Term Insurance Basics You Should Know

• 24th Sep 2021
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People in India are generally not insured owing to the lack of knowledge on how term insurance functions. However, if you are the earning member of your family, it is your duty to ensure their financial security in case something were to happen to you. A Term Insurance looks after your dependents in such circumstances that are uncalled for.

Term Insurance is the most basic form of Life Insurance, and it is a risk cover plan that ensures the financial stability and security of your dependents (parents, spouse, kids, etc.) in the case of an unfortunate event

This plan provides a life cover (also known as sum assured) to the beneficiary and cushions your dependents’ monetary requirements in your absence.

There are specific eligibility criteria for buying a term insurance policy. The minimum entry age for a Term Insurance Plan is 18 years, and the maximum is 65 years. The term period varies from 5 years to 30 years depending on what you choose, with a minimum and maximum life cover ranging between 3 lakhs to almost 25 lakhs. There are options between annual and single premium, and you can choose your mode of premium payment from alternatives like regular pay (monthly and yearly basis), single pay (wherein you pay one single premium for life), or Limited pay option (pay the entire premium in 5 years or 10 years).

Sometimes, term insurance policyholders want provisions that are not covered under standard term insurance plans. These additional provisions are covered by Rider Benefits to help create a plan that best suits their needs. When you add rider benefits to your term plan, it brings about certain changes like - providing extra coverage or limiting it, amending certain terms, etc. You will also have to bear additional costs for riders you choose. There are many kinds of rider benefits such as - premium waivers, accidental disability riders, etc. with different types of insurance plan and the flexibility to choose these as per your requirement.

One might wonder why people go for Term Insurance Plans in the first place. Apart from providing financial security for you and your family, they have several benefits -

• Flexibility

You can choose a plan that best suits the needs of you and your family. You can customise your chosen plan with rider benefits and choose your preferred premium amount and term period as well. If you get a term plan before your marriage, you can always add your spouse and kids as nominees later.

• Affordability

Term insurance policies are some of the most pocket-friendly financial products as they provide a huge cover at relatively low premiums. The younger you are, the lesser premium you pay which ultimately ensures your family’s future and well-being with a substantial sum assured.

• Amount and Term Period Coverage

The payout sum that these plans provide have significant value and the sum assured provides enough coverage for your family for the long haul. The minimum insurance term is 10 years, and the maximum is 30 years wherein you can avail a cover of up to Rs. 1 crore. It also differs from plan to plan and company to company.

• Tax Benefits

Term Insurance plans come with tax benefits under Section 80C and Section 10(10)D. Under 80C, you can claim deductions up to Rs. 1.5 lakhs on an annual basis.

Term Plans are holistic and economic plans for anyone and everyone who have financial dependents and can be availed both online and offline. Once you have gained a basic understanding, you can compare features, schemes, and terms and conditions to choose a plan that offers the maximum benefits at a low premium.
With a critical purpose to serve, one should make the most of Term Insurance by gaining clarity on how they work towards securing your family’s future so that they can lead their lives with dignity in your absence. Such kind of preparation can provide unmatched peace of mind, so why not go for it? Let us secure our family’s tomorrow today!

- A Consumer Education Initiative series by Kotak Life