Term Life Insurance Policy

What Is Term Insurance?

Term life insurance is a type of life insurance policy that provides coverage for a specific period of time, typically ranging from 10 to 30 years. If the policyholder dies during the term, the death benefit, which is a pre-determined amount, is paid out to the beneficiaries tax-free.

If the policyholder does not die during the term, the policy will expire with no value. Term life insurance is typically less expensive than other types of life insurance policies and is designed to meet temporary coverage needs.

Term insurance comes under which section?

In India, term life insurance is governed by the Insurance Act, 1938 and regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The policy is considered a form of life insurance and falls under the category of non-linked insurance products.

Term Insurance Plan/Policy Benefits and Features

Term plans offer financial assistance to the family of the life assured in the event of the death of the policyholder. There are certain notable features of a term insurance policy which are listed in the section below:

• High Life Insurance Amount at affordable premiums:
  Term Insurance plans provide a large amount of life insurance cover at an affordable premium. This cover can compensate for several years of lost earnings.
• Cover Against Critical Illnesses
  Along with providing life cover, a new-age term plan like ICICI Pru iProtect Smart also provides protection against critical illnesses. For a small additional premium, Critical Illness Cover provides lump sum payments when a critical illness like a heart attack, cancer, kidney failure, or any other critical illness is first diagnosed.
• Support in Case of Disability
  In new-age Term Plans such as ICICI Pru iProtect Smart, the insurance company pays your future premiums in case of total and permanent disability. As a result, your life insurance cover continues even if you are unable to pay premiums.
• Additional Financial Security:
  To increase the security of your family, a Term Policy provides additional payout (up to `2 crore) in case of an accidental death+. For example, if your life cover is `1 crore, a Term Insurance Plan with Accident Death Cover pays `2 crore to your family in case of an accidental death.
• Tax Benefits:
  Term Insurance plans offer tax benefits^^ on premiums paid up to `46,800 under Section 80C^^. New-age Term Plans with critical illness cover also offer additional tax benefits on premiums paid up to `7,800 under Section 80D. You also get tax benefits^^ subject to conditions under Section 10(10D) on the money that your family receives in case of an unfortunate event.
• Death benefits:
  In the unfortunate event of death during the policy term, your family receives the death benefit from term insurance. Your nominee can choose to receive a regular income along with a lump sum benefit in your absence.
• Survival benefits / Maturity Benefits:
  Standard term insurance does not offer any benefits if you survive the term. However, a return of premium term plan also provides you with a lump sum or regular income as guaranteed benefits to help you fulfil varied financial goals. The term plan pays back an amount that is at least equal to the total premium paid. You receive these guaranteed benefits at the end of the tenure.
  
  The maturity benefit is not provided by every type of term insurance policy, but it is provided by term insurance with a return of premium policies when the life assured survives the entire term of the policy.
• Premium Payment Frequency:
  The premium for term insurance plans can be paid on a yearly, half-yearly, quarterly, or monthly basis.
• Sum Assured:
  A minimum sum assured of Rs. 50,000 is essential for a term insurance policy and there is no limit to the maximum sum assured.

Top Reasons To Buy Term Insurance Plans/Policy

Term insurance plans are the basic type of life insurance policy which are very cost effective and help a person in securing a financially protected future for their loved ones. Below mentioned are some reasons why you should invest in a term insurance policy:

• Affordable Premiums:
  According to the nature of the coverage provided under a term insurance policy the premiums of a term insurance policy are quite affordable. An individual can avail high coverage at nominal premiums rates. It is also advised to purchase a term insurance policy at a young age because older people are more prone to diseases and require more coverage which increases the premium.
• Helps in Tax Savings:
  A major advantage of purchasing a term insurance plan is that it can help you save taxes. Premium paid for a term insurance policy qualify for tax benefits under Section 80C of the Income Tax Act for up to Rs. 1.5 Lakh. Death/Maturity under a term insurance policy are also tax free according to the Section 10(10D) of the Income Tax Act.
• Option to Add Riders:
  Under a term insurance policy you can add additional coverages known as riders which help in increasing the scope of coverage under a term insurance policy. The riders can be added to the term insurance policy in exchange of additional premium. Some commonly opted life insurance riders are Accidental Death Benefit, Accidental Total and Permanent Disability, Critical Illness Rider, Waiver of Premium Rider etc.
• Provides Financial Security:
  A term insurance policy is known as pure protection plans which help in providing financial security to the family of the life assured in case of an unforeseen demise of the life assured during the coverage period. The death benefit shall be provided to the nominee in case of untimely demise of the life assured which can help the family members of the life assured to fulfil their financial requirements in case the life assured is not around.

WHO CAN BUY / PURCHASE
a Term Plan?

Anyone with financial dependents should buy a Term Insurance Policy. This includes married couples, parents, business people and self-employed, SIP investors, young professionals with dependent parents, and in some cases, even retirees. Let's see in details.

• Parents:
  Parents are generally the sole source of financial support for their children. The needs of children extend from school fees and living expenses to hefty university fees, later on in life. An unfortunate event with a parent can jeopardise their future and deprive children of life’s opportunities. Parents must ensure that this scenario does not come to pass, by purchasing a term insurance policy. This policy will pay out a lump sum and/or income to satisfy their children’s expenses, in the event of any mishap of the parent(s).

• Newly-married couple:
  Roses, chocolates and movie tickets are great, but here’s a truly long-lasting gift for your spouse – term insurance. This gift will give your spouse more than momentary joy, and it will secure their future. Term Insurance assures the spouse of financial support in case of a mishap with the insured person and should be purchased as soon as possible by married couples.

• Working Women:
  The women of today are on an equal footing with men, whether it be managing their finances or providing for their family. Today, a family is as dependent on the woman’s income as it is on the man’s. This dependency brings with it the need to financially secure your loved ones in case something happens to you.
  
  A Term Insurance plan assures that your parents/spouse/children are financially secured even in your absence. It ensures that your family does not have to compromise on their lifestyle and can continue with the goals you set for them. The term insurance cover amount also helps to take care of any outstanding liabilities like home loan, auto loan, education loan, and more. Not only this, but some term insurance plans also come with the added benefit of a critical illness cover that provides a payout if you are diagnosed with a serious illness like breast or cervical cancer.

• Taxpayers:
  Term Insurance premiums paid are allowed as a deduction from taxable income under Section 80C^^ of the Income Tax Act, 1961^^. The term insurance payouts on maturity are also exempt from tax subject to conditions under Section 10(10D)^^. Hence taxpayers can use term insurance to reduce their tax burden significantly.

• Self Employed:
  As a self-employed person, you face many challenges. Unlike salaried individuals, you do not earn a fixed monthly income; you have an uneven source of income that depends on the ups and downs of the market. Plus, you may have also taken a business or personal loan from creditors, banks, or even your family and friends. Hence, buying a term insurance plan to secure your family becomes even more important for you. A term life insurance policy can ensure that your family remains financially secure even in your absence.

• SIP Investors:
  Investors in mutual fund SIPs (Systematic Investment Plan) invest a fixed amount every month in a mutual fund. The wealth creation in an SIP is driven by a stream of regular instalments which compound over time. However, an unfortunate event of the investor can stop the flow of instalments. Term Insurance can protect the SIP by providing the nominees of the insured person with funds to continue the SIP.

• Retirees:
  Retired persons need to have term insurance if they have dependant spouses or families. Buying term life insurance can also be a way of leaving an inheritance for their families. This is because, Term Insurance is paid out to nominees in case of any mishap with the insured person. The payment of Term Insurance is also tax-free subject to conditions under Section 10(10D)^^ of the Income Tax Act,1961^^.

FEATURES OF TERM INSURANCE

• Low entry age:
  Term insurance plans have a minimum entry age of 18 years only. You can buy a term plan and secure your loved ones as soon as you reach adulthood
• Long term protection:
  The term plan offers long policy tenures of up to 40 years that allow you to protect your family members for a long time.
• Easy to buy:
  Term insurance can be purchased online in minimal steps. You can compare different plans and features with a few clicks and pick a plan that suits your needs the best. The submission of documents, premium payment, and all other customer queries can be submitted online from the comfort of your home or office.
• Easy premium payment options:
  Term insurance plans offer flexible premium payment options like monthly, quarterly or yearly payment.
• Adjustable cover:
  The term plan is flexible and allows you to increase or decrease the sum assured basis your financial condition.
• Liability protection:
  The sum assured of a term insurance plan can be used to ensure your family’s financial security and protect them from debt liabilities like a loan repayment.

ELIGIBILITY CRITERIA
To Buy A Term Insurance Plan

Term insurance policy is an ideal investment option because it offers life coverage in exchange for regular premium payment. Term insurance policy is a type of pure risk protection plan but before you purchase a term insurance plan, it is essential for you to check the eligibility criteria to know if you meet the eligibility criteria to purchase a term insurance or not.

Below mentioned are the eligibility criteria to purchase a term life insurance policy: