9 Most Frequently Asked Questions on Term Insurance

• 30th Nov 2021
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Purchasing a term insurance policy is one of the best ways to secure your family’s future. Not only is the assured sum for a term plan high, but the premiums for such a plan are also quite affordable. It is a sure way to ensure that your family gets the necessary financing in case something happens to you. Term plans are uncomplicated, easy to understand and mostly transparent, thus making them a very popular choice among policy buyers.

Even though they’re popular, many people still have some doubts regarding term insurance. Let us address some of the most frequently asked questions on term insurance.

1) Do term plans offer survival benefits?

A survival benefit means that the policy holder can get benefits on their term insurance if they survive the policy term. This is only possible in term plans if the policyholder has bought a Return of Premium Term Plan. A pure term insurance plan does not have any survival benefits if the policy holder survives the policy term.

2) Can smokers get term insurance?

Smokers can very much purchase term insurance, the only caveat being that the premiums may be higher since risk of mortality is high with smokers.

3) Does the term insurance premium change over the policy period?

Usually, the term insurance premium remains constant throughout the entire policy term. However, in some cases the premium may increase if the policyholder takes up unhealthy lifestyle habits like smoking and drinking.

4) What is the difference between accidental death insurance and term insurance?

A term insurance offers the assured sum to the beneficiary in case of death of the insured that can occur due to many reasons, including due to accident. On the other hand, accidental death insurance only offers cover if death occurs due to an accident.

5) Should I buy an additional term plan if my employer already offers a group term policy?

Yes, you must buy an additional term plan over and above the group policy offered by your employer. A group policy remains active only until you stay with your employer. If you leave your job, the policy ceases and your life will no longer be covered, putting your family at financial risk. Additionally, the benefit of a group plan is usually low and could be insufficient for your family’s future expenses.

6) Is a term plan valid in foreign countries?

Yes, term insurance policies are valid and can be claimed if death occurs in foreign countries. It is important to inform the insurer of your travel abroad. Keep in mind though, that insurers may not offer the death benefit when travelling to countries that are in a war-zone like Afghanistan and Somalia.

7) Can NRIs purchase term insurance?

Yes, NRIs living abroad for work or education can purchase term insurance in India. There may be some additional documentation required for the same. NRIs can either buy a policy from abroad or purchase one on their visit to India.

8) Does Term Insurance Offer Tax Benefits?

Yes, under Section 80(C) and Section 10(10D), term insurance offers tax benefits to the policy holder. Section 80(C) entitles the policyholder to a tax deduction on premiums upto Rs. 1.5 lakh per annum. Section 10(10D) ensures that the death benefit on term insurance is completely tax free.

9) Do insurance companies investigate the policyholder’s death?

Yes, the insurer has every right to investigate the death of the policyholder if they deem it necessary.

We hope the above answers cleared all your doubts related to term insurance. If they did, then do not waste any more of your precious time. Buy your term policy soon and secure your family’s future.

- A Consumer Education Initiative series by Kotak Life