Term Insurance Benefits

Following is a list of benefits that a term insurance policy can provide you:

• High Sum Assured at Affordable Premium
• Easy to Understand
• Multiple Death Benefit Payout Options
• Additional Riders
• Income Tax Benefits
• Critical Illness Coverage
• Accidental Death Benefit Coverage
• Return of Premium Option

There are different types of term insurance available in the market. These come with varying levels of coverage and convenience. Here are the main types.

Buying a term plan when you are young can be quite beneficial in the long run and result in a positive impact on your future. Let’s explore some of the key benefits of purchasing a term insurance at a young age.

• Higher Cover at Affordable Premium: If you apply for a term plan when you are you, you will be considered as an applicant with a lower risk profile. This is because, on average young individuals are more likely to be healthy and less likely to have developed a critical illness. This will allow you to lock-in a lower premiums for the entire policy term.
• Better Eligibility: When you are young and healthy, it is much easier to meet the qualifying criteria for term plans and some insurers might even offer these plans without medical tests.. This increases your chances of receiving easy approval and enjoying all the different benefits of a term insurance policy.
• Long-Term Financial Planning: If you get your term plan in place when you're young, you can focus on investing and saving for other goals as well. This way, you won’t have to worry about buying a term plan which might feature higher premiums later on when you are older.
• Lock-In Lower Premiums: Once your term insurance plan has commenced, the premium for the policy does not change during the policy period. So, locking in a lower rate early on helps you eliminate any and all risks related to an increase in insurance costs due to your age or rising inflation.
• Peace of Mind: Purchasing a term plan early in life ensures your family’s financial security in your absence. It allows your loved ones to maintain their standard of living and also allows you to rest easy knowing that your family will be financially secure.
• Tax benefits: Buying term insurance at a young age allows you to enjoy tax benefits on premiums paid over a longer term. The premiums paid are eligible for tax deductions up to Rs. 1.5 lakh under section 80C of the Income Tax Act. However, this tax benefit is only applicable if the policyholder has opted for the old tax regime.

You may believe nothing uncertain will happen to you based on the lifestyle you follow. However, there is always a risk of untimely demise through external factors, like accident or disease etc. which are not under your control. Buying term insurance plan is essential as it helps your family to minimize the financial stress that they might have to face in your absence.

You may find a wide variety of term insurance plans available in the market with various benefits. However, it would be good if you do not follow a one-size-fits-all approach while considering the term insurance benefits.

You should take adequate life cover based on your financial liabilities and select appropriate add-ons basis the kind of coverage you are seeking. Keep in mind that you know and understand various facets related to buying term insurance plans online or offline before you buy one.

Term insurance is a form of agreement between the policyholder and the insurance company. The policy provides coverage of life for a particular duration at a corresponding premium.

Here’s how a term insurance policy works:

• Selection of a policy: The policyholder chooses the sum assured, the duration of the policy, method of premium payment, etc., in accordance with the chosen policy scheme.
• Application and underwriting: The insurer evaluates the information the applicant provides. Age, health condition, personal habits, occupation, and medical history are all taken into account during the underwriting process.
• Issue of policy: The policy is issued after the insurer approves the application and the policyholder pays the premium. The policy document states the terms of coverage, duration of the policy, the premium amount, and other applicable conditions.
• Coverage continuation: The coverage continues during the policy period if the policyholder fulfills all terms and conditions of the policy. Further, they should also pay the premiums timely to keep the policy active.
• Claim during the policy period: In case of death of the insured person during the policy period, the nominee can file a claim with the insurance company. Following the assessment and approval of the claim, the applicable death benefit is paid.
• Survival throughout the policy term: If the life insured survives to policy term, the regular term insurance policy ends without any maturity proceeds. However, certain policies that have specific maturity features might operate under other conditions.

Term insurance is therefore a risk protection product. It pays a lumpsum amount to the nominees in case the life insured passes away during the period of coverage. The amount of compensation, exemptions, premium payments, etc. vary depending on the terms of the policy.

Also Read: Things to Consider Before Buying Term Insurance Policy

As a rule of thumb, buy term insurance plan with the cover that is at least eight to ten times your annual income. For example, if you currently earn Rs. 5 lakh in a year, then you should select a life cover of around Rs 40 – 50 lakh or more to get maximum benefits of term insurance plan.

To calculate term insurance premium for yourself, use our term insurance calculators online.

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You should choose a term insurance policy that aligns with your financial requirements. This is an essential decision that requires careful consideration of several factors. Here are the common factors you should consider before buying a term insurance policy:

Various indicators can be used to analyse the Indian insurance sector. The first one is insurance penetration, which denotes premium as a percentage of GDP. The second indicator is the insurance density, which denotes the premium as a percentage of per capita income. Premium income is the amount earned insurance companies earn, while policies issued denote the number of insurance policies the company issued.

According to IRDAI for FY 2024-25, the following data have been recorded:

Term insurance acts as the financial shield for your family. It supports them with sufficient funds in your absence. Here are a few ways it saves your loved ones’ future.

Riders strengthen your term coverage with a small extra cost. Here are a few everyday riders:

• Critical Illness Rider

  With this rider, you will receive a lump sum if you are diagnosed with a critical illness. Obviously, the disease must be covered by policy to receive this payout. It helps you manage treatment expenses without affecting your savings.

• Accidental Benefit Rider

  It provides extra protection in case of your absence or accidental loss. The payout helps your family manage sudden financial strain.

• Waiver of Premium Rider

  In case you face a serious illness or disability, future premiums are waived off. This is known as the waiver-of-premium rider.. As a result, your policy will be continued independently without any premium payment. It also ensures an uninterrupted protection.

• Income Benefit Rider

  If you purchase this rider, your family receives regular income along with a lump sum. This helps them meet monthly expenses with ease.

Premium (Per Month) for Life Cover of Rs. 1 Cr for a Non-Smoker, Male and Female

Premium (Per Month) for Life Cover of Rs. 2 Cr for a Non-Smoker, Male and Female

Note: For Sum assured of 1 crore and 2 crore, the above calculations are based on Axis Max Life Smart Total Elite Protection Plan (UIN:104N125V08). Monthly premium amounts are excluding GST and before any applicable discounts assuming Regular Pay and monthly payment mode.

There are several misconceptions about term insurance plan that can cause confusion or misunderstanding. Now, this section will debunk some myths about term insurance.

• Term plans offer no value if I survive

  Nowadays, many term insurance plans offer return-of-premium options. So, you get your premiums back if you outlive the policy term.

• Term insurance is costly

  Term plans are usually the most affordable life cover options available. These offer larger sums assured at lower premiums. If you’re in your 20s, you can get a life cover of 1 cr for as low as 600/month.

• I don’t need a term plan if I am young

  As younger individuals become eligible for better coverage and attract lower premiums, you should start investing early. Specifically, your 20s and 30s are the best time for investment.

• Only the earning member needs a term plan

  It doesn’t matter whether an individual is earning or not; everyone should have a term plan. Thus, homemakers should also get a term insurance. Their absence can also impact family’s finances.

• Claims take too long to settle

  Most insurers have faster claim processing and maintain a strong claim settlement ratio. For instance, Axis Max Life Insurance has a CSR of 99.8%^.

Factors that affect the benefits of term insurance vary greatly depending on both the policy and individual aspects. Such factors may affect the sum assured, premium, tenure of the policy, and the benefits that the nominee gets from the policy. Understanding them before purchasing a policy can help ensure that the coverage is appropriate for the policyholder's financial responsibilities.

Here are some factors that affect term plan benefits:

The appropriate balance of these factors ensure that term insurance coverage fulfills all financial needs of the person. People should evaluate their term insurance coverage in case of any alterations in the income, obligations, family, and financial commitments.

Here is the difference between term insurance and other life plans.

A term insurance plan is an efficient financial tool that provides coverage for a specific duration. It provides death benefit to the nominee if the policyholder passes away during the policy term. The money helps them sustain their basic lifestyle even after the demise of the policyholder without depending on anyone.

It acts as the income replacement of the person who passed away to ensure adequate financial protection for the family, even in their absence. Choosing a term insurance policy depends upon the careful analysis of several factors, such as age, income, lifestyle, and inflation. One should consider all factors when buying a term insurance plan that aligns with their financial requirements.