• All About Term Insurance
  • Term Insurance FAQs
All About Term Insurance

The only thing predictable about life is that it is completely unpredictable. This is why for every income-earner, TERM INSURANCE- which is the most basic yet essential type of life insurance there is- is a MUST-BUY. Read on for everything there is to know about this crucial financial product and how to choose the best term insurance plan for your loved ones!

Exactly, what is term insurance?

 

 

Term insurance policies are a type of life insurance policy which offer predetermined monetary benefits to your chosen nominee(s) (Usually loved ones such as family members) in case of your death and in certain comprehensive term policies such as HDFC Click 2 Protect 3D Plus- in case of death, disability, and disease! These monetary benefits are also known as the “sum assured” or “cover” extended to your nominee(s) as a lumpsum or in periodic instalments, in case of the above-mentioned unforeseen event(s). In exchange for this sum assured for the nominee, the policy holder pays a stipulated amount known as “Premium”  based on his/her age, sum assured, lifestyle and other factors which can again be paid in instalments or in a lumpsum.

Each policy comes with its own term, or tenure, during which it is valid. Beyond this period, the policy lapses and it must be renewed for it to hold good in case of an unfortunate event. As the insured party, you must pay the premiums at the stipulated time in order for the policy to continue to insure your life.

Why should you invest in a term insurance?

Term Plan and its Benefits
Is the term plan really worth the pain?

There are several benefits of investing in a term insurance. However, let us cover the 6 Most Important ones:

  1. It Can Fulfill Your Family’s Dreams

Whether you are the sole breadwinner of your household or are supported by your spouse or parents, your family’s finances and well-being will always be the highest priorities in your life. One of the best ways to ensure their happiness is to insure your life. By investing in a term plan, you can guarantee their prosperity even if something unfortunate happens to you.

In case of an unfortunate event, your life insurance policy will give your beneficiaries ample cover that can be used as per their needs, without any financial drain on them- be it for investing in property or higher education or paying off mortgage or home loans, or financing a significant life milestone such as a child’s marriage, etc.

  1. It is Affordable by Almost Anyone

When one imagines a lump sum of a large amount like 1 Crore, it is natural to assume that you must pay through your nose to be able to afford a policy that gives you such a high ROI. Nothing could be further from the truth. Term insurance plans are designed in a way as to make them extremely affordable for the average investor. More often than not, the premiums are not only affordable but also come with flexible payment plans such as in the to suit different types of investors. You could choose to pay your premiums on a one-time, monthly, bi-annual, or annual basis, depending on your comfort.

  1. You Can Avail of Staggered Claim Pay-Outs (If Needed)

Beneficiaries with little or no financial knowledge may misuse the life cover amount they receive when a loved one passes away. Moreover, when your cover is meant to be the security of a family member who does not have any earning power or limited financial acumen, it could be risky to entrust them with a huge lump-sum amount.

The best solution to this is a staggered claim pay-out. In this option, a certain amount can be given to your nominee as a lump sum, while the remainder is paid to them monthly. The lump sum amount can be kept aside or used for emergencies (or invested in other financial products to help it grow more), while the monthly amount can be used the same way as a salary normally is. Your family can use it for the expenses needed to run a household. This way, they do not have to make too many sudden changes or compromises in their lifestyle. Any change can be a gradual, well thought out decision rather than a rushed, forced outcome of an unfortunate event.

  1. Top Ups and Adjustments help the Term Plan Evolve with your Needs

The best term life insurance plan is one that grows with you. After all, your idea of a comfortable lifestyle at 20 may be vastly different from what you feel you need when you are 50. With the top-up options, your plan can grow with you as you hit key milestones in your life such as getting married, having children, etc. This means that you have the option of increasing your cover (along with the premium amount) should you feel the need. It can allow you to plan your finances in a more comprehensive manner, while also creating a safety net that does not force your family members to go back to square one.

  1. You Can Use Riders for a Failproof Strategy

When the purpose of a life insurance plan is to protect you from life’s uncertainties, you cannot allow any loopholes to be present in the picture. This is where riders come in. Riders are additional features that you can latch onto your plan, as you see fit. Some of the most commonly used riders include accidental death- in this case, the nominee gets an additional sum over and above what they would have received had the policyholder died of natural causes; waiver of premium- in which all future premiums are waived off if the policyholder becomes disabled; critical illness rider, disability rider, income benefit rider, and so on. These riders ensure that you are still able to take care of your family even if you are physically unable to do so or in case of any other contingency.

  1. You Receive Tax benefits

Finally, investing in a term insurance not only provides your family with benefits in the future but also lessens your financial strain from the moment you invest. This may seem unlikely, as you must now pay a premium at fixed intervals. However, term insurance plans can help you save on the tax you pay. Under various sections of the Income Tax Act, 1961, investors can reap tax benefits if they invest in certain financial products, such as life insurance plans.

However good this benefit may sound, it is essential to understand exactly how it really affects you. When we talk about the tax benefits that are applicable under term life insurance, it means:

  • Tax deductions under Section 80C: Under Section 80C, policyholders can claim tax benefits up to Rs 1.5 lakh during a financial year on their premiums.
  • Tax deductions under Section 80U or 80DDB: This specific section applies to people who have invested in life insurance before April 2013. These people can claim tax deductions on premiums paid for a person who has a disability.
  • Tax deductions under Section 80CCC: If you have invested in an annuity plan, you can claim your tax benefits under this section. However, it is vital to note that these benefits cannot exceed Rs 1.5 lakh.
  • Tax deductions under Section 10A: If you have received a lump sum payout, you can claim tax deductions for the same under section 10A.
  • Tax deductions under Section 10D: Any death benefit is exempt from tax deductions.

Term Insurance Plans- 5 Most Common Myths Busted!

 

Now that you know about some of the benefits of investing in term insurance plans, it is equally important for you to know about the common myths attached to them. Many people do not fully understand the way financial products work and the confusion regarding their features and benefits can often brew some unsavoury myths. As a result, people feel wary of buying a term plan. Let us take a look at some of the myths that are associated with term insurance:

  1. Term insurance is a poor investment because it gives nothing in return

People tend to believe that insurance is pointless because, in spite of paying premiums, they see no returns at all once the term is over. However, this is a completely incorrect expectation to have.

The purpose of term insurance is to guarantee financial protection to your family in case of an unfortunate event, in the most affordable and risk-free manner- No other form of life or general insurance does this.  If your intention is to purely grow your funds, you must consider other riskier and more expensive forms of investment.

  1. Investing in term insurance when you are young is a waste of your money

Some people believe that when you keep in mind the term period of an insurance policy, it does not make sense to invest at a young age. After all, if everything goes right, you will live until your bones begin to creak, right? There is no way to predict when something unfortunate happens so why to take that chance in the first place?

Furthermore, another reason why this particular myth does not make sense is that your premium rate is linked to your age at entry. This means that the younger you are, the lower the premium amount that you must pay is. Alternatively, the older you are, the more premium you must pay. So, If the total amounts of the premiums through the period are added up, the cumulative cost at an older age entry will be much higher! So, it is actually much wiser to buy insurance at a younger age!

  1. If you have a company provided insurance, you don’t need your own term plan

Many leading companies today provide their employees with term insurance as an added benefit of employment. As a result, people believe that there is no need to invest in an additional, individual insurance policy. However, this is not true because of two main reasons. The first is that the company provided insurance does not give you any control over the cover. More often than not, the cover provided by group insurance policies is just not adequate and this can lead to a financial crisis should your family need the money. The second reason is that the company provided insurance policies are linked to specific companies. This means that once you terminate your employment, the policy is no longer valid for you. This is why you must not tie yourself down to a policy that comes with your place of employment.

  1. Insurance companies do not honour the claims

Insurance companies are often painted as the devil in cinema, pop-culture, etc. As a result, people believe that even if they pay their premiums on time and follow all the rules to the T, there is a good chance that the company will not pay the claim. However, this is not true. Insurance companies do not want to lose their credibility by denying claims left, right, and centre! They would have no future customers left!

An insurance company only denies a claim when it falls under the exclusion bracket which is a well-detailed way in advance in the offer document. Furthermore, an insurance company may also deny a claim if you keep certain medical information about yourself or your family history hidden. Therefore, when you are investing in a policy, it is important to make sure you do not hide any information from your insurance provider. Furthermore, if you have doubts, you can always look at the settlement ratio of the company. A high settlement ratio generally indicates that the insurance provider honours the claims they receive.

  1. You should not purchase term insurance online

With practically everything going digital, it is natural for term insurance plans and other financial products to follow suit. However, some people believe that purchasing term insurance online is a complicated and risky process. This is not true. Most insurance providers make it a point to keep the process as simple and user-friendly as possible. Their websites are equipped with a term insurance premium calculator that allows you to figure out what cover and premium are right for your needs. With the help of a term plan premium calculator, easy to access information, and policy purchases just a few clicks away, investing in a term plan online is, in many ways, far simpler than dealing with an agent or policy broker.

Moreover, it is also important to note that most financial advisors have their own agendas, which is why you must take their advice with a pinch of salt. They may steer you towards policies that may not be the best for you simply because their commissions for the same are higher. It is better to conduct your own research and try to understand what policies make the most sense for your needs. Of course, not everyone is an expert in the field of finance. Most insurance policy providers have FAQs and helpline numbers for you to call and get all the answers that you need!

7-Common Mistakes You May  Make While Investing in a Term Insurance Plan

 

Common mistakes that don't let you make the most of your term plan

Even when you know the benefits of a term plan and are aware of the general myths surrounding them, there is still some scope for making mistakes while investing. After all, we are all human. The heat of the moment may sometimes make a policy seem extremely alluring. However, the same policy may look a little worse for wear in the light of day. Here are some common mistakes people make while investing in a term insurance plan:

  1. Opting for insufficient coverage

This is perhaps the most common mistake people make. The main purpose of any life insurance cover is to protect your family from any financial distress. However, the purpose is defeated when the cover you opt for is not sufficient for them. There is a general rule of thumb used to calculate what your cover should be. According to most financial advisors, you must be insured for a cover that is at least 10 times what your income in a year is. Of course, this is a general rule and not something that is set in stone. You can opt for higher covers as well, if you see the need.

  1. Opting for short policy tenures

Opting for a short policy tenure can be a huge mistake. While you may think you can renew the policy every time the term lapses, it is essential to understand that this will be more expensive for you in the long run. This is mainly because your age at entry plays a role in the premium rates you are eligible for. So when you are comparing two policies with two different terms, one may seem higher priced than the other, but in fact, the short-term policy with renewals every few years is the one that will work out to be more expensive.

  1. Hiding important information

People sometimes hide crucial information while investing in policies as they fear that their application might be rejected. You may end up getting the policy you like, but you are also jeopardizing your family’s future in the process. This is because insurance companies are more likely to deny the policy claims if they find any misrepresented information. You must be completely candid about your medical conditions, lifestyle choices, and family history while you are investing.

      4.Investing in the first plan you like

Like any other investment, investing in a term plan is something that you need to think about thoroughly and not just jump the gun. There are so many policies out there and some will suit your needs much better than the others. Investing in the first term insurance plan that looks good on paper (or screen) isn’t the smartest idea. Take your time. Read the fine print. Mull over the decision. There is no hurry. Of course, this does not mean that you should procrastinate on this important choice. It just means that you should not rush into a commitment that can completely affect your family’s future.

  1. Procrastinating when you’re young

When you are young, death and disease seem so far off in the horizon. No one ponders over their mortality when they are just getting into college. However, it is essential to note that the affordability of the premiums varies with age. The sooner you start investing in a term policy, the better it is for you. Premium rates tend to be on the lower side when you are younger and creep steadily towards the higher side as you age. Of course, this does not mean that an aged person is not eligible to make this purchase. It just means that they must be ready to pay a higher premium amount than someone, say, 20 years younger buying the same policy. The premium amount and its difference vary from policy to policy.

  1. Choosing a policy because of the low premium rates

Sometimes, things seem too good to be true because they are so! Advertisers and insurance agencies may dangle exciting policies in front of you with extremely low premium rates. However, if you’re considering investing in these, it is essential to note that there may be some loopholes or exclusions involved in such low premiums. You must read the fine print and speak to someone you trust about the same before signing the dotted line. Do not choose a policy simply because it offers you the lowest rate. It may leave huge gaps in your safety net.

  1. Not looking at any riders

Riders are add-on benefits. They cover you for a range of scenarios for an additional premium. People often avoid riders in an effort to save money. However, there are cases when these riders can mean the difference between a good quality of life, and a life filled with compromise. Some of the common riders include accidental death, waiver of premium rider, critical illness rider, disability rider, income benefit rider, and so on. You must certainly consider these options before sealing the deal. Of course, some policies allow investors to add riders later as well. Just do not close the door on these options.

 

Term Insurance FAQs

What is term insurance?

 

Term insurance is a form of non market-linked life insurance, which offers monetary benefits to the nominee(s) only in case of the policyholder’s death. Some term insurance policies also cover cases of disease and disability along with death.

What are the benefits of term insurance?

Term plans are an essential financial investment for any primary earning member of a family because they:

  1. Give your family a comfortable future: Making sure that your family is secure and happy under all circumstances is understandably one of your highest priorities. The biggest advantage of investing in a term life insurance plan is the financial security of your loved ones if something unfortunate were to happen to you.
  2. Have affordable premiums: A term life insurance is designed to provide high monetary benefits for low premiums, making them accessible to the average investor without them ever having to pay through their nose for the financial comfort of their loved ones. Apart from the premiums being affordable, some term plans also offer different payment options such as annual, monthly, bi-monthly and more, so you can choose one that is most convenient for
  3. Offer staggered payouts: In case your nominee does not feel comfortable handling the entire amount they receive in the lump sum payout, you can opt for them to receive the sum assured in the policy in a staggered payout. In this scenario, the nominee can keep receiving monthly payouts from the sum assured, making it easy for them to manage the finances.

 

  1. Offer Top-ups and plan adjustments: The best term insurance plans are the ones that can grow with you. You can increase the cover amount as you progress in life and can get your life insured based on the requirements and changes in lifestyle that you experience or expect to experience.
  2. Offer Tax benefits: Apart from the many benefits for the financial security of your family, a term life insurance is also popular for saving taxes. If you are purchasing a term insurance policy, you are eligible to avail tax benefits under the Sections 80C and 10D of the Income Tax Act, 1956.
What is the difference between term insurance and ULIPs?

A term insurance policy insures your life, while a ULIP provides a mix of life insurance and market-linked investment options. Term insurance policies offer a much higher cover for the premium you pay and are a risk-free bet for ensuring that your family is safe and secure after you are gone. 

What is the difference between a term insurance and endowment plan?

A term insurance is a life insurance policy that offers your family members monetary benefits if you pass away. An endowment plan is an insurance cum investment product that is non-market linked but provides both death benefit and maturity benefit. However, the death benefit for a given amount of premium isn’t as high as it would be for a term insurance policy, all other factors remaining constant. 

What is the age limit for buying a term policy?

You will be eligible to invest in term life insurance plans if you are above 18 years of age. Most insurance providers set the maximum limit at 65 years. However, it is always advised to invest in a term policy at as young an age as possible, once you’re financially independent- since the premium amount keeps increasing based on the age at which you start the policy.

How can I select the best term insurance plan?

Here are a few things you should consider before selecting a term life insurance:

-          Evaluate the benefits offered by the term policy and the different features of the plan:

Some plans offer financial cover for just the death of the policyholder while a select few offer cover for other unforeseen events like disability or disease as well.

 

-          Decide the time period for which you would need the cover:

A general thumb rule is to take the cover till the age at which you would want to retire. However, you can decide your term period based on your financial planning and the needs of your loved ones. You will be able to calculate the total amount of your premiums based on that.

 

-          Consider the needs of your family and the lifestyle you want them to maintain factoring in inflation:

Since inflation is an ever-present factor and is not likely to go away anytime soon, it is important that it is considered when calculating the cover. Generally, inflation is considered to be around 7%. Also consider the aspirations that you and your family may have: A house of your own, that dream car, sending your kids abroad for higher education, a fairytale wedding, etc. Do these needs and desires keep growing with time? What else would be added to the wish list? All of it needs to be factored in while deciding your cover.

 

- Evaluate the trustworthiness and the ROI of various Insurance providers:

 

Researching the history, the credibility, and the claim settlement ratio of the insurance provider are a few things that can help you sleep better at night knowing that your loved ones are in safe hands should an unforeseen event strike. 

How should I calculate the risk cover I need?

The cover you need in your term plan depends on the financial cover you want to leave behind for your nominee(s) and your annual income. The younger you are, the higher cover you can opt for without having to pay very high premiums. If you are starting young, you can opt for a cover amount as high as 25 times your annual salary. You should also include the outstanding loans in the cover amount you need in the term plan. This will help your loved ones lead a comfortable life without having to handle the extra pressure of paying off the loans.

Is there a term plan calculator I can follow to calculate the cover needed?

Here are the steps of a basic term plan calculator that can make it easier for you to decide how much cover is needed from your term policy. We’ve assumed certain figures just to provide an illustrative example to give you a clearer breakdown:

A – Monthly expenses- This means the current monthly expense your family requires. The monthly expenses do not include investments and savings. Let us take that to be around Rs. 30,000.

B – Rising Cost of Living- Since inflation is an ever-present factor and is not likely to go away anytime soon, it is important that it is considered when calculating the cover. Generally, inflation is considered to be around 7%.

C – Number of years left before retirement- You can decide this based on your current age and a general assumption of how long you would want to work for. Let us say you are 30 years old right now. If you assume your retirement age to be 60 years, the number of years left for retirement is 30 years.

D – Large expenses like children’s education, marriages, medical emergencies and others should be included in this category. We can take this expense to be around Rs. 25,00,000. This figure obviously varies depending on whether you have or plan to have more than one child.

E – This category comprises savings in financial assets such as fixed deposits, mutual funds, stock options, bank balance and more. For this example, let us take the amount to be Rs. 15,00,000.

F – Liabilities like outstanding loans go under this category. A home loan, a car loan, a personal loan or any other existing liability like credit card balance, go under this category. We can assume the amount to be Rs. 10,00,000 for this calculation.

G – If you already have existing life insurance policies, then the sums assured in those policies need to be taken into consideration under this category. For example, you have taken a life insurance policy and the sum assured in the policy is Rs. 12, 00,000.

Now, putting all variables into the term plan calculator:

Term Life Insurance required: {A x 12 x [1- (1+B/100)^C) / (1-(1+B/100)]} + D – E + F – G

Taking the assumed figures into consideration:

{30000 x 12 x [1 – (1.07)^30/(1-1.07)]} + 25,00,000 – 15,00,000 + 10,00,000 – 12,00,000 = 3,47,94,286

 

Going by this example, the amount required for your term insurance coverage plan comes up to around Rs. 3.4 crores.

What documents do I need to purchase a term insurance plan?

The documents typically required for the process are:

·         Address Proof such as any of the following: Aadhaar Card, Passport, Voter Id, Utility bills etc.

·         Photo Identity Proof such as any of the following: Aadhaar Card, Passport, Voter’s Id, Driving License etc.

·         Age Proof (Aadhaar Card, Passport, Voter’s Id, Driving License etc.)

·         PAN Card

·         Passport size photographs

·         Income Proof (Salary Slip, Form 16, etc.)

 

You might be asked for some other requirements too, based on your insurance provider’s policies.

What happens if I stop paying the premium before the tenure of the policy is over?

If you are late in the payment of premiums, most policies allow you a grace period of 30 days under the annual and quarterly payment options and 15 days under the monthly option, in which to pay the premium. After the expiry of the grace period your policy will lapse resulting in the termination of the insurance cover. The premiums already paid won’t be returned just because the policy stands terminated, However, the policy can typically be reinstated within 2 years of lapsing, subject to certain terms and conditions.

 

 

Can I cancel my term insurance policy?

Generally, there is a free-look period included in the term insurance policy. This period typically consists of a fortnight after you purchase the policy. However, in the case of certain insurance providers, if you purchase the term policy through distance marketing (Including online, telephonic and /or any other sales process that doesn’t involve face-to-face selling), the period is extended to 30 days. Consider this period a test run for your policy. You can cancel the policy in the free-look period and are eligible for a refund on the premiums paid after minor deductions such as stamp duty, medical expenses (if any) incurred by the insurance provider on your behalf, and the proportionate premium amount for the period that you were covered. 

What happens if I outlive the term of my policy?

Term plans are designed to insure the risk of death. If the policyholder outlives the tenure of the term life insurance, then no payout is due to the nominee. In such cases, you can choose to extend or renew the tenure after speaking to your insurance provider. However, a select few term policies, offer the option of “return of premium”, under which if the life insured survives the tenure of the plan, and all the premiums paid are returned after tax deductions but without any interest on the principal amount. 

Do I still need a term insurance plan if I already have a company-provided insurance?

There is a common belief that if one holds a company provided insurance then they do not need a term insurance plan. However, this might be a mistake for many reasons.

Firstly, you don’t have any control over the cover offered by the company provided insurance, which might not be enough for the lifestyle you want your loved ones to have even if you are not around.

Secondly, if you leave your job at the organization, you are no longer a part of the group policy and in case you want to opt for a good term plan then, you might just find the premiums to be too high at that age.

 

Thirdly, in the current economic climate, there is also the risk of companies opting for cost-cutting and there is every possibility of the insurance benefits being reduced or removed. In such a scenario, you are back to looking for the best term life insurance policy, but this time, with a much higher premium than it could have been.

Are there any exceptions for a payout under term plans?

A few exceptions are not covered by term plans- Most insurance providers do not cover suicide. Moreover, the accidental death benefit and critical illness benefit rider or option typically rule out death due to alcohol or drug abuse, death as a result of participating in illegal activities, death caused by self-inflicted injuries, due to war or terrorist attacks, and pre-existing conditions. However, these exceptions may vary from policy to policy and hence it is advised that you read the policy document carefully to evaluate the comprehensiveness of your coverage. 

Are natural disasters covered in term plans?

Yes, death due to natural disasters is covered under most term plans. Please read the offer document carefully to check if yours does.  

What are some mistakes people make when investing in a term plan?

The most common mistakes people make when purchasing a term plan include:

-          Opting for insufficient coverage: The main purpose of any life insurance cover is to protect your family from any financial distress. However, the purpose is defeated when the cover you opt for is not sufficient for them. There is a general rule of thumb used to calculate what your cover should be. According to most financial advisors, you must be insured for a cover that is at least 10 times as that of your annual income. Of course, this is a general rule and not set in stone. You can opt for higher covers as well, if you see the need.

-          Opting for short policy tenures: Opting for shorter policy tenure can be a huge mistake. While you may think you can renew the policy every time the term lapses, it is essential to understand that this is more expensive for you in the end. This is mainly because your age at entry plays a role in the premium rates you are eligible for. So when you are comparing two policies with two different terms, one may seem higher priced than the other, but in fact, the short-term policy with renewals every few years is the one that will work out to be more expensive if you consider the cumulative cost for a fixed period.

-          Hiding material information: Sometimes people hide crucial information while buying policies, as they fear that their application might be rejected should this information be revealed. However, while they may end up getting the policy they like, they are also jeopardizing their family’s future in the process. This is because insurance providers are likelier to deny the policy claims if they find any misrepresented information. Hence, you must be completely candid about your medical conditions, lifestyle, and family history while you are investing.

-          Buying the first plan you like: Buying the first term insurance plan that seems to suit your needs is not the right way to go. Different plans offer different benefits and it is essential to understand how each affects your family’s needs when compared to the others.

-          Starting late: When you’re young, it’s easy to overlook the importance of insurance or postpone its purchase with the mindset that it’s not something you or your family needs right now; that you’re far too young for anything to befall you so it’ll be much more sensible and economical to buy it later. However nothing could be further from the truth. Firstly, life is unpredictable- anything can happen to anyone at any point of time. Safe not sorry should always be the mantra.

More importantly, you might be in for a huge shock if you evaluate the cumulative cost of your insurance when you start early vis-a-vis when you start late! Believe it or not, you’ll be paying significantly more in the latter case and may not even be able to afford it properly then! It’s wise to start as soon as possible once you become financially independent.

-          Choosing policies only because of low premiums: Advertisers and insurance agencies may dangle exciting policies in front of you with extremely low premium rates. Please remember though- if the policy sounds too good to be true, it probably is. So, if you are considering buying these, it is essential to note that there’s probably some loopholes or excessive exclusions involved in such low premiums. You must read the fine print and speak to someone you trust about the same before signing the dotted line. Do not choose a policy simply because it offers you the lowest rate. It may leave huge gaps in your safety net.

-          Not adding riders: Riders are add-on benefits that insure you in the most comprehensive way possible. They cover you for a range of scenarios for an additional premium. People often avoid riders in an effort to save money. However, there are cases when these riders can mean the difference between a good quality of life and a life full of compromises.

 

Some of the common riders include accidental death, waiver of premium rider, critical illness rider, disability rider, income benefit rider, and so on. You must certainly consider these options before sealing the deal. Of course, some policies allow buyers to add riders later as well. Just do not close the door on these options. 

Are there any circumstances under which the death claim may be rejected?

Generally, term insurance policies include a clause for suicide stating that the nominee will not receive any payout in such cases. Other reasons for the death claim to be rejected include hiding material information, stating misrepresented facts and making fraudulent claims about the details required. It is always advised to be completely transparent when it comes to providing information for the term plans otherwise you may end up jeopardizing the future of your loved ones.

What are the different riders available with a term policy?

Riders are the add-on benefits offered with the term policy, apart from the life cover. Some of the riders commonly chosen by policyholders include:

Accidental Death- In this benefit, the nominee receives an additional sum over and above what they would have received had the policyholder died of natural causes.

Waiver of premium – With this rider, all future premiums are waived off if the policyholder becomes disabled.

 

Critical illness – Under this rider, all the future premiums can be waived if the policyholder is diagnosed with a critical illness covered under the plan.

Can I take out a loan against my term life insurance policy?

Since term plans are not designed to have any maturity benefits, taking loans against a term policy is not possible.

Can I invest in term insurance even if I am pregnant?

This depends on the exclusions mentioned in the policy you are considering. Often, women who have a history of miscarriages are not covered under life insurance if they are pregnant. 

Can NRIs purchase term insurance?

In this case, a lot depends on the insurance provider. Most companies even offer non-resident Indians options to buy a term life insurance policy while others mandate that the policyholder has to be a resident of India. 

What if I become an NRI after buying the policy?

Most term insurance plans remain active even if the policyholder becomes an NRI after investing in the policy. However, it is advised that you keep the insurance provider informed about the status.

What are the tax benefits of investing in a term insurance policy?

The tax benefits one can avail after investing in a term plan include:

-          Tax deductions under Section 80C: Under Section 80C, policyholders can claim tax benefits up to Rs 1.5 lakh during a financial year on their premiums.

-          Tax deductions under Section 80U or 80DDB: This specific section applies to people who have invested in life insurance before April 2013. These people can claim tax deductions on premiums paid for a person who has a disability.

-          Tax deductions under Section 80CCC: If you have invested in an annuity plan, you can claim your tax benefits under this section. However, it is vital to note that these benefits cannot exceed Rs 1.5 lakh.

-          Tax deductions under Section 10A: If you have received a lump sum payout, you can claim tax deductions for the same under section 10A.

 

-          Tax deductions under Section 10D: Any death benefit is exempt from tax deductions. 

Will the premium amount change if I decide to renew the term policy?

Yes. While the premium amount remains the same throughout the tenure of the plan if you opt for renewal of the policy, the premium amount you need to pay after renewal increases. The increase is determined primarily based on the sum assured in the policy and the age of the policyholder at the time of renewal.

Can I pick a minor to be my nominee?

Yes. At the time of purchasing the term plan, you can select a minor to be your nominee. In addition to the nominee, you will also have to select somebody to be the appointee. If a claim is to be raised with the nominee still being a minor, then it will have to be done by the appointee. If in case you do not want to select an appointee, the sum assured will be paid to the legal guardian of the nominee.

Is it possible to change the nominee after the policy is in effect?

Policyholders are allowed to change their nominees at any time during the term of the policy. All you need to do is submit a request to your insurance provider.

How long does it take for insurance claims to be paid out?

The time it takes for your family to receive the sum assured can vary from insurance provider to insurance provider. However, as a rule, it should not take more than 8-15 days for the claim to be settled. 

Can I switch insurance providers if I want to?

No, you cannot switch insurance providers. If you have bought a term plan from a specific company, you and the company are committed to each other for the duration of the plan. You can, however, invest in other policies as well to supplement the existing one. Also, once the term ends, you can consider either renewing the same policy or investing in a different policy offered by a different company. 

Can a smoker or tobacco user purchase a term insurance policy?

You can invest in a term life insurance policy even if you are a smoker or use some other form of tobacco. However, you should declare it in the forms for the policy. In case of non-disclosure, you run the risk of the death claim being rejected if something unfortunate were to happen to you during the term of the policy. The premiums charged for smokers are higher as compared to non-smokers.

Why do smokers have to pay higher premiums than non-smokers do?

Insurance providers charge a higher premium from smokers because of the higher risk involved. Smokers are significantly more prone to conditions such as heart and lung diseases, which results in higher risk for the insurance provider when compared to the case of a non-smoker. 

I used to be a smoker but I have quit. Do I still need to declare myself as a smoker?

For a person who was an erstwhile smoker, to be considered a non-smoker, he or she must not have consumed tobacco in any form in the 5 years prior to signing the term life insurance. If you have not consumed any nicotine or tobacco products in those 5 years, you are eligible to declare yourself as a non-smoker.

Do Insurance Providers Classify Smokers?

Yes. Insurance policies classify smokers under three main categories. These are:

-          Preferred smokers – someone who smokes occasionally but has no physical ailments

-          Typical smokers – someone who smokes and has a few supplementary health concerns

-          Table rated smokers – someone, who smokes and also suffers from major physical condition(s) because of it

You can get medical tests to determine which of these three categories you fall under. 

What is a preferred non-smoker?

The term preferred non-smoker refers to the people who don’t consume tobacco and also don’t have any pre-existing medical ailments at the time of purchasing the term plan. The criteria for being included in the category of preferred non-smoker are as follows:

-          No use of any form of nicotine or tobacco-based products in the one year prior to signing the policy

-          Cholesterol levels of 280 or below

-          Blood pressure 152/92 or below

 

-          No death of either of the parents due to cancer or cardiovascular diseases before 60 years of age

Do I need to declare myself a tobacco user even if I am an occasional smoker?

Yes. Use of tobacco in all portions counts and even if you are just an occasional user of tobacco or nicotine-based products, you need to declare it in the forms.

What happens if I die within a year of insuring myself?

As long as your policy is valid, your beneficiaries will receive the sum assured that they are entitled to, no matter when death occurs (unless the cause is an exclusion). This can mean years into the policy term, or the first year itself. In other words, insurance companies are liable to pay your family no matter when the death occurs, as long as it happens during the term period and not due to any of the exclusions. 

Is it possible to purchase more than one term plan?

Yes, as long as you pay your premiums on time, it should not be a problem. Your nominees will get the sum assured from both policy providers. 

What can my nominees do if the claim is rejected?

Insurance claims are generally only rejected if there are any discrepancies found in the information you’ve provided regarding your health or if the death has occurred due to a cause that was excluded in the offer document. If your nominees want the policy to be re-evaluated, they can always contact the redressal department of the insurance provider to make their case. If that does not work, they can also contact the Insurance Regulatory and Development Authority of India (IRDAI) for the same. 

Do I need term insurance even after I have retired from work?

Term insurance policies can benefit you and your family no matter what stage of life you are in. The following are some of the benefits of having a valid term insurance policy even after retirement:

  • Spousal support: Even if you have retired from work, your spouse may still require financial support when you are no longer there. Having a term insurance policy can help ensure his/her financial independence during old age.
  • Children support: Your children may depend on you even after you have retired or grown old. Having a term insurance policy can help you meet their needs even if you are no longer present in their lives.
  • Early retirement: Not everyone retires at the age of 60 onwards. Some people retire earlier so that they can pursue a life with little or no professional commitments and more personal time. However, an early retirement does not translate into a life that is completely devoid of responsibilities. You can make sure that you are doing your bit for your loved ones by purchasing a term insurance policy.
  • Working post-retirement: Many people cannot swallow the idea of not working anymore. Hence, they work post-retirement as well. If you are planning to work post-retirement, you may still be a key source of income for your family. In order to make sure that nothing changes for them financially after you’re gone, you can invest in a term insurance policy.
  • Covering the cost of death: Your term insurance policy can also help cover the cost of death once your nominee receives the pay-out.

It is crucial to note that as you age, your premium rates will be much higher. As a retired individual, you may have to pay a much higher premium than you did a few years ago.

Is it safe to buy an insurance policy online?

Yes, most leading insurance providers offer the option to buy a term insurance online. Like buying most things online, purchasing a policy digitally is safe, convenient and cost-effective! You can always rely on the brand name of your insurance provider for added assurance.

Why should I buy term insurance online?

There are many benefits to holding an electronic term plan. Some of these are:

  • With papers, there is always a risk of losing policy documents or damaging them accidentally. This does not apply to online policies.
  • You can automate your premium payments and carry the same out online, ensuring that you never miss the payment date.
  • You do not have to keep submitting KYC details every time you take out a new policy, as all the details are saved in the company database online.
  • All the documents and information pertaining to your policy can be accessed anytime you want.
  • You can make service requests at any time and have all your queries answered online or through a customer service representative.
  • You receive monthly statements related to your policy on your e-mail and can access them anytime.

 

How can I pay premiums online?

There are many ways to pay your premiums online. Some of these are:

  • Debit card
  • Credit Card
  • National electronic fund transfers (NEFT)
  • Net banking
  • ECS (Electronic Clearing System)
Is protection against life the only thing term insurance can offer?

As a term insurance is not an investment geared towards making your funds grow, such policies generally solely offer protection against your life. Since the purpose of a term insurance is to help you safeguard your family, this is the highest and safest form of protection you can get. However, there are certain term policies available in the market that can offer you protection against disability and disease as well. These are often preferred by consumers who want to ensure the financial security of their loved ones come what may!

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