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Features
Ref. No. KLI/22-23/E-BB/492
A term insurance plan offers affordable coverage for a specified period, with fixed premiums and customizable coverage amounts to suit individual needs and provide temporary protection.
The only thing assured about life is its uncertainties. There is nothing you can do to fight that. However, there are ways you can safeguard your loved ones from the cruelties.
Term insurance emerges as a ray of hope for financial security, offering individuals a straightforward yet powerful means of protecting their loved ones’ futures. At its core, term insurance embodies a set of salient features that distinguish it from other types of life insurance policies, making it a preferred choice for individuals seeking affordable and customizable coverage.
Term insurance, in its essence, is a form of life insurance that provides coverage for a specific period, or “term,” as the name suggests. Unlike permanent life insurance policies, which offer lifelong coverage and often include savings or investment components, term insurance is designed to offer temporary protection for a predetermined duration. This distinction forms the foundation of term insurance’s appeal, as it caters to individuals’ varying needs and financial goals with simplicity and flexibility.
Term insurance is a type of life insurance policy that provides coverage for a specific period, known as the “term.” Unlike permanent life insurance policies, such as whole life or universal life insurance, which offer coverage for the entirety of one’s life, term insurance is designed to provide protection for a predetermined duration
With their simplicity and flexibility, term insurance policies offer a range of features designed to provide financial protection to policyholders and their loved ones. Let’s delve into the key features of term insurance plan, an attractive option for securing your family’s future.
Term insurance plans are renowned for their affordability compared to other types of life insurance, such as whole life or universal life insurance. Since term insurance provides coverage for a specified period, typically ranging from 5 to 30 years, premiums are generally lower. This affordability makes term insurance accessible to individuals with varying budget constraints, allowing them to obtain essential coverage without breaking the bank.
One of the appealing features of term insurance plans is the predictability of premiums. Once you purchase a term policy, the premium remains fixed for the duration of the term. This feature provides peace of mind to policyholders, as they can budget for their insurance expenses without worrying about unexpected premium increases.
The primary purpose of term insurance is to provide a death benefit to the beneficiaries named in the policy in the event of the insured’s death during the term. The death benefit is typically paid out as a lump sum, offering financial support to surviving family members. This tax-free payout can be used to cover various expenses, including funeral costs, outstanding debts, mortgage payments, and ongoing living expenses.
Term insurance plans offer flexibility in choosing the coverage amount based on individual needs and financial obligations. Policyholders can select coverage amounts that align with their specific goals, such as providing for dependents, paying off debts, or covering future expenses like college tuition. By customizing the coverage amount, individuals can tailor their policy to suit their unique circumstances.
Term insurance plans come with a range of term length options, allowing policyholders to select the duration of coverage that best suits their requirements. Common term lengths include 10, 15, 20, or 30 years, although some insurers may offer more flexible terms. Policyholders can choose a term length based on factors such as their age, financial goals, and anticipated future expenses.
Many term insurance plans offer the option to renew the coverage at the end of the term, allowing policyholders to extend their coverage without undergoing a medical examination. Additionally, some policies include a convertibility feature, enabling policyholders to convert their term policy into a permanent life insurance policy providing lifelong coverage if their needs change over time.
Unlike permanent life insurance policies, such as whole life or universal life insurance, term insurance plans do not accumulate cash value over time. Term policies focus solely on providing death benefit protection during the term of the policy, without any savings or investment component. While this means that term insurance premiums are lower, it also means that policyholders do not build up a cash value that they can access during their lifetime.
One could argue that the most traditional sort of insurance is a term insurance policy. The majority of term insurance policies have premiums that increase incrementally over the course of the policy. This accounts for how much less money is worth as time goes on.
It also includes coverage for the increased mortality risk and newly imposed fees for a longer period of coverage. You can take into account the following three situations to comprehend how it functions:
You don’t need to constantly save a sizable sum of money in order to be able to obtain a term insurance policy. For a price as low as around ₹10,000 per year, a sizable number of insurance policies can provide you with an amount assured of up to ₹1 crore.
You pay the premium for these plans on a schedule that you choose, just like any other insurance policy. These premiums may be paid monthly, quarterly, on a recurring basis, or once a year. They may also be paid in one big payment rather than at regular intervals.
Aside from term insurance, term insurance policies do not often include any maturity benefits. Their primary objective is to provide life insurance coverage, and they successfully accomplish this. The beneficiary designated on the insurance will receive the sum promised in the event of the policyholder’s death.
Offering simplicity, flexibility, and affordability, term insurance plans come with a host of advantages that make them an attractive choice for those seeking life insurance coverage.
Payout options include lump sum payments at the end of the term, periodic payments in addition to the lump sum, and monthly payments in addition to the halfway lump sum.
The most practical way to cover your life for a certain period of time is with term insurance. Term insurance plans are incredibly reasonable, and the coverage amount may be enough to compensate for a significant portion of your lost income.
Some term insurance plans also provide disability support and death benefits. The insurance provider will cover the remaining policy premiums if you suffer injuries in an accident that result in total and permanent disability while the policy is in existence.
For comprehensive protection against death, disability, accident, or disease, riders are available as critical illness riders, accidental death advantage riders, and waiver of premium riders.
According to one’s financial convenience, several premium payment options are available, including monthly, quarterly, semi-annually, and yearly.
Last but not least, under Section 80C of the Income Tax Act, premiums paid for a term insurance plan are eligible for tax advantages. The nominee’s death benefit received under the plan qualifies for tax deductions under Section 10 (10D).
A term insurance calculator lets you figure out the premium quote in just 10 minutes. All you need to do is enter your personal information, like age, gender, monthly salary, marital status, and other information. It is essential to mention the sum assured you will pay over a period of time and the beneficiary’s monthly, one-time lump payment, or both. Following is the way to calculate the term insurance premium.
The Insurance Regulatory and Development Authority (IRDA) of India has set the premium as Own Damage Premium - (No Claim Bonus + Discounts) + Liability Premium.
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Not all circumstances are covered by a term plan. We refer to these as exclusions. If specific conditions are met, the nominee is not given the claim amount in that scenario. This varies from business to business.
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Term life insurance provides coverage for a specific period, typically ranging from 5 to 30 years, and offers a death benefit to beneficiaries if the insured passes away during the term.
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Term insurance is suitable for individuals who have financial dependents or obligations, such as families, mortgage payments, or outstanding debts, and want affordable protection for a set period.
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The age limit for term life insurance varies among insurance providers but generally ranges from 18 to 75 years old. However, the availability of term insurance may decrease with age, and premiums typically increase as the insured gets older.
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Income proof is not typically required for term insurance. Instead, insurers assess the applicant’s financial situation based on factors such as occupation, lifestyle, and health status to determine eligibility and premium rates.
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Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
