A term insurance plan is a Life Insurance policy taken by an individual on his or her own life. The policy will come with a specific tenure and chosen sum assured. If the policyholder passes away during the term of the policy, the sum assured will be paid by the insurance company to the family of the policyholder.
How does term insurance work?
You need to pick the best term insurance. Then, decide on the policy term and the coverage amount that you will need. You should use your salary, monthly expenses, liabilities and other details to choose the right coverage amount. The premium for term insurance plan will be calculated based on multiple factors such as your health, age, smoking habits, coverage amount, term etc. This premium usually remains constant throughout the term of the policy.
Most insurance companies provide you with the options to pay the premium as a one-time payment or at regular intervals. Most people opt to make premium payments annually or on a monthly basis. You can also decide how you want to receive the sum assured.
Once the policy is bought, in case of the policyholderâ€™s demise during the term, the insurance company pays the sum assured to the beneficiary named in the policy.
If the policyholder is alive at the end of the term, no payments will be made and the insurance cover will cease to exist. However, if the policy comes with survival benefits, then the policyholder will get a lump sum amount at the end of the policy term.
Once the policy term is over, to continue the policy, the policyholder can renew the policy.
Usually, insurance companies allow policyholders to renew policies are till the policyholder reaches the maximum age as provided by the insurance company. Note that for renewals, the insurance company will recalculate the premium.
Benefits of term insurance plans
Term insurance plans have the following benefits which you should know.
- Term plans come with very low premiums because the policy covers only the risk of death
- There is usually no limit on the sum assured that you can avail for the policy. You can opt for as much sum assured as your family will need. This makes for better financial security
- The term of the plan can be up to 30 or 35 years. This makes sure that you get coverage even after retirement
- Several riders are available under term insurance plans. You can use them to increase the scope of your policy cover
Cons of term insurance plans
Here are some of the disadvantages that come with term insurance plans
- There is no paid-up value or surrender value for term insurance plans. So, once you stop paying the premiums, the policy will lapse
- There is no bonus under term insurance plans. On the death of the policyholder, only the sum assured is paid
5 best term insurance plans in India 2021
If you are looking for the best term insurance policy, here are the most popular ones that you can consider.
SBI Life eShield Plan
The unique feature of this plan is that it offers two benefit structures. One is the Level Cover benefit and the other is the increasing cover benefit. Accelerated terminal Illness benefit is available as an inbuilt benefit for both the structures. So, you will get protection against terminal illness.
Under the Level Cover benefit, the sum assured will remain the same throughout the policy term. Under Increasing Cover benefit, the sum assured automatically increases by the simple rate of 10% at the end of every 5th policy year.
Under both the structures, during the policy term, on unfortunate death or diagnosis of terminal Illness, whichever is earlier, the â€˜Sum Assured on Deathâ€™ will be paid.
The â€œSum assured on Deathâ€ will be higher of 10 times the Annualized premium, or 105% of the total premiums received up to the date of death, or the absolute amount assured to be paid on death. For Increasing Cover benefit the absolute amount will be the sum assured increased and applicable for that year.
LIC e-Term Plan
LICâ€™s e-Term is an online term insurance policy which provides financial protection to the policyholderâ€™s family in case of his/her unfortunate demise. This plan will be available online only and no intermediaries will be involved. To purchase the plan, you need to log on to the website www.licindia.in.
Under this plan, there are two categories of premium rates. One is the Aggregate lives premium and the other is the Non-smoker lives premium. For sum assured that is up to Rs. 49 lakhs, the premium under the Aggregate category will apply. For sum assured that is more than Rs. 50 lakhs, there is an option to choose differential premium rate that is available for the non-smoker category.
The minimum sum assured for the plan will be Rs. 25 lakhs for Aggregate category and Rs. 50 lakhs for Non-smoker category. There is no limit to the maximum sum assured. The minimum age for the policy is 18 years while the maximum age is 60 years. The maximum cover ceasing age will be 75 years.
ICICI iProtect Smart Plan
ICICI Pru iProtect Smart is a comprehensive and flexible term insurance plan. You can customise your own plan by choosing from a range of benefits. The plan provides options to provide financial protection against 34 critical illnesses and provide higher cover against accidental death.
The minimum sum assured for the plan will depend on the premium and the plan options chosen. The minimum age for the policy is 18 years while the maximum age is 60 years. The maximum cover ceasing age will be 85 years. The plan offers single, yearly, half yearly and monthly premium options.
Women can get lower premium under the plan and the premium will be waived if the policyholder has permanent disability such as incompetency to write. In the event of death, the beneficiaries will be paid lumpsum, regular income, increasing income or lumpsum with income as chosen by the policyholder when they purchased the policy.
Max Life Online Term Plan
The Max Life Online Term Plan offers a high life cover at a relatively low premium. The sum assured for the pal starts from Rs. 25 lakhs and goes up to Rs. 100 crores. The entire sum assured will be paid to the dependants in the unfortunate event of death.
This is an online term insurance plan. You can choose from a basic life cover, a life cover + monthly income and a life cover + increasing monthly income. The monthly income will increase at the rate of 10% every year.
You can add the Max Life Comprehensive Accident Death Benefit rider to your plan. In the event of death or permanent disability caused by an accident, this rider will be activated. If you go for the Max Life Waiver of Premium Plus rider, your future premiums will be waived in the event of dismemberment or critical illness. You will need to pay for the riders.
The plan for those who are between the age of 18 and 60 years. The cover can be extended till you are 85 years of age. The tenure for the cover will be between 10 and 50 years. The premium payment modes offered by the insurance company are annual, semi-annual, quarterly, and monthly. The premiums will be lower for non-smokers.
Aegon Life iTerm Plan
Aegon Life iTerm Insurance Plan is a comprehensive life protection plan. The unique feature of the plan is that it provides the policyholders with an option of life coverageÂ till the age of 100 years. The plan provides add-on flexibility to choose from three different plans based on your protection needs.Â
The best thing about this plan is that you can get an additional lumpsum pay out on diagnosis of 36 Critical Illnesses. You can use this option up to age 80 years. The critical illnesses include cancer, heart attack and kidney failure. You can choose this using the Aegon Life CI Care Rider. Aegon Life iTerm insurance plan also covers corona virus death claims. You get 100% pay out on terminal illness.
The InstaCover benefit offered by the insurance company makes sure that your policy is valid from the day you submit your complete application. Under the policy, you can choose between the life cover increasing by 5% every year without increase in premium and Life cover plus regular monthly income starting from 60 years of age till maturity.
Under the â€˜It pays to Quit Smokingâ€™ benefit, the insurance company provides the option to smokers to quit smoking. This will help them reduce their policy premium from the 2nd year onwards.