Term Insurance FAQs
The cheapest, and simplest form of insurance, Term Insurance is a pure risk cover determined by the sum assured. On demise of the policyholder, the predetermined amount is paid to the nominee.
Every individual has varying needs for term insurance, but the most common benefits are
- Financial security for family – For single earners, term insurance offers monetary assistance for dependents in case of demise
- Protection from liabilities – Term insurance can help dependents manage financial obligations of a deceased family member, such as loan payments.
- Cost effectiveness – This form of insurance is extremely cheap compared to other types. For example, a risk cover of Rs. 30 Lakh for a 30-year old male can cost as little as Rs. 3000 per year.
- Tax Benefits – Investing in term insurance allows policyholders to claim deductions under Section 80C
- Additional Protection Options – Critical illness, accidental death or disability, hospitalization etc are some of the additional cover options available in the form of riders
The main factor in deciding risk cover is annual income. Generally, a risk cover that is 10 to 15 times the annual salary of the prospective buyer is recommended. For example, someone earning Rs 4 Lakh per annum should have term risk cover of at least Rs. 40 Lakh. This calculation is designed to allow self sustainability for dependents while maintaining the same lifestyle, and take care of future needs. For younger policyholders, the recommended amount is 25 times annual salary as dependents will require longer support.
At BimaKaro , we believe that your lifestage is more important than just your age. That is why we recommend insurance and comparison options based on your requirements , and let you compare your available options online with ease. BimaKaro also allows you to buy term insurance directly from the insurer, without an agent, and the savings are passed on to you. Further savings are available when you buy certain insurance policies exclusively available online. Compare and save easily, and when it’s time to purchase you can submit all your documents easily online and get immediate confirmation. With online purchase, you also get an easier claims process.
Term plans do not have maturity benefits, beneficiaries only receive payment upon death of the insured party. If the policyholder survives the term specified in the policy, no payment is made. Certain plans have Return of Premium options, where the premium amount is paid back to the policyholder in case of survival to end of the term, sometimes with a certain percentage of interest. These plans are pricier compared to straightforward term plans.
Term insurance riders are supplementary benefits added to life insurance policies, at additional cost to the policyholder. The premium paid on riders are also eligible for tax benefits.
Term insurance portability is not yet available. However, one can surrender their current policy and buy a new one. This is not recommended because the premium paid up to that point will lapse without any return, and the new policy will most likely have higher premiums due to increased age of policy holder. In these cases, continuing the current term policy and buying another one after declaring the current plan allows one to avail benefits of both plan. For term plans bought offline, one can consider surrendering them after calculating the cost difference and benefits. Generally, online term plans are considerably cheaper even after factoring in age.
As per current rules and regulations, smokers and tobacco users are charged higher premiums than non-smokers to counteract the higher risk of insuring them. The risk to the insurer is also increased due to higher susceptibility to diseased, especially heart-related disorders, leading to higher premiums.
If death occurs by suicide within first year of the policy or within first year of reviving lapsed policy, term plans will not pay any death claims.
Younger policyholders are entitled to lower premiums on insurance policies. The chances of getting a policy are also higher, due to lower health risks.
Life is insurance is a contract between policyholder and insurance company, in which the insurance company agrees to pay a predetermined amount to the policyholder or their beneficiaries in the event of death, critical illness or personal disability (as laid out in their policies) in return for payment of a premium amount.
Term insurance, term with return of premium, endowment and whole life policies are considered traditional life insurance products. The cash value increases with time as you pay the premiums under these policies. Certain traditional life insurance policies are participatory, which means the offer bonuses and dividends to customers.
Definitely, as any coverage provided by employers will not be valid upon leaving the company, leaving the individual uninsured and at risk . It is advisable to purchase individual term coverage before this eventuality, as premiums will rise with age, and insurance companies may not be willing to offer term insurance plans anymore.
The required documents are :
- Age proof (Voter ID, Passport, Driving Licence etc.)
- Address proof (Voter ID, Passport, Utility Bills etc.)
- Photo identity proof (Passport, Voter ID, PAN Card, Driving Licence etc.)
- Recent Passport Size Photographs
- Income Proof (Salary Slips, Form 16, ITR etc.)
Some insurance companies may require specific additional documents.
Tax planning through investment in life insurance is widespread in India. Premiums paid up to a maximum of 1.5 lakh for life insurance policies are exempt under Section 80C of the Income Tax Act, 1961. Life insurance proceeds are not taxable for the deceased’s family under Section 10 (10D).
Term insurance plans are most beneficial when they are bought for the longest duration possible. They should cover the policyholder until the intended retirement age. Earlier, 60 was considered the retirement age but due to many people having late marriages and children at older ages, financial responsibilities may continue after that age. That is why plans with flexibility in fixing tenure are recommended, as needs vary as per circumstances.
Life insurance coverage begins only after acceptance of proposal form by the policyholder. The insurer will send a written confirmation of the same, as well as a policy kit.
Because term insurance plans do not have maturity benefits, loans cannot be availed on them.
Address changes can be made by visiting the branch of the insurance company. Written communication will be required. In case the branch is not easily accessible, this may be done via registered email ID. Additionally, some insurers allow the change to be made through their customer portals.