Term insurance is a life insurance plan in which the policyholder pays premium monthly, quarterly, semi-annually, or annually at regular intervals. In return, the insurance company provides a lump-sum amount to the nominee on the policyholder's death during the policy's span.
If the policyholder survives until the end of the policy term, then the insurance company will not get any maturity benefit or survival benefit. However, some companies provide a certain percentage of the policyholder's premiums paid on the survival of the policyholder. But this depends on company to company.
The features & benefits of term insurance are:
The plan provides a life cover to the person insured and covers the unexpected death of the person insured during the policy term
Term insurance offers financial security to the policyholder's family with an affordable plan
All term insurance plans have a free look period of 30 days in which the policyholder can return the policy within the said period. All the premiums paid will be returned to the policyholder after deducting a nominal charge
There are additional and optional riders available to increase coverage of the plan
There are lower rates for females and non-smokers
There is the flexibility to choose policy period, premium frequency, and premium paying modes
There is a higher sum assured at a lower premium
There is a 30 day grace period provided for paying the premiums in case the policyholder is unable to pay the premium on the due date
Tax Benefits on payouts and premiums under Sections 10(10D) and 80C of the Indian Income Tax Act, 1961
Here is a rundown to top 6 reasons why one must buy a term insurance plan:
Term insurance plans are not considered as an investment option. It is a policy that is meant to financially secure the family members of the policyholder and fulfill their monetary needs on the death of the person insured.
The lump-sum amount available due to the unfortunate death of the policyholder can be used to pay off debts. It also helps the nominee in meeting their goals or paying for their immediate financial needs. Thus, if one has liabilities like loans and debts, it becomes essential for the person to buy a term insurance plan with a higher sum assured.
Term insurance plans' flexibility is one of its main features. The insurance provider and various insurance websites offer many term plans online. So, one can opt to purchase their policy through online or offline channels. The benefit of buying a term plan online is beneficial since one can save on premiums paid as there is no need to pay additional agent or brokerage fees.
Also, the person has the flexibility to buy the policy at anytime from anywhere after doing the research. Many insurance companies do not require health check-ups if the cover amount is less than or equal to Rs 50 Lakh. The policyholder has to fill up the declaration form during the application process. Also, one can customize a term plan with various optional riders by providing additional coverage to their family.
Term plans have flexibility in the frequency of paying premiums. The premiums can be paid annually, semi-annually, quarterly, or monthly. There are many term plans which offer limited pay premium or single premium pay and regular pay premium options. Such flexibilities help the policyholder in choosing the appropriate option as per his/her budget and convenience.
Term insurance plans have various riders that provide extra coverage at a low cost. The riders are accidental death protection, partial or permanent disability coverage, premium waiver, critical illnesses, and income benefits riders. The various types of riders offered by insurance companies are based on the plan type. There is no limit on adding the number of riders to one policy.
People should customize their policy with riders as it will provide enhanced coverage without the hassle of maintaining numerous insurance plans. It all depends on one's needs. For example, if someone is working in the heavy industries, a rider on permanent and partial disability cover can be bought by the person.
While buying a term insurance plan, one can choose a policy period ranging from 5 years to 30 years in most of the cases. Hence the policyholder has the flexibility to choose term life insurance's policy tenure accordingly. So, if a 30-year-old is looking to buy a policy, he/she can choose a longer-term as it can provide a cover for their retirement. So he/she can choose 30-year policy tenure for the term insurance policy.
Although the main purpose of a term insurance life plan is to provide financial security to the policyholder's family on the death of the person insured. But term plans also provide tax benefits to policyholders. So a person can claim tax deductions under Section 80C of the Income Tax Act of 1961 on the premiums paid. The lump-sum amount that the nominee gets in case of the death of the policyholder is eligible for tax rebates, as per Section 10(10D) of the Income Tax Act.
Insurance provider companies offer a high lump sum payment to policyholders on purchasing term insurance plans, as these policies only have protection benefits. A high life cover amount is essential as it can protect the family or the nominee of the policyholder from financial crunch in case of unfortunate death of the person insured. While opting for a sum assured, it is essential to consider the financial needs, liabilities, investments, debts, and financial goals.
A1: Yes, one can buy Aviva term insurance online.
A2. It is always advisable to buy a term insurance plan with a long term cover since the premium rate will increase every time one renews the plan.
A3. A GST of 18% is charged on a term insurance plan.
A4. Yes, term insurance has low claim rejection compared to other policies. But while buying a term insurance plan, it is necessary to state correct facts about the policyholder's health conditions, finances, and habits. IRDAI has stated that insurance companies cannot reject a claim due to non-disclosure of facts after 2 years before the policy begins.
A5. The exclusions of term insurance plans are death due to:
Sexually transmitted diseases like HIV or AIDS
Pre-existing health conditions
Involvement in illegal activities
Accidental death due to drugs/ alcohol influence
Taking part in racing activities such as a bike or car racing
Taking part in adventure activities
Pregnancy and childbirth