Term Insurance: A Comprehensive Guide to Affordable Life Coverage

Term insurance is a type of life insurance that provides financial security to the family members of a policyholder at an affordable premium for a definite time period. In case the insured dies during the policy tenure, the nominee gets the death benefit. In exchange for the premium paid, the policyholder gets financial coverage over the insured’s life. Term insurance has many features; hence, before finding the Best Term Insurance Policy, one should look at the features of term insurance to understand it better, as mentioned below.

Salient Features of Term Insurance

Provided below are the salient features of Term Insurance:

• Wide Coverage of Term Insurance Plan
  

Term insurance plan includes:

i. Large life cover amount

ii. Cover for accidental death and disability

iii. Cover for critical illnesses

iv. Longer policy term, i.e., coverage for a long time

v. Affordable premium rates

• Large Life Cover Amount
  

It is considered to cover all the associated expenses of the family members, such as:

a)Living costs

b)Ongoing debt

c)Cost of important goals

• Cover for Accidental Death & Disability
  

It is an important cover because:

a)Disability can affect the earning capacity

b)You may be required to modify the living space for the disability

c)Accidental death may lead to an addition in the final and legal costs.

• Cover for Critical Illness
  

It can be a life-threatening disease, which can be fatal despite the best treatment, such as cancer, heart failure, etc. This cover will provide:

a) Protection for household expenses

b) Support for treatment costs

• Longer Policy Term – Age of Entry
  

One can buy a term insurance plan at the age of 18 years, and even some policies allow it to be continued till the age of 99 years.

• Affordable Premium Rates
  

There is no investment premium, as there is no maturity benefit in the case of a term plan. As only protection cost is included as a premium, it is quite low and can be easily included in your monthly budget.

• Convenient Pay-Out Options
  

Though the term plan seems to be quite a nominal thing, it becomes quite important in the event of the unfortunate demise of the policyholder for the nominees.

• Premium Waiver Option
  

This feature covers the disability risks, helping to continue the life cover without any need to pay any additional premium. The premium can be waived with the permanent disability claim and will continue to run the policy cover until the death claim or expiry.

• Tax Savings
  

The premium paid for the term insurance gets Tax Benefits of Term Insurance u/s 80C of the Income Tax Act, which will help reduce the tax liability.

• Other Important Feature – Flexibility in Premium Payment
  

A good term plan will ensure making the payment easier, i.e., with the help of iSelect Smart360 Term Plan, one can opt to pay the premium amount towards their life cover in the mentioned manner:

i.Single Pay

Here, the premium is to be paid for the whole 20 to 30-year policy in one single instalment.

ii.Limited Pay

The premium is to be paid for the whole policy within a few years; let us say pay a 25-year policy premium within 5 years.

iii.Regular Pay

Here, it offers the lowest amount towards the premium payment, which can extend to the entire period of the policy.

Types of Term Plan

Provided below are the different types of Term Plan:

a)Level Term Plan

In this plan, the sum assured remains the same throughout the tenure. However, some plans allow for increased coverage depending on certain life events such as marriage, purchase of a home, childbirth, etc.

b)Increasing Term Insurance Plan

In this kind of plan, the coverage continues to increase automatically. This department states that you are not required to increase the coverage of your plan as per your growing lifestyle, as this plan will take care of the same.

c)Decreasing Term Insurance Plan

This means the coverage of the term plan will continue to decline over a period of time. This plan normally covers the loan in the unfortunate event of demise.

d)Term Insurance with Return of Premium

In this plan, the premium paid during the tenure of the plan gets disbursed at the time of expiry of the policy in case you survive.

How Does a Term Insurance Plan Work?

Let us go through the key points about how the term plan functions:

• While investing in a term plan, you should agree to pay a premium to the insurer.
  
• The premium amount can be either paid as a lump sum amount or as periodic payments.
• In the case of periodic payments, they can be made on a monthly, quarterly, semi-annual, or annual basis, depending upon the plan opted for.
• The insurer will provide protective life coverage.
• The insurer will have to pay the amount of the sum assured in case of the death of the policyholder to the beneficiaries of the insured.
• In case the policyholder survives during the tenure, no benefits will be paid by the insurance provider.

Reasons to Opt for Term Insurance

a)Provide Financial Security to Your Family

If you are a single breadwinner in your family, the term insurance will ensure financial security. Also, it will help fulfil their financial needs in the event of the demise of the policyholder.

b)Mitigate Risks Related to Lifestyle

As with the growing age, the risk of death also increases. Also, it increases with certain lifestyle-related changes. It will cover all the risks against an extra premium amount.

c)Pay Outstanding Debt in your Absence

In case of an unfortunate demise and there were some outstanding dues, the term plan also provides a certain amount, in this case, from the sum assured.

d)Help your Family Meet Important Financial Goals in your Absence

Financial goals are quite important for the continuation of well-being. The term insurance coverage ensures that financial goals are achieved, further ensuring long-term stability.

A term insurance plan offers the policyholders financial protection for their family members, which can help fulfill their financial goals. Also, it is important to get a better understanding of the workings, features, and benefits of the term insurance plans, allowing one to make a well-informed decision.