Term Insurance Plan: A Comprehensive Guide

Term insurance is a type of life insurance policy that provides financial security to your loved ones in case of your unfortunate demise. It is one of the most affordable and straightforward life insurance policies that offer cover for a specific time period. In this article, we’ll explore everything you need to know about term insurance, how it works, its benefits, and some frequently asked questions.

What is a Term Insurance Plan?

A term insurance plan is a life insurance policy that provides coverage for a specific term, generally ranging from 5 to 35 years. In case the policyholder dies during the policy term, the death benefit is paid to the nominee. If the policyholder survives the policy term, there is no payout. Hence, term insurance is a pure protection plan that offers financial security to the family of the insured.

Term insurance plans are popular among individuals who want to ensure financial protection for their loved ones in case of their unexpected demise. It is a simple and cost-effective way to secure the future of your family.

Features of Term Insurance Plan

Here are the features of a term insurance plan:

Term insurance plans are available in two types – level term and decreasing term.

Level Term Insurance

A level term insurance plan provides coverage for a specific period with a fixed sum assured. The premium for such policies is usually constant throughout the policy term. Such policies provide a lump-sum payout in case of the policyholder’s demise during the policy term.

Decreasing Term Insurance

A decreasing term insurance plan is a type of term insurance policy in which the sum assured decreases over the policy term. These policies are generally taken for loans or mortgages. The premium for such policies is usually lower than that of level term insurance.

How Does Term Insurance Work?

A term insurance policy works as follows:

1. The policyholder chooses the policy tenure and sum assured while buying the term insurance policy.
2. The policyholder pays the premium regularly during the policy term.
3. In case the policyholder dies during the policy term, the death benefit is paid to the nominee.
4. If the policyholder survives the policy term, there is no payout.

It is essential to choose an appropriate sum assured while buying a term insurance policy. The sum assured should be high enough to cover the future financial needs of your family in case of your premature demise. You can use online calculators to determine your ideal coverage amount.

Benefits of Term Insurance Plan

Here are some of the benefits of a term insurance plan:

• High Coverage Amount – Term insurance plans offer high coverage amounts at an affordable premium.
• Financial Security – In case of the policyholder’s demise, the death benefit is paid to the nominee, providing financial security to the insured’s family.
• Tax Benefits – Premium paid towards the term insurance policy is eligible for tax deductions under Section 80C of the Income Tax Act.
• Easy to Understand – Term insurance policies are simple, and their features are easy to understand.

FAQ

1. What is the minimum and maximum age to buy a term insurance plan?

The minimum age to buy a term insurance plan is generally 18 years, and the maximum age is 65 years. However, the age limit may vary from insurer to insurer.

2. Can I change the nominee of my term insurance plan?

Yes, you can change the nominee of your term insurance plan by filling out the nomination change form provided by the insurer.

3. Can I surrender my term insurance plan?

No, you cannot surrender your term insurance plan as it does not have any surrender value.

4. Is the death benefit paid in case of suicide?

No, the death benefit is not paid in case of suicide within one year of buying the term insurance policy. However, the nominee is entitled to receive at least 80% of the premium paid.

5. Can I take a loan against my term insurance policy?

No, you cannot take a loan against your term insurance policy as it does not have any loan facility.

Conclusion:

Term insurance is an essential tool for individuals who want to secure the financial future of their loved ones. It is an affordable way to provide financial security to your family in case of your untimely demise. While buying a term insurance policy, it is essential to understand the features, benefits, and eligibility criteria to make an informed decision.