Choose a Suitable Term Insurance at Younger Stage of Life

This is where term insurance plans struck a responsive chord with Indian policyholders. An economical option all through, term insurance is one of the best insurance plans for the early birds.

Life isn’t easy. A severe illness or a terrible road accident could derail the whole financial structure of one’s family. But what if one grow old along with a life insurance cover? If one starts investing in a term insurance plan early, securing the family's financial needs in his/her absence is easy. Let’s discuss more on term insurance. Also, we’ll explore the reasons why one needs to purchase a term plan at a younger stage of life. 

What is Term Insurance?

• As the name suggests, term insurance is a kind of life insurance policy, which offers life cover for a certain period.

• In case if the policyholder passes away during the term, the nominee receives the sum assured. For this, the policy has to be active at the time of the policyholder’s death.

• Losing a family member is a difficult time for the family. The monetary benefit availed from a term insurance policy ensures that the family’s financial needs are covered for a while.

• The benefits of a term insurance policy are not limited to the death benefits. Some firms offer cover for permanent or partial disability of the policyholder.

• The sum assured can be received as:

  • A lump sum

  • A combination of lump sum amount and a monthly amount

Types of Term Insurance Plans:

Term insurance plans are basic and effective insurance plans are designed to give protection. To suit the various needs of the customers, these plans are further divided into categories with various features.

Level Term Plans:

This is the basic type of term insurance. In this plan, the sum assured under the policy doesn’t change. All the benefits are paid out to the nominee of the policyholder.

Return of Premium Plans:

This type of plans offers maturity benefit. As maturity benefits, if the policyholder survives the term, the insurer refunds the premium.

Increasing Term Plans:

In this type of term plans, the policyholder can increase the sum assured at an annual frequency. The premium of the plan remains the same throughout the term.

Decreasing Term Plans:

You probably guessed it already. Decreasing term plans are the opposite of the increasing ones. As years pass by, the insurance needs of the policyholders decrease as their financial goals are fulfilled. Hence, they can reduce the amount of sum assured at an annual frequency. A decreasing term plan is best suited for a financial goal like purchasing a house or any personal loan. As the EMI amount decrease over the years, the policyholders can decrease the sum assured.

Convertible Term Plans:

A few insurance firms allow their customers to switch to another plan at any given point during the term. For instance, if the policyholder of a term insurance plan wishes to switch to a whole insurance plan after five years, he/she is allowed.

Term Plans with Riders:

As the name of the policy explains, some of the term insurance plans come along with rider benefits. Benefits such as critical illness cover, accidental death cover or disability cover are covered under the policy. By paying an additional premium, one can get benefits from all these features in a single plan.

Main Features of Term Insurance Plans:

• Tax Benefits: The money one invests in a term insurance plan is eligible for tax deductions under the Income Tax Act, 1961. Besides that, one can avail the tax benefits for the premium amount paid for Critical Illness Benefits.

• Term Period: The period of the policy term ranges from 5-20 years whereas some policyholders opt for a long-term policy.

• Age: The minimum age of eligibility to purchase a term insurance plan is 18 years, and the maximum age is limited to 65 years.

• Maturity: Most of the term insurance plans do not provide maturity benefits, however the plans that do have average maturity age around 65-70 years. Some plans might have a higher maturity term as some of the term insurance plans cover the insured for a lifetime.

• Survival Benefits: This is the point where term insurance plans stand out. TROP plans offer survival benefits, i.e., the insurer refunds the premium if the insured survives the term. Precisely, insurance cover + savings opportunity=Term Return of Premium (TROP) plans. Though it is increasingly becoming popular among investors, it is essential to understand that the premium is quite higher for TROPs.

• Additional Benefits: Once a policy seeker purchases a term insurance policy, he/she won’t have to invest in an individual plan for rider benefits. Term insurance plans cover several rider plans that one can avail by paying an extra amount of premium. Some of the rider benefits covered under term insurance plans are:

  • 1.Critical Illness Rider

  • 2.Hospital Cash Rider

  • 3. Waiver of Premium Rider

  • 4. Accidental Death Benefit Rider

  • Total and Permanent Disability Benefit Rider

Why must one Purchase a Term Insurance Policy at a Young Age?

• Higher age means lower premiums

• Financial protection

• Tax-saving

• Stress-free life

Let us consider each reason to buy term insurance when one is young.

• When one is young, he/she is not prone to critical diseases, and their premiums are considerably less as they pose less risk to the insurer.

• However, as one gets older, the risk they carry is higher in the eyes of the insurance firm. So, they can merely cite your older age as a risk factor and charge an increased premium. So, if a 20-year old purchases a term insurance policy, it would be a lot more economical. All the above benefits can be availed for a less premium if one invests in this insurance early.

• Irrespective of gender, losing a family member who earns for the family is a tragedy. The reason for buying life insurance is to make sure that the loved ones of the policyholder are not left with the debts. By starting to invest in a term insurance policy at a young age, wealth generation will be easier.

• Term insurance can help you save taxes. The premium paid to purchase term insurance is eligible for tax deduction under Section 80C of the Income tax act. A maximum of up to Rs.1, 50, 000 can be pulled out of taxable income.

• Term plans offer the flexibility of changing the premium/cover amount as one may need from time to time. That way, the insured doesn’t have to stress about if he/she is under-insured or over-insured.

Best Term Insurance Plans in India

HDFC Life Click2Protect Plus Term Plan

Features of HDFC Life Click2Protect Plus Term Plan

• This affordable protection policy has a claim rate of 97.62%.

• Along with a traditional life cover, HDFC Life Click2Protect Plus Term Plan offers an accidental death benefit option. In case the cause of death of the policyholder is an accident, then the nominee will receive an additional benefit.

• There is an income option which offers monthly income for the next 15 years.

• All tax benefits can be availed for this policy.

Details:

• Entry Age: Min-18 years and Max-65 years

• Maturity Age: Max-75 years

• Policy Term: Min-10 years and Max-40 years

• Sum Assured: Min-Rs.50 lakhs and No upper cap

ICICI Prudential - iProtect Smart Plan

Features of iProtect Smart Plan

• ICICI Pru iProtect Smart Plan is a flexible term plan that can be purchased with affordable premiums.

• The policy claims at a claim rate of 96.68% and come with three income options:

  • Lump sum

  • For ten years, 10% of the death benefit is paid annually in the form of monthly income

  • Benefits are paid out in monthly installments on the basis of increasing income. Also, from the second year, a simple interest of 10% is applicable.

• In case the policyholder gets diagnosed with a terminal illness during the term, the sum assured is paid out completely.

• If the policyholder has a permanent disability because of an accident, the rest of the premium will be waived off.

• As for critical illness benefits, around 34 critical illnesses are covered under the policy.

• If the policyholder opts for the single pay premium payment, then surrender benefits can be availed.

Details:

• Entry Age: Min-18 years and Max-65 years

• Maturity Age: Max-75 years

• Policy Term: Min-5 years and Max-40 years

• Sum Assured: Min- subject to the premium paid and No upper cap

LIC's e-Term

Features of LIC's e-Term:

• This is a traditional term plan by LIC with a whopping claim rate of 98.31%. It is available online and offers only death benefits.

• A person can choose a very long period of approximately 35 years.

• The premium paid for the policy is eligible for tax deductions under Section 80C of the Income Tax Act.

• Under this term plan, there are preferential rates for non-smokers and female policy applicants.

• The frequency of premium payment in this policy is annual.

Details:

• Entry Age: Min-18 years and Max-60 years

• Maturity Age: Max-75 years

• Policy Term: Min-10 years and Max-35 years

• Sum Assured: Min-Rs.25 lakhs and No upper cap

Max Life Online Term Plan

Features of Max Life Online Term Plan:

• While ensuring a 97.81% claim rate, this term policy by Max Life also allows the policyholder to avail a loan.

• Since this is purely an online term place, it can be purchased at the official portal of the firm.

• The frequency of the premium payment for this plan is annual.

• Both the premium and sum assured are eligible for tax deductions.

• The death benefit can be received in three ways, and there are a couple of income options.

  • Lump sum

  • Sum assured plus a certain monthly income

  • Sum assured plus an increasing monthly income.

• The premium amount has to be paid throughout the policy term.

• By paying an additional charge, the policyholder can avail Max Life Comprehensive Accident Benefit Rider along with this plan.

• The best feature of this policy is its free-look period of 30 days. This ensures that the policyholder becomes completely aware of the terms and conditions.

Details:

• Entry Age: Min-18 years and Max-60 years

• Maturity Age: Max-70 years

• Policy Term: Min-10 years and Max-35 years

• Sum Assured: Min-Rs.25 lakhs and No upper cap

Tata AIA iRaksha Supreme

Features of Tata AIA iRaksha Supreme

• This affordable life protection policy from Tata AIA comes with a claim rate of 96.01%.

• The firm offers three different modes of premium payment for this policy. The payment modes are regular pay, limited pay, and single pay.

• Under this term plan, there are low rates for non-smokers and female policyholders.

• Like the previously discussed policies, this one allows tax benefits.

• In case a plan has lapsed, it can be renewed within two years.

• The add-on covers available in this policy are Accidental Death and Dismemberment Long Scale Rider.

Details:

• Entry Age: Min-18 years and Max-70 years

• Maturity Age: Max-80 years

• Policy Term: Min-10 years and Max-40 years

• Sum Assured: Min-Rs.50 lakhs and No upper cap

Disclaimer: “Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.

Summing It Up!

So, that’s what term insurance plans are all about. One should be able to pick a plan from the list of the best term insurance plans as the offers are suitable for young insurance holders. And there is no big procedure for one to fear about. Find the firm’s website and purchase a term policy. Or else one can ask for help online, and the assistant takes a policyholder through the process.

Instead of wasting away money on whole life insurance cover, opt for term insurance and save some money.