What Is Term Insurance in India A Beginner’s Guide

Have you ever wondered what will happen to your family’s finances if something unfortunate happens to you? It’s a thought that crosses many minds, especially when we have loved ones relying on us.

Term insurance offers a simple, affordable solution. Unlike other types of life insurance that combine investment and coverage, term insurance is purely a protection plan. It ensures your family’s financial security in case of your untimely demise. Term insurance is straightforward — it’s a policy that provides a lump sum payout to your beneficiaries in case of a death of the life assured during the policy term.

What Is Term Insurance?

erm insurance is an affordable life insurance plan that ensures your family’s financial security by providing financial support in case you are not around anymore. This payout helps your family maintain their lifestyle and meet financial obligations like home loans or education expenses.

How Does Term Insurance Work?

All Life insurance policies including Term insurance is regulated by the IRDAI (Insurance Regulatory and Development Authority of India), which ensures transparency and fairness. Here’s how term insurance works, step-by-step:

1. Choose coverage and policy term:

Decide the amount of coverage (sum assured) and the length of the policy term, typically ranging from 10 to 40 years

2. Pay regular premiums:

Pay the premiums at regular intervals — monthly, quarterly, half yearly or annually — based on the coverage chosen.

3. If the life assured passes away during the term:

The nominee will receive the sum assured

4. If the life assured survives the term:

There is no maturity benefit (except in return of premium plans, in which return the premiums paid if the life assured survives the term)

Term insurance plans simplify this process by offering flexible coverage options and some unique features with riders and premium return options. This ensures both protection and value.

Key Features and Benefits of Term Insurance

Term insurance is designed to offer high coverage at low premiums, along with additional benefits that can be tailored to suit your needs. Here are some of the standout features:

High Cover at Low Premiums:

A term insurance has super-affordable. Younger you are, lower the premiums hence earlier you buy, the cheaper the premiums are.

Flexible Tenure:

Choose from policy terms ranging from 10 to 40 years to match your financial goals and responsibilities.

Add-on Riders:

Value-add options like critical illness, accidental death, and waiver of premium riders provide extra coverage for unforeseen situations.

Tax Benefits:

Get tax benefits under Section 80C (under the old tax regime) on premiums, with the death benefit being tax-exempt under Section 10(10D) (if certain conditions are met). Please check the prevalent tax laws and the conditions for the tax benefits.

Peace of Mind:

With term insurance, your family stays financially secure. It ensures they can maintain their lifestyle and meet critical expenses.

Common Myths About Term Insurance

Despite its affordability and simplicity, term insurance is often misunderstood. Let’s clear up some common myths that prevent people from making informed decisions:

“You Lose Your Money If You Survive”

This is a common misconception. While traditional term insurance doesn’t offer maturity benefits, Return of Premium (ROP) variants, like the iTerm ROP plan, return all premiums paid if the policyholder survives the term.

“It’s Only for Older People”

Term insurance is more affordable for younger buyers. In fact, buying term insurance at a younger age locks in lower premiums.

“Buying Online Isn’t Safe”

You can safely buy life insurance online with instant quotes, quick underwriting, and policy issuance. It’s a seamless, safe experience for customers.

How to Choose the Right Term Plan?

Choosing the right term plan requires a thoughtful assessment of your financial situation and family needs:

• Dependents’ Financial Needs: Consider the lifestyle and obligations your family would need to maintain if something were to happen to you.
• Coverage Multiple: A common rule is to aim for coverage of 60 minus your age times your annual income to ensure your family’s financial security. E.g. if you are 30 yrs old then 60 – 30 = 30 times your annual income should be your cover.
• Add-ons and Discounts: Explore available add-ons like critical illness and accidental death riders, and consider digital purchase discounts for added savings.

Conclusion

Term insurance offers peace of mind for you and your family. It’s an affordable and straightforward way to ensure that your loved ones are financially protected in your absence. With the right coverage, term insurance can help your family maintain their lifestyle, meet obligations like education or home loans, and keep moving forward without financial stress.

By considering your dependents’ needs and assessing various coverage options, you can make an informed decision. Calculate your ideal life cover today with our term insurance calculator and take the first step toward safeguarding your family’s financial well-being.

FAQs

1. What is the minimum age for term insurance?

The minimum age for purchasing term insurance is typically 18 years. However, this might change with the insurer.

2. Can I get my premiums back?

Yes, Bandhan Life offers Return of Premium (ROP) plans that return all premiums paid if the policyholder survives the term.

3. Are premiums tax-deductible?

Yes, premiums are eligible for tax deductions under Section 80C of the Income Tax Act. These tax exemptions are subject to changing laws and certain terms and conditions.