Term Insurance

Life insurance is a contract between the insurance company and the policyholder. In return for a premium, insurance company agrees to pay a particular amount to the policyholder or his/her beneficiary on the happening of certain events like death of the insured, critical illness and personal disability.

Known as a pure life cover, term insurance is the cheapest and simplest form of insurance. It is a pure risk cover and is determined by the sum assured. On the demise of policyholder, this pre determined amount is paid to the nominee.

Traditional Insurance products consist of Term Insurance, Term with Return of premium, Endowment, and Whole Life Policies. The cash value increases every year as you pay the premiums under these policies. Some traditional life insurance policies are participating, that means they offer bonus and dividend to their customers.

The need to buy term insurance varies from one individual to other, but the most common benefits which influence a person decision to buy a term insurance are as follows-

Secure your family- If you are the sole earner of your life, buying term insurance is indispensable for you. Term insurance offers monetary assistance to your family after your death. It means there would be no monetary burden on your family and they could carry on their normal lifestyle even if you are not around.

Safeguard against liabilities- In today’s time, we take a lot of liabilities to buy our home, new car and for meeting other expenses. Many of these liabilities are usually paid over a period of time (loans repayments). However, if something happens to you, responsibility of repaying liabilities falls directly on your family. A term insurance helps your dependents to manage your financial obligations.

Cost-effective- Term insurance plan is cheap. For instance, a risk cover of Rs 30 lakh for a male age 30 years can be as low as Rs 3000/year.

Tax benefits- Term insurance is a great tax saving instrument. By investing in plan, you will get deduction under Section 80C & 10(10D) of the Income Tax Act, 1956.  

Additional protection options: Many term insurance plans comes with additional cover options in the form of riders such as Critical Illness, Accidental death or disability, Hospital cash etc. It’s easy to appreciate the need of these benefits with our current lifestyle habits.

How much risk cover you should buy primarily depends on your annual income. The general thumb rule says that risk cover should be 10 - 15 times of your annual income. It means if you are earning Rs 4 lakh/annum then you should buy a term cover of at least Rs 40 lakh. The idea is to arrange for self sustainability of dependents so that life style can be maintained and future needs could be settled after the demise of a policyholder.

This also depends on the age. Younger age people should and can buy higher cover – up to 25 times. This is because their dependents will take a longer time to be on their toes.

Yes, it is always advised to buy individual life insurance policy even if you are covered under a group policy because:

The amount of insurance you are covered for in the group policy may not be enough.

If you leave your job, you may no longer be covered under the group policy.

If you employer decides on cost-cutting then you run the risk of losing on the benefits of the insurance coverage.

As you age, the premiums are much higher & so is risk. If you decide to buy it later, you will end up paying higher amount. Insurance companies take extra precautions as well.

       Documents you need are:

Age proof (Voter’s ID card, Passport, Driving license, etc.)

Address proof (Voter’s ID card, Passport, Utility bills, etc.)

Photo identity proof (Passport, Voter’s ID card, PAN card, Driving license, etc.)

Recent passport size photographs

Income proof (Salary slip, Form 16, ITR etc.)

Some insurance companies might need specific documents apart from these.

Buying online at PolicyBazaar is always advised. You can find a most effective plan by comparing all available options on a click of the mouse. When you buy insurance at PolicyBazaar, you make substantial savings because policy is directly sold to the person without the involvement of agent. 

You can also upload all documents online and submit them to the insurer. There are various insurance policies which can only be bought online like SBI eShield, HDFC Click2Protect, ICICI Prudential iProtect etc. When a company specifically designs a product for online market, distribution cost is saved and the benefit is transferred to the policyholder. It is a general observation that the claim experience has been better for online customers. 

Moreover, you can even compare different insurance policies online to see which plan suits you most. By entering basic details like name, age and type of policy intending to buy, you can get free insurance quotes on a click of the mouse. 

Life insurance is one of the most preferred investment avenues in India as it helps in tax planning. Following are the tax benefits one can avail by taking life insurance:

Premiums paid for all life insurance policies are exempt from tax up to a maximum of Rs 1.5 lakhs under Section 80C of the Income Tax Act, 1961.

The life insurance proceeds are not taxable for the deceased’s family under section 10 (10D).

There is no maturity benefit attached with the term plans. Term plans will pay your beneficiary only in case of insured’s death. However, if you survive the term, nothing will be paid. 

Term with Return of Premium option has maturity amount attached. Generally it pays back the premium on survival till end of policy term. Few plans add a certain percentage of interest on the premium. These plans are however costly.

Bought by the policyholder, riders are supplementary benefits added in the life insurance policy. However, you need to shell out extra money to get life insurance riders. Like insurance policies, premium paid on riders also give you tax benefits as per prevailing tax laws.

Various options of life insurance riders available in the market are-

Term insurance plans are beneficial if they are bought for the longest duration possible. An insurance policy should cover the person till the age he intends to work. Also, late marriages and children at a high age mean responsibilities do not end at 60 years, which was earlier considered as a retirement age. Our financial experts at PolicyBazaar believe that a person needs coverage at least till 65 years, though it may vary as per circumstances. You should go for plans that offer you flexibility of fixing the tenure. For example, a businessman might have planned for extended earning years and therefore, it makes sense to buy income replacement plan.

Your life insurance coverage will start only after the acceptance of your proposal form. Insurer will send a written confirmation regarding this. Policy kit is also sent across by the insurer.

No, you can’t avail loan on term insurance plans because these policies do not have maturity benefits.

You can get the changes done by visiting the branch office of your insurance company. A written communication is required. This can also be done via registered email id in case branch is not easily accessible. Few insurers allow the change through the customer portal. 

Term insurance portability is not yet available and hence one cannot switch from one insurance company to another but you can surrender your policy and buy a new plan with desired benefits. However, surrendering a term policy is not recommended because that will cost you a lot as the entire premium paid towards current plan will lapse without any return and the new policy which you will buy come at high cost since your age has increased.

In such a case, it is advised to continue with your current policy and buy another policy after declaring your current insurance plans, thus availing benefits of both the plans. For the plans bought offline, one can consider closing them down after analyzing cost difference. Generally online plans will be way cheaper with the age factor as well.

Yes, term plan covers an insured even if he/she travels abroad for business/leisure purpose. However, if any such trip is scheduled at the time of buying the policy then the same should be mentioned in the proposal form.

Sum assured is usually referred to as the amount of insurance in a policy. It is the amount that would be paid to the nominee in case of death of the policyholder. Sum assured plays a major role in deciding premium rates of a policy. 

Few policies also pay additional cover along with sum assured. This increases total life cover for the same sum assured.

Once a term plan has been bought, you cannot.

Slightly unrelated, there are a few plans which have increased income facility in their structure. It means, these plans offer the benefit of monthly income increase every year. For example, HDFC Click2Protect Plus Increasing income, Max Life Increasing Monthly Income Plan, etc.

It is a term during which a policyholder pays premium to the insurance company.

The amount received by nominees at the time of death of a policyholder is called death benefit.

A proposed insured is a person whose interests are safeguarded by insurance company. For instance, if you are an individual whose life is going to be covered under the insurance policy then you will be called proposed insured. 

A pregnant lady is not covered if claims fall under exclusions of pregnancy clause imposed by the insurer at the time of issuing the policy. Also it will not be covered if non-disclosures are found with regard to pregnancy related questions (history of miscarriage, abortion, ectopic pregnancy) at the time of proposal. 

If a pregnant lady wishes to cover under life policy, insurer can ask her to apply for it 3 months after delivery. However, this clause is not applicable if a pregnant lady is already covered under a plan.

Your term insurance plan coverage will remain active even if you become an NRI post policy issuance.  It is good to keep the insurer informed about the change in status though.

Yes, buying insurance at an early stage would entitle you to a lower premium on the policy. The earlier you buy an insurance policy; the lower will be your premium amount.  Also, chances of getting a policy are higher because of your good health.

The life insurance company’s decision to insure your life or not relies on the information you provide in the application form. The evaluation of your risk is determined by several factors such as your age, habits, occupation, and medical history. If you have any pre-existing medical condition then the insurer will raise the premium of the policy. The increase in premium is subject to the actual medical status of the policyholder and risk posed to his life. 

Yes, term plans cover death due to natural disaster, like flood, earthquake, storm, etc.

Yes, death due to terrorist attack/war/natural calamities is covered in insurance policy (unless specifically excluded by insurance company) and claim is settled if documentation is in order. 

Term plans does not pays death claims if death occurs due to suicide within first year of policy issuance or within first year after reviving a lapsed policy.

Non-smoker refers to a person who does not consume tobacco in any form. Preferred non-smoker is the one who does not have any pre-existing medical conditions at the time of signing the policy. Below are the situational requirements to fall under this category:

No use of tobacco or nicotine-based products in last 12 months

Cholesterol level not exceeding 280, with or without treatment

Blood pressure not exceeding 152/92, with or without treatment

No cardiovascular or cancer death of more than one parent before age 60

These customers generally fall under non-medical category – depending on their age. Preferred rates are applicable for this category if there is any differentiation by the insurer.

Yes, you will be entitled to get term insurance cover even if you are a smoker or tobacco user. However, the premium rates will be higher than a non-smoker. Do declare in the proposal form.

According to current rules and regulations, insurance companies charge high premium from smokers or tobacco users than non-smokers as there is more risk involved in insuring a smoker. Also, a smoker becomes more susceptible to diseases, especially heart related disorders, and therefore, increasing the risk for the insurer. To combat high risk, insurers charge higher premium rates from smokers.

Even if you are an occasional smoker, you need to declare yourself as a tobacco user in the proposal form.

Anyone who has not consumed tobacco product in last 5 years will be considered as a non-smoker. In your case, if you haven’t smoked for last 5 years, you can declare yourself as non-smoker in the proposal form. Usually, the time frame is mentioned in the proposal form.

Once you have booked your insurance policy under smoker category, it is not possible to do re-assessment for a non-smoker category. Your policy will continue with the same premium rate.

You can apply for a new one if you wish to. Chances are that the premium will become the same after those 5 years.

A customer needs to declare his tobacco and alcohol usage at the time of filling the proposal form. Also, the insurer conducts additional nicotine/continue medical test to confirm tobacco usage by a customer.

If the insured starts smoking & drinking after buying the policy, it will not affect the base cover.

A policy number is a unique identifier that attaches a policy to a specific individual. It is the number by which the insurer keeps the track record of your policy details.

Yes, every policy has distinct features to meet the specific needs of the insured. The features that your policy holds will vary according to the plan and term of the policy. Hence, it is important that you read the policy document and understand the policy conditions.

It is very important that you buy a policy directly through the insurance company or an authorized agent. To check whether the agent is authorized to sell life insurance policy or not, you can ask for his authorization card issued by IRDA (Insurance Regulatory and Development Authority).  A safer option is to buy online!

No, it is not possible to change the policy duration after its issuance. However, if you wish to increase the duration of the policy then a good idea is to buy a fresh policy with a longer duration.

No, premium amount will not change during the policy tenure, provided you continue paying your premiums on time.

There are various options provided by insurance companies by which you can pay your premiums. Policyholders can make their insurance premium payment via:

• National Electronic Fund Transfer (NEFT)
• Net Banking
• Credit card
• Debit card
• Electronic Clearing Services (ECS)
• Direct payment at branch offices

The following are the benefits of holding Insurance policies in electronic form:

Safety: There is no risk of loss or damage of a policy as is common with paper policies

Payment Options: Premium for all the policies can be paid online and several service requests can be logged from the e-Insurance account.

Convenience: All insurance policies can be electronically held under a single e-Insurance account. You can access them whenever required.

Less Paper work and savings in time: An e-Insurance account holder is freed from the trouble of submitting KYC details each time a new policy is taken.

Single Point of Service: Service requests in respect of e-Insurance account or any of the electronic policy can be submitted at any of Insurance Repository's service points.

Statement of Account: At least once every year, the Insurance repository would send a statement of account to the e–Insurance account holder with the details of the policies of the account holder.

Yes, money back policy is the insurance plan under which you can get money at regular intervals during the tenure of the policy. It is an anticipated endowment policy with an additional feature of receiving regular benefits during the policy term. Even if the installments are already paid to you in advance, the risk cover continues for the entire sum assured. In case you outlive the policy, the balance sum is paid back to you along with the accumulated bonus.

For a regular premium paying policy, premium has to be paid within 30 days of due date. It will be 15 days incase selected mode is monthly. The insurance company provides a grace period during which you can pay premium and keep the policy in force. However, if premium is not paid within the grace period, your policy is considered lapsed. Insurance companies offer different ways to revive lapsed policies. Some of them are mentioned below-

By paying all the arrears of the term along with interest, you can revive your policy. In some situation, the company offers installment revival process. It means, you can pay arrears and interest in installment along with regular premium. The balance revival amount is paid in installments spread over a year.

You can revive your money back policy by using survival benefits (amount received from the insurance company at regular intervals) to pay premium and extra charges. If the survival benefit is lower than the revival value, you have to pay shortfall. If it is higher, you receive excess funds from the company

Known as protection plan, income replacement plan is a non-linked and non-participating life insurance plan. It gives death benefits in the form of lump sum amount and ensures an uninterrupted annual income for a family for specified number of years in case a policyholder dies within the tenure.

Any individual lying in the age bracket of 18-65 years can opt for this plan. Even NRIs are allowed to buy this plan.

Usually, there is no fixed period of payouts under the plan and thus, it could vary between 10-20 years.

Underwriting is a term used by the insurance companies to evaluate proposal and assess risks, ensuring that the cost of cover is proportionate to the risks faced by an individual. The evaluation is done on the basis of information submitted by the proposer in the insurance form along with the reports of medical tests. Usually, insurance companies take 3-4 days for underwriting after receiving all documents like medical certificates, financial and other relevant information.

While forwarding policy documents to the policyholder, insurance company will inform the insured by issuing a letter that they have 15 days from the date of receipt of documents to review all terms and conditions of the policy. If the insured disagrees with conditions, he has the option to return the policy and the insurance company has to refund the premium paid, subject to deductions. This 15-day period is also called cooling off period. It remains same for all products/policies.

Yes, if you bought a policy and later realized that you don’t want it then you can return it and get a refund. You can exercise this option within 15 days of receiving the policy document.

Very nominal charges are deducted. For example, stamp duty charges, premium on pro rata basis for the days covered along with medical charges, if applicable.

Yes, you can change the date of birth after the free look period of the policy. Just submit the proof of age with the correct date of birth, along with a covering letter.

However, if the age changes premium or eligibility, it will involve additional premium payment or cancellation.

A claim is a formal request to an insurance company asking for the payment based on the terms of the policy. It is reviewed by the company and once approved the benefits are paid out to the insured or the beneficiary. 

The company checks the sum at risk, circumstances of the claim, cause, and duration of the policy before asking the claimant to submit the documents. For example, in case of accidental death, company requires police report, post mortem report etc. while in case of death due to illness, the company calls for medical records. 

It generally takes 8 – 10 working days after all the documents, records, necessary forms are submitted, and documentation is completed. In case, the claim warrants further verification, the insurance company keeps the applicant informed of the same.

Following are the documents required for claim settlement:
• Mandatory documents: In case of death claims the mandatory documents include
Original Policy bond
1.Copy of death certificate and self attested by the nominee.
2. Copy of photo identity proof
3.Copy of residential proof
4.Copy of bank passbook of the nominee along with cancelled cheque.
• Additional documents:
In case the policy holder is murdered or killed in an accident, the following documents are required along with the mandatory ones:
1.Copy of FIR
2.Copy of Post Mortem report
In case of non-accidental death of the policy holder, the following documents are required along with the mandatory ones:
1. Copy of medical and legal cause of death
2.Copy of medical reports
3.The certificate issued by the attending physician
4.certificate issued by family doctor (optional)

If death occurs within a year of policy purchase, the insurance company will do a thorough investigation on the matter to strike out any chance of fraudulency or criminal intent. The nominee will get the entire amount of the assured money and the claim will settle within 180 days of submitting all the relevant and necessary documents of the early death claim to the insurance company. 

The nominee last recorded under the policy is entitled to receive the claim benefits in case of death of the policy holder.

If your claim gets rejected your nominee can re-apply for it. For that, he will have to submit a written application to challenge the insurer’s decision of repudiation of your claim. If the nominee is not entertained by the insurance company he can approach the local insurance ombudsman (for claims up to Rs. 20lakhs). He can even move to consumer court and claim for above Rs. 20lakhs.  Both the ombudsman and the consumer court have the power to compel the insurer to reconsider his decision.

Here are a few main reasons for which a claim may get rejected:
• Lapsed policy: Once your policy is lapsed there is no chance that your claim will be paid any more.
• Avoiding Compulsory medical tests: Some insurance plan ask for some mandatory medical tests. If you avoid those tests your claim may get rejected.
• Mandatory exclusion plans: Some policies are pre conditioned to exclude some particular events or loss. If you ask for coverage on such events your claim may get rejected.
• Inadequate or untrue information: If you have not provided some important information (e.g. some pre existing condition) in the proposal form, your claim may get rejected. Similarly If you have provided some false information, your claim will be rejected.

Insurance Regulatory Development Authority or IRDA in short is the apex body that oversees the insurance industry in India.  Apart from protecting the interests of the policy holders, it promotes  , regulates and makes sure that the development of the insurance industry in India is in order.

According to IRDA guidelines, the company has to process a claim within 30 days. If the claim needs further verification, it should not take more than 6 months to settle. In case the company fails complete the whole procedure within 6 months the company will have to pay interest on the claim amount. 

You can pay through the agent only if you are sure that he is IRDA authorized and provides you the receipt after your payment of the premium.  But it is always better and reliable to pay your premiums directly to the insurance company itself.

There are numerous benefits of splitting your money among multiple policies instead of sticking to only one policy.  For example, instead of buying a 20/25years long plan you can buy multiple policies with different maturity dates. This will help you manage your finances better through different stages of your life.  Moreover, when you have multiple policies, the rejection of claim from one insurer will not matter most as long as you have other back up policies to file your claim. On the other hand if you have only one policy and your claim gets rejected, the entire money would be lost.   So it is always better to buy multiple policies instead of one.

In case there are issues with your medical condition, your premium will increase. However, there is no fixed percentage of increase in premium. It is completely depended on the insurer’s decision as well as on the policy holder’s actual medical condition.  Even you can reject the offer if you do not want the raise in your premium.

Nomination is the act of authorizing another person the right to receive the policy money in case of death of the policy holder.
Nominee is the person who, chosen by the policy holder, will receive the policy money in case of the policy holder’s death.

Yes you can change your nominee just by filling up the nomination form and submitting it to the insurance company anytime before the maturity date of your policy.

While appointing a nominee you have to provide the details including his/her full name, address, age, and your relationship with your nominee. Make sure that the information you provide are correct to avoid any future complications.

Nomination means the right of the policyholder to appoint another person who will receive the policy money in case of death or unavailability of the policy holder.   On the other hand, Assignment is an act of legally transferring the rights of the policy holder (assignor) to another person (assignee).

The main benefit of riders/add-ons is that it provides additional insurance coverage on your existing insurance policy.  You can get riders/ add-ons by paying some extra amount on your basic policy premium.

ou have to apply for a duplicate copy of your policy from the insurance company. You will also have to pay the necessary fees and execute the indemnity bond in order to get the duplicate policy.

In order to change your policy detail you have to submit a written request either online or by visiting the insurance company office in person.

Yes, you can, but only in case of your policy renewals.  If you were paying your premium annually (low frequency) you can change your frequency to pay half-yearly or quarterly (high frequency) or vice versa.

Either visit the Insurance Company office in person or submit the request online. You can also surrender your policy simply by not paying your premiums.

Premium rates are hugely affected by health conditions.  The chances of a healthy person to be hospitalized are very low. In the same manner , a person having some pre-existing condition  may have to be hospitalized more than once for which he would have to pay  higher premium rates or the disease may also  be excluded from the policy coverage.