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20 Year Term Insurance

A 20 year term insurance plan offers financial protection for 20 years, during which the policyholder pays regular premiums to the insurance company.

  • 1,520 Views | Updated on: May 02, 2024

Are you looking to secure your family’s financial future for the next two decades? If so, a 20 year term insurance plan might be the solution you need. This type of life insurance offers straightforward protection for a specified period, ensuring your loved ones are financially covered in case of your untimely demise.

Key Takeaways

  • A 20 year term insurance plan suits individuals with specific financial responsibilities or obligations.
  • If the policyholder passes away during the term, the insurance company pays out a death benefit to the designated beneficiaries.
  • Premiums for a 20 year term insurance plan are calculated based on factors such as age, gender, health, and coverage amount.
  • Additional benefits of a 20 year term insurance include income tax benefits, surrender benefits, and optional riders for enhanced coverage.

With the benefit of coverage, a 20 year term insurance plan offers a long list of benefits for the policyholders as well as the beneficiaries. If you want to avail of these benefits, understand the features and workings of this plan.

What is a 20 Year Term Insurance Plan?

A 20 year term insurance policy is a type of life insurance that provides coverage for a specified period of 20 years. During this term, the policyholder pays regular premiums to the insurance company. If the policyholder passes away during this term, the insurance company pays out a death benefit to the designated beneficiaries. This type of insurance is popular for providing affordable coverage for a specific period, such as until children reach adulthood or until a mortgage is paid off.

How Does a 20 Year Term Insurance Plan Work?

A term insurance for 20 years works straightforwardly. Those who enroll in this scheme are granted protection throughout its term, which spans 20 years. If the policyholder passes away during the duration of a 20 year term insurance, their designated beneficiary would receive a death benefit. The policy remains in force as long as premiums are regularly paid. However, if the policyholder dies after the policy matures, no benefits would be disbursed. Also, if the policyholder survives the entire policy term, there would be no maturity benefits provided to them or their beneficiaries.

How to Calculate 20 Year Term Life Insurance Premiums?

Using a term insurance premium calculator enables you to determine the necessary insurance coverage to financially secure your family members, along with calculating the corresponding premium. Following a general guideline, the coverage amount should adequately meet your family’s financial requirements in unforeseen circumstances. Meanwhile, the premium for your selected term plan must fit comfortably within your monthly budget.

You can follow these steps to calculate your term insurance premium with an online calculator:

Step 1: Provide Your Details

Begin by inputting personal information such as your date of birth, gender, marital status, annual income, number of dependents, desired life cover, and any smoking habits into the term insurance calculator. It’s crucial to note that your annual income reflects your earning capacity, thus influencing the premium rates of the term insurance policy.

Step 2: Specify the Desired Sum Assured

Next, indicate the sum assured amount you require and the duration of coverage. Additionally, clarify whether you prefer your family to receive a lump sum payout or monthly income. Simply submit these details and await the results.

Step 3: Compare Available Plans

Upon completion, the online term insurance premium calculator will suggest suitable term insurance plans based on the provided information. Conduct a thorough comparison of the options presented, select the most suitable plan, and proceed with the purchase.

Benefits of a 20 Year Term Insurance Plan

A 20 year term insurance plan offers various benefits that make it a popular choice among individuals looking for financial protection. Here are some key benefits:

Extended Cover

A 20 year term insurance plan provides coverage for a significant duration, offering financial protection to your loved ones for 20 years in the event of your death during the policy term.

Death Benefit

The primary benefit of a term insurance plan is the death benefit, which provides a lump sum payout to your beneficiaries if you pass away during the term of the policy. This payout can help your family cover expenses, repay debts, maintain their lifestyle, or achieve other financial goals.

Income Tax Benefit

Investing in a 20 year term insurance policy offers a double tax advantage. First, you can deduct a portion of your premiums from your taxable income each year up to the limit set by Section 80C of the Income Tax Act. Second, the death benefit paid to your beneficiaries is typically exempt from taxes under Section 10(10D) of the Income Tax Act. This makes term life insurance a smart financial strategy to secure your family’s future while reducing your tax burden.

Surrender Benefits

While term insurance plans typically do not offer surrender benefits like cash value or loan facilities as permanent life insurance policies do, some insurers may provide surrender benefits in the form of a return of premium (ROP) option or partial surrender facility. These options allow policyholders to receive a portion of the premiums paid if they choose to surrender the policy before the end of the term.

Additional Riders

Many insurers offer additional riders or optional benefits that can be added to a 20 year term insurance plan for enhanced coverage. These riders include critical illness, disability income rider, accidental death benefit rider, and waiver of premium rider. With these riders, you get an extra layer of protection against specific risks, offering additional financial security to you and your family.

Affordable Premium

Compared to permanent life insurance policies, term insurance plans typically have lower premiums, making them a cost-effective option for obtaining substantial coverage. The affordability of premiums allows individuals to secure comprehensive financial protection for their loved ones without straining their budget.

Features of 20 Year Term Insurance Policy

If you are deciding to buy a 20 year term life insurance plan, then you must familiarize yourself with its features. This will help you understand your policy better and maximize the results. Let us have a closer look at some of the most important features of a 20 year term insurance plan:

Premium Paying Modes

The premium-paying modes for a 20 year term insurance policy typically refer to the frequency at which the policyholder makes premium payments. With the annual payment mode, the policyholder pays the entire premium amount once a year. Under the semi-annual or half-yearly mode, the policyholder pays the premium twice a year, typically every six months. This option allows for smaller, more manageable payments compared to an annual payment but might not offer as significant of a discount.

Apart from this, policyholders opting for quarterly payments make premium payments every three months. With monthly payments, policyholders pay premiums monthly. This mode offers the most frequent payment option, making it easier to budget smaller amounts each month. Some insurance companies may offer flexibility in premium payment modes, allowing policyholders to switch between annual, semi-annual, quarterly, or monthly payments based on their convenience or changing financial circumstances.

Loans

Many 20 year term insurance policies offer a loan provision, allowing policyholders to borrow against the cash value of the policy if it is a type that accumulates cash value, such as a whole life or universal life policy. Policyholders typically have the option to repay the loan with interest or to allow the outstanding loan balance to reduce the death benefit paid to beneficiaries upon the insured’s death.

Who Should Opt for a 20 Year Term Life Insurance Policy Plan?

A 20 year term life insurance policy plan is typically suitable for individuals who have specific financial responsibilities or obligations that will last for approximately two decades. Here are some scenarios where opting for a 20 year term life insurance policy might be appropriate:

Young Parents

Parents with young children often choose a 20 year term policy to ensure that their children are financially protected until they reach adulthood or become financially independent. This duration can cover the period until children finish college and become self-sufficient.

Homeowners with Mortgages

Homeowners who have taken out a mortgage usually consider a 20 year term policy to cover the mortgage duration. This ensures that if the primary breadwinner passes away prematurely, the surviving family members can continue to make mortgage payments and keep the home.

Individuals with Long-term Loans

People who have taken out long-term loans, such as business loans or educational loans, may opt for a 20 year term policy to ensure that their loan obligations are covered until they are expected to be repaid.

People Looking for Income Replacement

Individuals who want to replace their income for their dependents in case of their untimely death might find a 20 year term policy suitable. This duration can provide financial support to dependents until they become financially independent.

Business Owners

Business owners may choose a 20 year term policy to protect their business interests, such as covering key employees, business loans, or buy-sell agreements with a defined term.

Conclusion

Term insurance plans are a practical choice for individuals seeking to safeguard their family’s financial well-being. A 20 year term life insurance offers straightforward protection for 20 years. If something happens to you, your loved ones will receive a financial payout to cover bills, debts, or future goals. A 20 year term insurance is flexible and easy to understand, so by buying it, you can focus on your family’s well-being.

FAQs On 20 Year Term Insurance


1

Are there any provisions for increasing the coverage amount at specific intervals during the 20 year term?

Typically, term insurance policies do not offer provisions for increasing coverage amounts during the term.



2

Can I include coverage for critical illnesses or chronic conditions in my 20 year term insurance policy?

Yes, you can usually include coverage for critical illnesses or chronic conditions as riders to your 20 year term policy.



3

What happens if I want to surrender or cancel my 20 year term insurance policy before the end of the term?

Surrendering or canceling your 20 year term insurance policy before the term ends may result in financial penalties or loss of benefits.



4

Can I convert my 20 year term insurance policy into a joint policy with my spouse during the term?

Converting your 20 year term insurance policy into a joint policy with your spouse might be possible, depending on the terms of your policy and the insurer’s policies.



5

Can I adjust the frequency of premium payments during the 20 year term?

The frequency of premium payments is generally fixed for the 20 year term. You must carefully decide on the premium payment frequency before finalizing the policy.



6

Can I include coverage for specific hereditary conditions or genetic disorders in my 20 year term insurance policy?

Coverage for specific hereditary conditions or genetic disorders may be available as riders, depending on the insurer and policy terms.

- 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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