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Salient features of a Term Insurance Plan

Term Insurance Plan: A pure term plan gives life insurance for the sum assured, or predetermined amount, and the policy term. Here are a few of the most crucial ones that will aid you in choosing the best policy for your family.

  • 7,731 Views | Updated on: Feb 26, 2024

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. For example, term life insurance coverage can be of great financial help for the policyholder’s family if he or she passes away untimely. The cover provides a sum assured to the nominees of the insured.

There are many great features of this insurance plan. Here are a few of the most important ones:

1. Affordable

The term plan is a pure life insurance cover. If the policyholder dies before the tenure of the plan is over, the family of the insured receives a sum assured from the insurer. However, if the policyholder survives the term, then no benefits are paid on the plan’s maturity. This is why this insurance policy is affordable. You can financially safeguard your family by paying cost-effective premiums.

2. Easy to buy

Among all the best features of term insurance, this particular facility has made it a very popular insurance plan. Either you can find a trustworthy insurance agent who can take care of buying the cover for you, or you can do it independently by using the Internet. Find the web portal of the insurance company you trust and apply for the insurance through their online form. Moreover, you can pay the premiums online. Overall, online term plans are cheaper compared to offline plans.

3. Term plan with return of premiums

If you are worried about the no maturity benefit factor of the term plan, then you can opt for the one that comes with the ‘return of premiums’ facility. The term plan with return of premiums is a variant of the insurance policy where, on the plan’s maturity, the insurer returns all the premiums paid by the policyholder. This insurance policy is slightly costlier, but the added benefit makes up for it.

4. Staggered claims payout option

If you are worried that the lump sum paid by the insurer will be too much to be handled by your family, then the staggering claims payout option is one feature of the term plan that can put your fears to rest. If you opt for this option, then only a portion of the cover will be paid to your family as a lump sum, and the remaining money will be paid as yearly or monthly payouts.

5. Flexibility in paying premiums

The term plans offer a variety of options regarding paying your premiums. You can pay them yearly, quarterly, and monthly. The flexibility allows you to choose a premium payment option according to your comfort.

6. Offers rebate

If you are a non-smoker, then most insurance companies will offer you a rebate on the premium. Some insurers do the same for women policyholders too.

Knowing these features of a term life insurance plan will help you make an informed decision when selecting the right policy for your family. Once you do that, you can lead a wholesome life, completely free of financial worries.

How do term plans work?

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:

1. Buying the insurance

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.

2. Maintaining the rule

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.

3. Getting the advantages back

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.

Advantages of term insurance plans

1. Payout options

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.

2. High coverage and low premium

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.

3. Disability support

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.

4. Riders

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.

5. Premium payment mode

According to one’s financial convenience, several premium payment options are available, including monthly, quarterly, semi-annually, and yearly.

6. Tax benefits

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).

How are term insurance premiums calculated?

A term insurance calculator lets you figure out the premium quote in just 10 minutes. All you need is to 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 also: 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.

FAQs

1

What are the premium payment modes available under term plans?What are the premium payment modes available under term plans?

  • Regular Payment Option
  • Limited Payment Option
  • Single-Premium Payment Option

2

Do term plans have exclusions?

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.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

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.

Amit Raje
Reviewed By :
Prasad Pimple

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

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