Close
Close

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term

Protect Your family’s financial future with Kotak e-Term. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Lifetime Income Plan

Retirement years are the golden years of life. Know more

Close

Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

How Does Term Life Insurance Work? Learn the Benefits

Term insurance policies has the lowest premium with maximum benefits. Understand the working and benefits of term insurance policies before buying one.

  • Jul 17, 2018
  • 4,260 Views

In the world of financial planning and investments, there are many avenues to be considered. The primary aim of financial planning is to create a corpus of funds that a person can use after his productive years are over. This can be done by either choosing investment instruments that will give a secured rate of return with no uncertainties or choosing options which will earn higher rate of return coupled with market risks. While the latter class of investment options will prevent inflation from eating into the value of corpus in the coming years, the former class will assure a guaranteed amount, no matter what the economic scenario in the country.

A right combination of both the classes of investments is necessary to meet the financial goals of any person’s life. What are these financial goals? They can be ensuring financial safety and continuation of the same standard of living for the family even in the event of demise or disability of the principal bread earner, to avail of the best medical care, to provide for higher education and wedding of an offspring, and finally to save enough for retirement so as to be able to live off these savings comfortably.

Insurance, as you might have gleaned from the discussion above, is a very important part of this financial plan. It is the only way through which you can protect yourself and your family members against the risks like loss of life, permanent disability, prolonged illness, loss of income etc. That means you must plan on buying adequate insurance. But, you would immediately feel daunted by questions like which one to buy out of so many plans in the market? What is the cost-benefit ratio? Which one is the best for my needs? So, let’s address these questions here.

Life insurance plans are essentially of two types – endowment policies and term policies.

Endowment policies are a combination of insurance and investment. Under these policies, the buyer is assured against loss of life, disability and resulting loss of income. In addition to this assurance, endowment policies create a fund that is derived from regular investments made on behalf of the assured out of the premiums paid by him.

The amount so invested and the interest earned on this investment are paid to the assured at the end of the policy as survival benefit. Premiums for these policies are higher because of complexities of managing investments and also due to various factors such as surrender value, loan against the policy etc.

Term insurance operates on principles of pure insurance. While being simple and low cost, it is a very effectual mode of insurance wherein the assured person is covered against the risks of mortality. The premium depends upon the sum assured and age of the assured person. Premiums under term insurance policies are nominal. Younger the person, lower the premium because the insurance company perceives the risk of mortality i.e. death of a young and healthy person to be very less.

If the assured dies during the term of the policy, which is generally anywhere between 10 to 30 years, the beneficiary of the policy gets the entire sum assured as death benefit. The beneficiary can be anyone from the assureds’ family, generally wife or dependent child.

If nothing happens to the assured during the term of the policy, then the policy comes to an end at its stipulated period and the risk cover stops. As there is no further benefit involved, the assured gets nothing at the end of the policy. However, he has the option of extending the insurance cover at any time during the term of the policy.

If he chooses to extend the term of the policy, he would have to pay premiums, which will be altered and often, would be a little higher than earlier according to his age at the time and his impending insurance needs. But exercising this option while the policy is still functional makes sense because if you wait for the policy to end, which normally happens when you are already in your retirement years, you may either be denied the renewal or extension altogether, or may have to pay very steep premiums - and that may not be a smart financial move.

Term Life Insurance Benefits

Term insurance doesn’t provide options like surrender value or loan against the accrued cash value. It adopts a straightforward and cost-effective approach of granting security against the payment of premiums at very nominal rates. This makes it quite an attractive strategy to secure the financial future of your family. We will look into some of the benefits of Term Insurance plan in the following points:

1. Very simple to understand:

All you have to do is decide the sum assured and the term of insurance cover you want to opt for. There aren’t any other complicated terminologies or provisions to understand.

2. A truly low cost- high benefit alternative:

As the premiums are relatively smaller even for a bigger sum assured, term Life insurance tends to be affordable to all.

3. Very important for households who depend on principle or sole breadwinner:

In the unfortunate demise of this person, the entire family may be crippled financially. Term insurance policy gives them a tool to meet their major financial obligations with little worry.

4. Convertible into whole life with a little incremental cost:

This option of convertibility can be exercised by the assured, who wish to switch to an endowment policy and create a savings fund while keeping their risk cover intact.

5. Return of premiums:

There are some variations of the standard term policy. With slightly higher premiums, the provision of return of all premiums at the maturity of the policy can be availed of. Thus, if the assured outlives the policy, he at least gets back what he paid to the insurance company.

6. Income tax benefits:

The premium payment for term insurance is deductible under Sec 80(C) of Income Tax Act and the death benefit is exempt from tax under Sec 10(10D). Thus, by buying a term insurance policy, the assured can plan his tax obligation and in the event of his death, his dependents get the money tax free.

7. Exploring other, more profitable investment alternatives:

This can be done by sophisticated investors with higher risk appetite. Rather than locking in higher amounts of premium towards endowment policy, which provides returns at a moderate rate, they prefer to invest in market related instruments like debt, equity, mutual funds. Term insurance assures them of the financial safety of their family at minimum possible cost.

8. Options to renew and extend the coverage as well as to add various riders:

The person seeking to buy term insurance can modify the terms to suit his requirements like adding specific riders that cover the risk of permanent disability or prolonged illness. This can be done at the time of buying the policy. The risk cover under the policy can also be furthered by extending the term either during the tenure of the policy or at the time of its expiry. In both the cases, the insurance company will charge higher premiums depending upon the stature in life and insurance needs of the assured.

Given all these well-assessed benefits of Term Life insurance, you can handsomely plan and secure the financial future of your loved ones.

Kotak e-Term

Download Brochure

Features

  • Life Cover till 85 years for Life & Life Secure Option
  • 3 Payout Options
  • Special Rates for Women
  • Option to exit the policy with premium refund at the age of 60*
  • Special Rates for Non-Tobacco Users
  • Free Medical Check Up every 5th year**

Ref. No. KLI/22-23/E-BB/2435

T&C

- A Consumer Education Initiative series by Kotak Life

Similar Articles

Insurance Policy for Housewife In India

Can You Get Term Insurance Without Income Proof?

Can I Get Term Insurance on Behalf of My Spouse?

What is Insurance Premium? | Definition of Insurance Premium

Is There Any Tax Benefit on Term Insurance?

Term Insurance Vs Car Insurance: A Budgetary Choice You'll Regret

What Are Insurance Riders and How to Choose Them in a Term Plan?

How To Choose the Right Sum Assured Under a Term Plan?

Planning For Son or Daughter's Wedding

टर्म इंश्योरेंस क्या है? टर्म इंश्योरेंस का मतलब

How to Compare Term Insurance Online

Types of Life Insurance Policies in India

What is a term insurance plan with a return of premium, and how does it work?

What is Critical Illness Policy?

Understanding Term Insurance Riders

How To Change The Nominee in Term Insurance?

What are the Documents Required for Term Insurance Plan?

Make Your Online Term Plan Your Family's Monthly Pay Cheque

Term Vs. Whole Life Insurance: Which One You Should Buy in India?

What is a short term insurance policy?

8 Things To Do After Buying Term Insurance

8 Factors to consider before choosing a Critical Illness Insurance

Which Death Type Does Your Term Plan Not Cover?

Is it a Good Time to Buy Term Insurance During the COVID-19 Pandemic?

What is Form 16, Form 16 part A, Form 16 part B, Information Required and FAQs

All about Online Income Tax Calculator

What Is a Passive Income? Why Should You Use It to Buy a Term Plan?

Do You Need Term Insurance Cover After Retirement?

How Much Cover Should I Take In A Term Plan?

Is term Insurance Needed for People With No Dependents?

10 Ways to Mentally Refresh After a Stressful Day

5 Reasons to Buy Term Insurance When You are in Your 30s

How to Identify Term Insurance According to Your Needs?

Online vs Offline Term Insurance: Which Is The Better Option To Buy

Why Should New Parents Buy Term Life Insurance?

Insuring Protection Against Death With Death Insurance Rider

Term Life Insurance Vs Money Back Life Insurance

Insuring Against Disability With Disability Insurance Rider

Is Life Insurance Investment Worthy Enough

Why should single women purchase term life insurance?

Why does every working women need life insurance?

Can I Make Changes to My Term Insurance Policy Post Purchase?

Protection for your family

Why Premium Amount for Term Insurance is So Low?

10 Most Frequently Asked Questions - FAQs on Term Insurance

How Does Short-Term Life Insurance Work?

क्या ₹1 करोड़ का टर्म इंश्योरेंस पर्याप्त कवर है?

Why Should You Buy Term Insurance in 2022?

Gift Your Father A Term Insurance Plan This Father's Day

Why Surrendering Your Term Plan Policy In The Final Phase Maybe A Bad Idea?

Why Term Insurance Is Important in times of COVID-19?

5 Term Insurance Benefits for Single Women

Buying A Term Insurance? Don't Ignore the Claims Settlement Ratio

Individual Life Insurance vs. Group Term Life Insurance

How Much Term Life Insurance Cover Do I Need in India?

कोविड -19 बूस्टर खुराक के दुष्प्रभाव

5 Benefits of Early Retirement Planning

Planning For Children's Future

4 Methods to Calculate How Much Term Insurance You Need

Importance of Term Insurance at Every Stage of Your Life

Should you have more than one nominee in your term insurance?

Reasons You Need Term Insurance Plan as a Self-Employed Person

Know How to Invest at Every Age for Larger Returns

Should You Buy a Term Plan After 40?

Term Insurance Claims – Make Sure Your Claims Are Never Rejected

Advantages & Disadvantages of Term Insurance in India

Joint vs Individual Term Insurance: Which One Should You Choose?

Can Term Insurance Plans Be Purchased As A Gift?

Term Insurance vs Life Insurance: Understand the Difference and Benefits

Side Effects of Covid-19 Booster Doses

Why Term Insurance Is Better Than ULIP?

What Is the Correct Age to Buy Term Insurance?

Can You Increase Your Term Insurance Cover?

Term Insurance With Riders In India

Term Insurance: What Happens When You Don’t Pay Your Premiums?

Increasing Term Insurance and Riders

Cost of Term Insurance Likely to Increase Soon

टर्म इंश्योरेंस बनाम लाइफ इंश्योरेंस: अंतर और लाभ समझें

11 Types of Death not covered in Term Insurance Plans

What Should You opt for - Limited or Premium Pay?

3 Things to Consider When Buying Term Insurance, If You are Single

Why is it important to buy term insurance plan?

How to Surrender Term Life Insurance When You Have No Liabilities?

Key Differences Between Term Insurance, ULIPs, And Health Insurance

Difference Between Term Insurance and Endowment Plan

Buying A Term Insurance Plan? Take These Factors into Account

How Not To Get Your Term Insurance Claim Rejected

Make Your Online Term Plan Your Familys Monthly Payout

Different Types of Protection Plans

Ensure Protection Against Death, Disease & Disability With Life Insurance

Term Insurance: Most Common Term Insurance Myths Explained | Kotak Life

Zero Cost Term Insurance Plan: What is & Should you buy it?

Calculating Term Insurance Premium

How to Buy ₹1 Crore Life Insurance Policy Without Medical Test?

टर्म इंश्योरेंस क्लेम प्रक्रिया

Why Buy Term Insurance Plan With a High Cover?

6 Types of Death not covered in Term Insurance Plan

Do term insurance policy have a waiting period after buying?

5 Things To Consider While Buying Term Insurance Plan

How Does Term Life Insurance Work? Learn the Benefits

What Should Be The Duration Of Your Term Plan in India?

What is the Right Term Period For Term Insurance Policy? Here's How You Should Choose!

Everything About Claim Settlement Ratio for Term Insurance

How To Calculate The Amount Of Term Life Insurance You Need?

Can Non-Resident Indians (NRIs) Buy Term Insurance In India?

Ideal Features of a Suitable Term Plan - Act Now for a Stress-free Future

Comparing Term Plans – What Should You Look Out For

9 Point Guide on how to File Income Tax Return Online

Tax Benefits of Term Insurance in India

Do I Need to Give a Medical Test for Term Insurance in India?

What Is a Renewable Term Insurance Policy?

What Happens to Term Insurance Plan With No Beneficiary - Kotak Life

What is Term Insurance? Term Plan Meaning and Definition

Should You Have Multiple Term Life Insurance Policies?

Choosing Riders for Insurance Plans

What All Documents Required For Term Insurance In India?

4 Things To Expect From Your Term Insurance Plan in India

Why Term Plan Should Be The First Step To Securing Your Future?

All you need to Know about Term Insurance Plans for housewives

Can Senior Citizens Avail Term Insurance?

Different Types of Premiums in Term Insurance?

Top 3 Reasons Why You Should Buy A Term Plan Now

What Are the Best Term Insurance Plans for Planning Retirement?

What are incremental term insurance plans?

Why Buy Term Insurance Even at Rising Rates?

While Buying Term Insurance Compare Features, Not Just Premiums

Term Insurance Calculator - Everything You Need To Know

Is a Term Insurance Policy Portable?

Which Term Insurance to Choose: Lump Sum or Staggered Pay-out Plan?

जीवन बीमा पॉलिसी लेने की प्रक्रिया क्या है?

Difference Between Short-Term and Long-Term Insurance

Why Short-Term Insurance Plans Deserve a Second Look?

6 Reasons That Make Term Insurance a Must Buy

4 Reasons Why You Need Critical Illness Cover

Why Buying a Term Plan Is Smarter Than Traditional Life Insurance Products

Why Should You Not Take A Term Plan Without Medical Test in India?

Tips to Choose the Right Term Period for Term Insurance Plan

Term Insurance with Critical Illness

10 Ways to Get Your Kids Involved in Your Healthy Lifestyle

Advantages of Buying Term Insurance in Your 50s

Why Should You Add a Rider to a Term Insurance Plan?

Term Insurance Claim Process

5 Reasons to Have a Child Education Plan

Term Plans are Definitely Cheaper than You Think!

Key IRDAI Regulations That Changed Face Of Term Insurance Industry In 2020

All About Term Insurance Inbuilt Coverage

Benefits of Short-Term Life Insurance Policy

Why You Must Include In Your Financial Planning?

9 Most Frequently Asked Questions on Term Insurance

10-Year Term Life Insurance Policy - Explained in Detail

How To Evaluate Your Term Insurance Quote?

How do I Calculate My Term Insurance Premium

8 Benefits of Term Insurance You Should Know

Is It Good To Buy A Term Insurance Plan In 2022?

9 Ways to Help Family Members in Financial Trouble

Is Term Life Insurance Plan an Investment or Expense?

Is Group Term Life Insurance Provided By Employer Sufficient?

How To Choose the Right Term Insurance Plan?

What Types of Deaths Are Covered in a Term Insurance Plan?

How Does BMI Affect Your Term Insurance Premium?

Endowment Plans vs Term Plans: Understanding the difference

How to Buy 1 Crore Life Insurance Policy Without Medical Test

Does Term Insurance Cover Accidental Death?

Term Insurance: Smokers vs Non-Smokers

Difference Between Term Insurance and Endowment Plan

Term Life Insurance Plan for Smokers vs Non-Smokers

Are The Add-ons and Optional Features of Term Insurance Plans Actually Beneficial?

When is the Right Time to Buy Term Life Insurance Policy for Yourself?

भारत में जीवन बीमा कितने प्रकार के होते हैं?

Can I Extend the Tenure of My Term Insurance Plan?

Is ₹1 Crore Term Insurance Good Enough Cover?

Eligibility Criteria for Buying Term Insurance in India

How Much Term Life Insurance Cover Do I Need?

Can a Housewife Buy a Term Insurance Plan - All You Need to Know

Steps on How to Buy Term Insurance Online

Does Your Term Insurance Plan Cover Death Due to COVID-19?

Insuring Against Accidents with an Accidental Death Insurance Rider

Should Youngsters, Working Couples Buy Term Insurance Plans?

Insuring yourself against Ill Health with a Critical Illness Rider

Why Married People Should Buy Term Insurance Under MWP Act?

भारत में गृहणियों के लिए टर्म इंश्योरेंस

Term Plan with Spouse Cover

Term Insurance Basics You Should Know

5 Smart Steps to keep in mind while buying term policies

Do Beneficiaries Pay Taxes on Term Insurance?

Term Insurance Plans and Policies for Smokers

Busting Myths and Facts About Term Insurance Policies

What is a Joint Term Insurance Plan? Key Benefits of Joint Term Plan

Can I Buy Term Insurance for a COVID-19 Patient?

What Happens if you Hide Facts in your Term Insurance?

Why 1 Cr Term Plan Is Necessary For Family?

When Should You Review Term Life Insurance of Yours?

Should you buy a Renewable Term Life Policy?

Can An Individual Buy Multiple Term Insurance Plans?

Why Spending Time with Friends is Essential for Your Mental Health?

Term Insurance Age Limit – Term Plan for All Age Groups