibilities, such as raising kids or paying off a mortgage.

What is 20 year term life insurance?

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A ‘20-year term life insurance policy’ spans 20 years, with a level of death benefit during that term. If the insured dies before the end of the term, the death benefit will be paid to the beneficiaries. Coverage terminates without a payout if the term ends before the insured's death.

Is there 10 year term life insurance?

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Yes, ‘10-year term life insurance’ exists and pays for ten years. One of the most prevalent reasons for using this type of policy is short-term planning, such as paying for a loan or otherwise protecting other assets expected to be repaid within that timeframe.

Is there a limit for term insurance?

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Most insurers place limits on the type and amount of coverage you can buy based on your income, age, and health. Limits vary significantly by insurers and may be purchased based on income or insurable interest.

When to stop term life insurance?

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You may want to end term life insurance when your financial liabilities reduce, such as when all your children become financially independent, your mortgage is paid off, or you have enough assets to support your dependents from inheritance without the need for insurance.

Who cannot buy term insurance?

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Term insurance may not be available to individuals with severe health conditions, high-risk jobs, or those who exceed the insurer’s age limit. Individuals struggling with substance abuse or involved in high-risk activities, such as adventure sports, may also find it difficult to qualify for term insurance.

Disclaimer

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  • 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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