Insurance is a common household name in today's era. People of all age groups from children to old age adults can be covered under the various schemes offered by the insurance providers. It comes in handy to an individual during critical period at the time of emergency. There are different types of insurance, to suit the individual's needs and requirements. One such kind of insurance is the Term Insurance.
What is Term Insurance?
Term Insurance or term assurance is a kind of life insurance policy that provides coverage at a fixed rate of payments for a limited period. If the insured expires during the term of the policy, then the death benefit amount is payable to the nominee. It is designed to secure the family in case of death or uncertainty.
What is the Premium for Term Insurance?
The premium amount for the Term Insurance policies is lowest compared to other types of life insurance products. The premiums are low since there is no investment component and the premium amount is used for covering the risks. There is no survival or maturity benefit once the policy term gets over. In case of the death of the policyholder, the survivor will be entitled to get the policy amount.
When to Buy Term Insurance?
It is best to buy a term insurance scheme at the age of 30. An individual becomes a responsible adult at this age.
At the age of thirty, apart from being healthy, you will have a job with decent pay and the financial position will be okay. You may be planning to get married or have recently started a family. You may be planning to buy or build a house.
The insurance premium amount will be less if the age is less and vice versa. For example: If you are 30 years old you can buy a term insurance cover of Rs 1 crore for as low as Rs 573 per month. The same amount of term insurance differs for a person who is 40 years old. He/She has to pay Rs 914 per month for a term insurance cover of Rs 1 crore. So the earlier the purchase of insurance the cheaper the term insurance premium.
Salient Features of Term Insurance
• Entry Age - Minimum entry age is 18 years, and maximum entry age is 65 years
• Grace Period - 15 to 30 days based on the policy modes
• Plan Type - It offers flexibility regarding choosing a plan. One can either choose a plan on single life basis or joint life basis
• Paying Premium Term - Single pay or limited pay or regular pay
• Maturity Age - 25 years/ 65 years/ 75 years of whole life (differs from policy to policy)
• Premium Amount - Based on the age of the applicant and sum assured
• Policy Revival - Within two years from the date of unpaid premium
• Nomination - Provides nomination facility
• Frequency of Premium Payment - Monthly or Quarterly Or Semi-Annually or Yearly basis
• Policy Coverage - Maturity and Death benefits
• Sum Assured - Varies from policy to policy offered by various insurance companies
Benefits of Term Insurance Policies
There are several benefits which term insurance provides to the individuals. They are as follows:
• One of the most recommended financial product: Term Insurance Policies are one of the most recommended financial product by the financial advisors. It helps in solving most significant risk in life that is the risk of death. It provides financial security to the family in your absence; the nominee will receive the benefits in the event of a death of the insurer.
• Tax Benefits: A policyholder is entitled to receive tax benefits under Section 80C and Section 10(10D) under the Income Tax Act of 1961, on the premium amount paid.
• Death Benefits: It provides death benefits to the designated nominees. The nominees will receive the benefits in case of death of the policyholder during the tenure of the policy.
• Maturity Benefits: It provides maturity benefit by returning the total amount of the premiums paid so far if the policy is continued until the end of the term.
• Special Coverage: Term Insurance provides additional riders such as Critical Illness and Accidental Death or Disability riders.
• Lower Premium Amount: Term Insurance offers lower term insurance premium if the policyholder starts the policy early in his life. The younger you are at the time of buying insurance, the lower will be the insurance premium.
• Offers Rebate: Life Insurance Companies provide a rebate of opting for a high sum assured under the term plans. For non-smokers and female investors, the companies provide special discounted premium rates as a gesture for commemorating them as a standard life with no adverse risk associated with them.
Term Insurance Companies in India
The following are the companies that provide term insurance policies in India.
• HDFC Life
• Aegon Religare
• Bharti Axa
• Birla Sun Life