Understanding Term Insurance: A Comprehensive Guide For Indians

Term insurance is a type of life insurance that provides coverage for a specific number of years, i.e., a term. This type of life insurance offers a financial benefit to the nominee in case of the insured’s death during the policy term. Term insurance is one of the most basic forms of life insurance. It offers financial coverage for a predefined policy term in return for a fixed premium. A term insurance plan safeguards the financial interests of your loved ones in your absence.

Term insurance is a type of life insurance that provides coverage for a specific period of time, also known as the term

Term insurance is a type of life insurance that provides coverage for a specific period of time, also known as the "term". This type of insurance offers a death benefit to the beneficiary or nominee in the event of the policyholder's death during the policy term. Term insurance is a pure life insurance product, which provides financial protection to the policyholder. In case of the death of the insured during the policy period, the beneficiary receives a death benefit as defined under the chosen term insurance plan.

Term insurance is the simplest and purest form of life insurance, offering financial coverage to the policyholder against fixed premiums for a specified duration – hence the name ‘term’ insurance policy. Term insurance is one of the most basic forms of life insurance. It offers financial coverage for a predefined policy term in return for a fixed premium. A term insurance plan safeguards the financial interests of your loved ones in your absence. This single tool can help them cover various expenses like education, housing, groceries and more.

A term insurance plan provides high life cover at low premium rates. For example, a 30-year-old healthy, non-smoker male can buy a term cover of Rs. 1 Crore for his family for the next 20 years. If he buys a term plan, he must pay only Rs. 641/month. With this 1 crore cover, he can ensure that their family will be able to maintain their current lifestyle without any hassle in case of his untimely death.

Term insurance is a legal agreement between the policyholder and the insurance company. The policyholder pays the premium for the desired life cover. The policyholder can wish to take the policy for himself or for his family member. The person whose life is insured is known as the life assured.

Term insurance offers a high cover amount at a low premium

Term insurance is a type of life insurance that provides financial coverage for a fixed period of time, also known as the 'term'. In the event of the policyholder's death during this period, the nominee receives a death benefit. Term insurance offers high life cover at low premium rates, making it an affordable way to secure your family's financial future.

Term insurance policy is an insurance built to protect your family in case of your untimely death

Term insurance is a type of life insurance that provides financial protection to the policyholder's family for a fixed time or years, also known as the "term". This type of life insurance offers a death benefit to the nominee in case of the policyholder's death during the policy term. Term insurance is one of the most popular types of insurance schemes in the market. A term insurance plan provides protection in the form of financial assistance to your family. It pays a certain sum to take care of your family’s financial needs in case of your unfortunate demise.

• Guaranteed Amount: Term insurance plan pays a guaranteed amount of nearly 1 CR if the policyholder dies.
• Fixed Premium: In term insurance policy, you pay a fixed premium either once or annually for a few fixed years.
• Life is Uncertain: Sudden death can happen in anyone’s case. In case of your sudden death, how will your family survive? How will they pay the loans and live without a source of income?
• Family Protection: In case of your death, your family receives either a one-time large amount or financial support on a monthly basis for a pre-fixed time period.

Factors to look before buying a term insurance plan:

• Determine how much coverage you'll need so that your family can prosper when you're gone. Keep an eye on inflation, the state of the economy, upcoming costs, and liabilities. Always choose a plan with an amount assured of 15 to 20X your annual salary.
• With a term plan, you can determine the tenure of the policy. Tenure shouldn't be shorter because it might not cover your remaining long-term debt. Additionally, it shouldn't belong because the premium amount will increase yearly.
• Look for terminal and critical illness riders/personal accident cover/disability cover/waiver of premium. These options will protect you from life-threatening diseases/medical hospitalization in the long run.
• Corona Covid-19 Cover: Due to the ongoing pandemic, it is advisable to buy a term plan that provides a death benefit if the policyholder passes away due to Covid-19.

Term insurance being the purest form of life insurance policy has affordable premiums for high sum assured

Term insurance is a type of life insurance that provides coverage for a specific number of years, or a "term". It is a pure life insurance product, which means that it only offers financial protection to the policyholder in the event of their death during the policy period. Term insurance plans are an affordable way to safeguard your family's finances, as they offer high life cover for low premiums. For example, you can get a 1 crore term insurance plan for a daily premium of just Rs. 26. Term insurance plans also offer critical illness protection, disability support, and financial security in case of unfortunate events.

Term insurance plans offer tax benefits under Sections 80C and 80D of the Income Tax Act

Section 80C Benefits

Under Section 80C of the Income Tax Act, you can claim deductions of up to Rs 1.5 lakh per year on the premiums paid towards your term insurance plan. This section covers a range of investments and payments, including life insurance premiums, children's tuition fees, and home loan repayments.

To be eligible for the tax benefits under Section 80C, your yearly premiums should not exceed 10% of the sum assured. If they do, deductions will be applied proportionately. For policies issued before 31st March 2012, the yearly premium must not exceed 20% of the sum assured to qualify for the deduction.

Section 80D Benefits

Section 80D of the Income Tax Act is typically associated with health insurance policies. However, if your term insurance policy includes health-related riders, such as critical illness cover, you can claim deductions under this section. The maximum deduction allowed under Section 80D is Rs 25,000 for self, spouse, and dependent children, and Rs 50,000 for parents over 60 years of age.

It's important to note that the tax benefits under Sections 80C and 80D are only available under the old tax regime.

Section 10(10D) Benefits

Section 10(10D) of the Income Tax Act provides tax exemptions on the benefits received from a life insurance policy, including term insurance. The death benefit paid to your nominee(s) under a term insurance policy is exempt from income tax. Additionally, if you have a term plan with a return of premium feature, the refund of premiums received upon maturity is also treated as tax-free income under this section.

Frequently asked questions