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Term Insurance Plan

What is Term Insurance?

Term insurance offers financial coverage to policyholder’s dependants if they meet an unfortunate demise during the policy term. Let us understand it with an example of two individuals, Dinesh and Sanjay. Dinesh is 35 years old man who has a wife, dependent parents, and a child, on the other hand, there is Sanjay who is 40 years old with dependent parents, spouse, child, and who has been diagnosed with a critical illness. Now, in the event that either Dinesh meets an unfortunate demise or Sanjay is diagnosed with a critical illness, this plan will financially replace them in both of these. Thus, term insurance will financially support your dependents even if you are not around. Scroll through the section to know all about term insurance plans.

Benefits of Term Insurance

Term insurance is a kind of life insurance policy that provides life cover to the life assured at an affordable premium rate. This is the most basic type of life cover that one can get. You can ensure financial security for your loved ones in case anything unforeseen happens to you during the policy tenure as this policy provides a death benefit in case of an untimely demise of the life assured during the policy tenure. Some term plans also provide maturity benefits in case the life assured survives the entire policy tenure, helping the life assured to fulfil their long-term financial goals. Term insurance can also help you save taxes and provide you a sense of peace of mind.

Death Benefit

Term insurance provides a death sum assured (death benefit) to the nominee in the event of an unforeseen demise of the life assured during the policy term. This benefit helps your family remain financially sound in the time of emotional grief and meet financial liabilities, if any.

Tax Benefits

Life insurance premiums qualify for a tax deduction under Section 80C of the Income Tax Act. Also, as per Section 10(10D), the sum assured (SA) received on death or plan maturity is eligible for tax exemption if the premium is up to 10% of the SA or SA is at least 10X of premium amount.

Peace of Mind

Term Insurance plans help you maintain your peace of mind by securing the future of your loved ones financially in your absence. They give you enough assurance that the standard of living of your family and their dreams will not be compromised when you're not around them.

Pocket Friendly

Term insurance plans are known for providing high insurance coverage at affordable premiums. They help you secure the future of your family with amounts as high as Rs. 10 Crore or more against nominal premium amounts. Term plans’ affordability, make them a preferred choice.

Financial Stability

A term insurance plan helps you maintain financial stability of your family in case of your untimely demise. Also, if you opt for term insurance with return of premiums (TROP), you are eligible to receive a sum assured on plan maturity if you survive the entire policy term.

Whole Life Cover Benefit

Some of the life insurance providers offer a whole life cover with their standard term plans. This helps you to enjoy the benefits of a life cover till 99 years of age. This benefit enhances your peace of mind and helps you live your life to the fullest without worries.

When Is the Right Time to Buy Term Insurance?

Wondering whether term insurance will be more affordable if you buy at an early age? If so, then the answer is. Go through the illustration to understand the same:

 

Age                                            Annual Premium                                                       Total Premium Paid                            Total Number of Premiums

30                                                   Rs. 15,000                                                                    Rs. 6,00,000                                                      40

40                                                   Rs. 20,000                                                                    Rs. 7,00,000                                                      35

The above data explains how the premium gets directly affected if you buy it when you are old. Moreover, you should also keep your financial dependants in mind while determining the right time to buy term insurance.

Who Should Buy Term Insurance?

While a term insurance plan is recommended for all, here is a group of people who should buy it:

  • If anyone has non-earning dependants such as retired parents, non-earning children, and spouse

  • If you have taken a loan and that might lead to financial burden if you are not around

  • If you don’t have the adequate savings to fund your family’s need

  • If you have certain liabilities to fulfil such as children’s wedding or higher education

  • Newly married couples

Let us understand this with an example: Dinesh and Sanjay are two friends who are thinking to buy term insurance. Dinesh is 32 years old who has taken a home loan and is planning for having children and Sanjay on the other hand is 40 years with no dependent parents and children. In this case, Dinesh is suggested to buy a term insurance plan as compared to Sanjay.

Things to Consider While Buying Term Insurance

Depending on the coverage, policy term, premium payment frequency, and other factors, the premium will vary. These factors also determine premium and thus it is very important to keep these factors in mind. Thus, while buying a term insurance plan, you must check with your insurer regarding the policy term, premium paying term, and a lot of other things.

Factors That Will Affect Your Term Insurance Purchase

While buying term insurance, you need to keep a number of factors in mind such as your age, lifestyle, income, and others. All of these factors affect its premium. So, in the section below, let’s understand the different things that you need to consider when buying this plan:

  • Age: There is no best time to buy a term insurance plan. However, depending on which age you are buying the policy, its premium will accordingly vary. For instance, the premium of an individual who is 25 years old will have to pay a lower premium as compared to those who are in their 30s. This is because the chances of falling ill are higher when you are old and thus age directly affects the premium.

  • Income: To secure a financial future for your loved ones, you must also keep your income in mind. You should ideally choose a plan that offers 10 times the coverage of your annual earnings.

  • Smoking Habits: To keep the lifestyle of your dependents intact even in your absence, you must be careful in choosing the term insurance plan. You should select a plan, considering your current lifestyle. It is important to note that the premium amount for smokers is 30-40% higher vs non-smokers since smokers are more likely to develop smoking-related health complications vs non-smokers later in their life. So, while buying this plan, It is important to declare smoking habits honestly otherwise it may lead to claim rejection.

  • Education: Your education is another factor that will affect the premium. According to different reports, it has been found that insurers consider the educational qualification of the policyholder in determining their earning capability and thus assessing the premium.

How Should I Decide the Policy Duration?

The policy duration or policy term is the time period during which the term insurance plan remains active. You should ideally buy it for a period till you have financial dependents or until you are financially free. An individual who is financially free is one without a dependent spouse, parent, or child, doesn't owe any loan, and has accumulated substantial savings to fund future needs. So, based on your financial dependency, choose the right policy duration.

How Should I Decide On the Term Insurance Premium Paying Term?

There are different premium paying terms that you can choose while buying a term insurance plan: Regular Pay and Limited Pay. A limited pay is one where the policyholder pays the premium for a limited period unlike regular pay, where they are supposed to pay the premium for the entire policy term. Term insurance with a limited pay option is recommended for the following:

  • If you know that your business may suffer loss in the next few years

  • If you work in a non-stable organisation where

  • If you have an unstable source of income

  • If you are nearing your retirement and want to clear the term insurance premiums before that

So, based on your financial liabilities, choose the premium paying model accordingly.

How Should I Decide the Premium Payment Frequency?

While buying a term insurance plan, you should be wise in choosing the premium payment term. In order to avoid paying hefty premiums at one go, you should pay premiums monthly instead of annually. It is however important to note that there are discounts available when you choose to pay premiums on an annual basis. So, depending on your premium paying capacity, choose the premium frequency accordingly. You should also choose the auto-debit option so that premiums are always paid on time.

How Should I Decide the Term Insurance Payouts?

There are different payout options available when buying this type of life insurance plan. On choosing the adequate payout, you will be able to fix how your family will receive money when you are not around. Some of the options available when it comes to term insurance payouts are as follows:

  • Lump-sum: This refers to the payout model where the entire amount is credited to the nominees’ account in one go.

  • Lump-sum with Monthly Income: Lump-sum with monthly income is where a definite amount is paid when the policyholder dies. Along with this, a specific amount is also paid every month for the next 10-20 years.

  • Only Income: In this type of payout option, the payout is done every month for a specific number of years.

Now, depending on your financial dependents, you should choose the payout option. It is advisable that if you have nominees who are financially not independent, you must choose a lump sum with a monthly income. So, while buying term insurance, you need to opt for the premium payout.

What Are the Add-on Options Available in Term Insurance Plans?

Listed below are the add-ons available with the term insurance plan:

  • Accidental Death Benefit: Accidental Death Benefit rider provides a definite sum assured in the event of an unfortunate demise of the policyholder due to an accident. This type of rider is best-suited for those who frequently travel and are at greater risk of accidents. Thus, with this rider, you can financially protect your loved ones in case of death due to an accident.

  • Critical Illness: Critical illness rider provides financial coverage if the policyholder is diagnosed with critical illnesses like cancer, kidney failure, heart attack, etc. It is advisable that you check with your insurer about the list of critical illnesses covered under your term insurance plan. This is recommended for those who lead an unhealthy lifestyle and are thus at a higher risk of getting diagnosed with any critical illness.

  • Terminal Illness: Terminal Illness rider provides the payout of death benefits in advance if the policyholder is diagnosed with a terminal illness or any kind of life-threatening disease.

  • Premium Waiver: In case the policyholder suffers permanent or partial paralysis, the entire premium gets waived off with a Premium Waiver Rider. There are some plans that also provide premium waiver benefits if the policyholder is diagnosed with a terminal illness.

  • Accidental Disability Benefit: An Accidental Total and Permanent Disability rider provides or ATPD provides financial benefits if the policyholder suffers a permanent or partial disability.

Eligibility Criteria of Term Insurance

Below mentioned are the eligibility criteria to purchase a term life insurance policy:

Features                                          Eligibility Criteria

Minimum Entry Age                       18 years

Maximum Entry Age                       65 years

Minimum Policy Tenure                  5 years (may vary from one insurance provide to another)

Maximum Policy Tenure                 No limit (may vary from one insurance provide to another)

Who can Purchase It?                     Salaried people, self-employed, housewives, professional

Available for NRIs                            Yes, term insurance plan is available for NRIs

Types Of Term Insurance

There are different types of term insurance plans that you can buy such as the following:

  • Level Term Insurance Plan: It is the most basic type of plan in which the sum assured remains the same throughout the policy tenure. For example, when you buy with a coverage of Rs. 1 crore, then the same will be paid out to the nominees in case the policyholder meets an unfortunate demise.

  • Term Insurance with Return of Premium: In this type of insurance, the policyholder receives all premiums paid at the time of maturity. Additionally, the death benefit is paid to the beneficiaries of the policy if the policyholder dies during the policy period. Let us understand this with an example X has bought a coverage of Rs. 1 crore and has paid Rs. 20,000 premium per month for 3 years. In this case, if the policyholder survives, then the total premium paid which is Rs. 7,20,000 is paid back to the policyholder.

  • Increasing Term Insurance: With this term plan, your insurance cover increases at a pre-determined rate through policy tenure depending upon your increasing needs. For example, this type pf plan with a coverage of Rs. 25 lakhs, then under increasing insurance, of 10%, for 5 years, then after 5 years, you will get Rs. 37,50,000.

  • Decreasing Term Insurance: Unlike Increasing, in a Decreasing Term Insurance, the sum assured continuously decreases on the basis of the decreasing requirements of the policyholder. For example, if you have coverage of Rs. 25 lakhs, then under decreasing plan you will get Rs. 12,50,000 after 5 years.

  • Zero Cost Term Insurance: In this type of plan, the policyholders can choose to exit the plan after the specified tenure and get back all premiums paid until that date. For example, if you have bought this plan with a cover of Rs. 50 lakhs and at any point, you feel that you are financially free and no longer need the life cover, then in that case you should buy Zero Cost Insurance.

  • Term Insurance with Riders: This is another type of plan that allows adding paid riders such as accidental death cover, accidental disability benefit rider, and more. It is also suggested for those who want to enhance their coverage with additional benefits.

Advantages of Term Plan

There are multiple benefits of buying a term insurance plan such as those listed below:

  • Provides Death Benefit: It provides a sum assured benefit to the nominee in the event of an unforeseen demise of the life assured during the policy term. This benefit helps your family remain financially sound in times of emotional grief and meet any financial liabilities.

  • Pocket-friendly Option: Term insurance plans are known for providing high insurance coverage at affordable premiums. They help you secure the future of your family with amounts as high as Rs. 10 Crore or more against nominal premium amounts. Term plans affordability, makes them a preferred choice.

  • Tax Benefits: The premium paid towards this plan qualifies for a tax deduction under Section 80C of the Income Tax Act. Also, as per Section 10(10D), the sum assured received on death or plan maturity is eligible for tax exemption if the premium is up to 10% of the sum assured.

  • Financial Security: A term insurance plan helps you maintain the financial stability of your family in case you meet an untimely death. Also, if you opt for a plan with return of premiums (TROP), you are eligible to receive a sum assured on plan maturity if you survive the entire policy term.

  • Ensures Peace of Mind: It helps you maintain your peace of mind by planning a secure future for your loved ones even in your absence. They give you enough assurance that the standard of living of your family and their dreams will not be compromised when you're not around them.

Why Should You Buy Term Insurance Online?

Unlike the traditional process, policyholders now need not undergo a lengthy and tedious process to buy a term insurance plan online. Some of the benefits of buying it are as follows:

    • Hassle-free Comparisons: When you purchase it online, you can compare different plans offered by different companies without any hassle. You can use the term insurance premium calculator tool online to compare the plans and buy the one that best suits your needs.

    • Lower Premium Rates: Purchasing it online is a cost-effective option. This is because you don’t have to pay any commission to middlemen or agents. Simply visit the official website of Aroon Fintech, enter your personal details, compare different plans, and make a premium payment online to secure the future of your loved ones. There are many insurers who give discounts when you buy term insurance online.

    • Easy and Safe Purchase: Customers can buy this online from the comfort of their homes. You don’t have to visit one insurer's branch office after another in search of good term insurance plans. Additionally, the complete process of purchasing a term insurance plan online is safe and saves a lot of time for you.

    • Free-look Period: Free-look period is the time period during which you can cancel a term insurance plan for free. On buying term insurance online, you will get a free-look period of 30 days. On the other hand, if you buy it offline, then the free-look period is of 15 days. So, it is always a better idea to buy it online.

Basic Documents Required for Term Insurance

The documents required to buy term insurance plan are as follows:

  • Age and ID proof - PAN card

  • Address proof - passport, driving license, aadhaar card, or voter ID

  • Income proof - ITR copy, Form 16 copy, or, Salary slips, bank statement

How To Choose The Best Term Insurance Plan?

Our goal is to provide you with a seamless experience and understand your requirements to provide you with the best term plans. Below mentioned are some reasons why you should consider Aroon Fintech for purchasing this policy:

  • Easy Comparisons: You can use the term insurance premium calculator tool to easily compare several plans according to your requirements and budget. You just need to enter a few details to start comparing the different term insurance plans available.

  • Prompt Customer Response: At Aroon Fintech we have customer care specialists who will resolve your queries effectively and efficiently. Our team strives to provide you with a smooth and hassle-free experience.

  • Quick Policy Issuance: You can easily purchase a policy by entering a few personal details such as age, gender, mobile number, date of birth, etc. Within a matter of a few clicks, you can buy this plan with Aroon Fintech

Claim Process of Term Insurance

Below mentioned are the steps for an online term insurance claim:

  • Claim Intimation: Visit the chosen insurance provider’s official website and open the claim section on the website. You can log onto the website using your registered mobile number/email address/policy number.

  • Fill Out the Claim Form: Next, fill in the claim form and submit relevant documents for claim processing. The documents will vary for the type of claim you are raising, so check with the insurer regarding the documents you need to submit. For instance, in case of death, the nominees will have to submit a death certificate, on the other hand for critical illness-related claims, the policyholder needs to submit a valid medical certificate from the attending doctor.

  • Claim Processing & Settlement: After the required documents are verified, the insurer will start with the claim processing and will settle the claim for your term insurance policy within 30 days.

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