What is Term Insurance?

Term insurance is the purest and simplest type of life insurance that provides financial protection to policyholders for a specific time period. In case of the policyholder’s death during the policy term, the life cover amount is paid by the insurer to the nominee/beneficiary. With a term insurance plan, you can receive a large amount of life cover (sum assured) at a comparatively low premium rate.

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When understanding what is term life insurance, it is also important to know - the term insurance premium rate can differ depending on your age, gender, lifestyle habits, coverage tenure, etc. So, one should thoroughly know the term insurance definition for choosing the right term policy. Let’s discuss more what is term insurance plan and the various benefits and features of a term plan:

What is Term Life Insurance?

Term insurance is a type of life insurance plan that offers financial coverage to the policyholder for a specific period of time. In case of life assured's death during the policy tenure, the death benefits is paid to the nominee/beneficiary by the insurer.

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What are the Key Features of Term Insurance Plan? 

Let’s take a look at some of the features of term insurance plan:

  • Entry Age: The minimum eligibility for entry age is 18 years. Purchasing a term insurance plan at an early age helps you get large coverage at affordable premiums.

  • Pocket-friendly premium rates: Term insurance plans are the most preferred and affordable type of life insurance product. The premium amount you are required to pay is lower than the other life insurance plans. You can easily get 1 crore life cover for a monthly premium rate as low as Rs. 449 per month by opting for different types of life insurance plans. 

  • Policy term: A term plan offers coverage for a specific number of years that is called policy tenure. In case of an unforeseen event during this term, your beneficiary/nominee will get the life cover in your plan. This term can start from five years and may extend to 99 years if you select the whole life insurance option. Based on how long your family members need financial protection, you can choose the right policy tenure for your needs.

  • Maturity Benefit: A term plan provides financial security to your loved ones in case of an unforeseen event. Thus, it doesn’t return any premium that you have paid in your well-off time. And, you buy a term plan with a return of premium option if you want any maturity benefits. After the maturity of the policy, you will receive the entire premium back that you had paid throughout the policy term with such policies.

  • Multiple payout options: When you buy a term plan, you need to pay a fixed amount of premium to the insurer in order to get benefits. You can select annual, semi-yearly, quarterly, and monthly payouts as per your requirement. You can also opt for a 1-time, lump sum payment if you have a large number of funds unused. On the other hand, you can opt for a limited pay option to pay your premiums within the starting few plan years.

  • Life cover: The term plan offers a life cover of your preference at affordable premium rates. With this sum assured amount, you can help your family deal with financial difficulties that they can face in your absence.

  • Additional Rider Benefit: Extra coverage is offered under a term insurance policy accompanied by basic policy coverage as an add-on rider benefit. To avail of the rider benefit, the policyholder will have to pay an extra premium along with the basic policy premium. Let us take a look at the rider benefits offered under the term insurance plans.

    • Critical Illness Rider

    • Accidental death benefits rider

    • Hospital cash rider

    • Premium waiver rider

    • Total and permanent disability benefit rider

  • Tax Benefit: Term Insurance plan also offers the benefit of tax exemption. The policyholder can save on taxes within Section 80C and Section 10(10D). Additionally, the premium paid by the policyholder towards critical illness benefit is also qualified for tax benefit u Section 80D.

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Why do you need Term Insurance?

Now that you are familiar with what is term life insurance plan is, you should carefully understand the term plan meaning for your family members by going through the benefits and features of a best term insurance plan 2023.

Following are some of the key reasons for choosing the best term insurance plan:

  • Financial Protection to the family members: Term Insurance plans are the simplest and best way to create a financial protection net for the dependents of the life assured in case of his/her unfortunate demise.

  • Protecting your assets: If you have taken a home loan, personal loan, education loan, or a loan for a vehicle, then the repayment of these loans can financially burden your loved ones in your absence. The benefits from your plan pay off your debts, and loans and make sure that you don’t face any financial burden.

  • Covers risks associated with lifestyle: The chances of developing a lifestyle ailment increase with the increase in age. Some of the term plans offer critical illness protection that secures your loved ones in case of an unfortunate time. Critical illness cover provides financial security against different life-threatening diseases like heart attack and cancer.

What are the Benefits of Buying a Term Insurance Plan?

Key Benefits of Term Insurance

Key Benefits of Term Insurance


Financial protection of family against unfortunate events


Financial life cover for critical illnesses


Stay Covered till 99 Years


Tax Benefits


Financial coverage for disabilities


Affordable Premium rates

Here are the key benefits of term insurance:

  • Offers death benefit as a lump sum amount to the nominee of the policy when the policyholder passes away.

  • The term plan also takes care of loans and liabilities.

  • Offers financial security to the family of the policyholder so that they can continue to maintain a good lifestyle and meet everyday expenses.

  • The term insurance policy also offers a supplementary income to the policyholder in case he/she is suffering from income loss due to accidental disability or critical illness.

  • In case of accidental demise of the insured an extra sum assured amount is paid to the beneficiary of the policy if the policyholder has opted for accidental rider benefit.

  • It offers discounts to non-smokers and female policy buyers.

  • The premium rate of term plans is much more economical as compared to other life insurance plans.

  • It offers a low premium rate to healthy and young individuals.

  • A healthy individual can purchase a term plan online without taking a medical test.

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5 Things to Know Before Purchasing a Best Term Insurance Plan 2023

Following are the 5 points that one should consider before buying a term insurance plan:

  • Insurance life cover: Assess the amount that you want to be covered, on the basis of your age, needs income, loan liabilities, and lifestyle habits.

  • Claim Settlement Ratio: The Claim settlement ratio of term insurance companies 2023 indicates the total claims settled by an insurance company annually. The higher the CSR, the more reliable the company is.

  • Solvency Ratio: Solvency ratio indicates the financial capability of an insurance company to settle death claims. Always opt for a company whose solvency ratio is at least 1.5.

  • Critical illness benefit: You should buy a term insurance policy with a critical illness cover. This will help you cover the high expenses of medical treatments in case of diagnosis of any critical illness.

  • Add-ons/Rider benefits: Select a term insurance plan that offers you a number of benefits such as accidental death benefit, income benefit, and waiver of premium.

Apart from all these points, it is equally important to know the difference between term insurance and life insurance plans. Term insurance vs life insurance can help you find the best plan for you as per your requirements.

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How much Term cover do you need?

As per the insurance experts, the life cover in term insurance should be at least 10X of your yearly income, while 15-20X is always a good option to go for. You should always calculate your life cover as per your requirement.

You can get a clear answer to this question by computing HLV i.e., Human Life Value. HLV is an easy numeric process of calculating the term cover amount that you may require.

For example: If a 30-year-old man has a yearly income of Rs. 4 Lacs, the ideal sum assured would be 25X 4 Lacs = Rs. 1 Crore.

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How to Buy the Best Term Insurance Plan Online from Policybazaar?

You can buy the best term insurance plan online in just a few clicks from the comfort of your home. Here is a step-to-step guide to buy a best-term plan from Policybazaar:

Step 1: Go to the Term insurance plan form

Step 2: Fill in the basic information such as name, age, and contact details. Then, click on ‘View Plans’

Step 3: Answer the questions about educational qualification, occupation type, annual income, and smoking habits.

Step 4: After submitting all the information, a list of all available term insurance plans will be displayed on the page.

Step 5: Choose the plan that suits your requirements the most and then, proceed to pay.

Wrapping It Up! 

Term insurance plan is one of the most pocket-friendly ways of protecting the future of your loved ones The low premium rates and unique plan benefits make this plan a valuable tool to secure your family in case of an unfortunate event. You can also enhance your coverage against any uncertainties like accidental disability or loss of income.

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  • What is Term Insurance and how does it work?

    Ans. A term insurance plan is a pure life insurance product that offers financial protection to the family of the policyholder at low premium rates for a fixed time period. It provides large cover for a specific period in exchange for a fixed premium amount. The death benefit or sum assured is paid to the nominee if an individual die during the policy term.
  • What is the difference between term insurance and life insurance? 

    Ans. The difference between term insurance and life insurance is that a term insurance plan provides a death benefit in case of policyholder’s death within the policy term, whereas a life insurance plan offers both death benefit and maturity benefit to the life assured. 
  • Why should you buy term insurance in India? 

    Ans. Term insurance in India are available at affordable rates than the leading insurance companies in foreign countries. Indian term insurance plans are around 50% cheaper than abroad. So, if you are planning to relocate to a foreign country or have settled in a foreign country and are planning to purchase a term insurance plan, you should think about purchasing it from India
  • What are the minimum and maximum age limits to buy a term insurance plan?

    Ans. Generally, term insurance eligibility can vary for each insurance company and plan. All insurers offer plans with unique T&Cs. However, as per the usual conditions, the minimum entry age to buy a term plan is 18 years and the maximum age differs as different insurers have different criteria.
  • What are the factors that affect the term insurance premium rates?

    Ans. Anyone who knows what is term insurance, also knows that there are a number of factors that affect the term insurance premium rates. The premium of a term plan varies depending on several factors like age, yearly income, term and amount of insurance coverage, health conditions, and lifestyle habits (smoker/non-smoker).
  • What is Term Insurance Rider?

    Ans. Term riders are add-on benefits that are attached to your regular term plan. They can be purchased at low rates. They also allow the policyholder to personalize the plan according to their requirements. Different insurers offer these riders- Critical illness, waiver of premium, accidental death, and permanent or partial disability.
  • How much Term insurance do I need?

    Ans. As per the insurance experts, the life cover in term insurance should be at least 10X of your yearly income, while 15-20X is always a good option to go for. You can get a clear answer to this question by computing HLV (Human Life Value) using Human life value calculator. HLV is an easy numeric process of calculating the term cover amount that you may require. 
  • What documents are needed to buy term insurance plan?

    Ans. To buy a term plan, you will require the below-listed documents:
    • Identification Proof: PAN Card, Voter ID, or Aadhar card
    • Address Proof: Driving License, Voter’s ID card, Aadhaar ID, passport, and other identification documents 
    • Income Proof: Income Tax Returns, Salary Slips, bank statements
    • Age Proof: Aadhaar card, passport voter ID card, driving license.
  • What are the Tax Benefits of Term Insurance?

    Ans. With a term plan, you can avail of exemptions on tax to reduce your tax liabilities. You can receive a tax deduction on your premium up to Rs. 1.5 Lakh u/s 80C of the ITA, 1961. Also, in case of critical illness benefits, you can get tax savings benefit up to Rs. 25,000 u/s 80D.
  • Can I buy a Term insurance plan for a spouse?

    Ans. Yes, you can buy a term plan for your partner. Joint-term insurance plans offer various benefits. All these plans cover you and your partner under a single plan. Purchasing a joint-term insurance plan for yourself and your spouse can be hassle-free, simple, and effective to buy term insurance.
  • Is it possible to add a term rider to a current term plan?

    Ans. Yes, you are allowed to add a rider at the time of renewing your current term plan. Some insurers may have different T&Cs.
  • What are the Exclusions Under a Term Insurance Plan?

    Ans. The term insurance provides death coverage to the family of the insured in case of natural death, the accidental demise of the assured, or death due to health issues. Besides this, there are certain cases, which are excluded under the term insurance plan.
    • Suicidal death is not covered under the policy.
    • The policy does not provide any death coverage in case of self-inflicted injuries.
    • Death due to HIV/AIDS is not covered under this plan.
    • Death due to an overdose of drugs or intoxication is also not covered under the plan.
  • What is a terminal illness in term insurance? 

    Ans. Terminal illness in term insurance provides a financial benefit to the policyholder in case they have a terminal illness and their life expectancy is expected to be less than a year (12 months). 
  • Does the term plan offer terminal illness benefits?

    Ans. Yes, most term plans offer an option to opt for term riders like critical illness riders that provides extra cover against terminal illnesses.

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