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What is Term Insurance?

Term insurance is a life insurance product that ensures financial security of your family or nominee by providing them the death benefit in case of your untimely death during the policy term. Term life insurance policy is the simplest and purest type of life insurance that offers life coverage plan at affordable premium rates.

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Rhishabh Garg
Written By: Rhishabh Garg
Rhishabh Garg
Rhishabh Garg Term Insurance Head
Rhishabh Garg is the Business Unit Head of Term Insurance at Policybazaar.com. He has over 10 years of experience and currently plays a crucial role in shaping the future of term insurance in the company. Rhishabh also has experience in customer services and crafts new strategies for organizational success, one of which is Policybazaar’s claim assistance program.
Santosh Agrawal
Reviewed By: Santosh Agrawal
Santosh Agrawal
Santosh Agrawal Chief Business Officer
Santosh Agarwal is the Chief Business Officer- Life Insurance, Policybazaar.com and has over a decade of experience in the domain of insurance. She has helped shape the life insurance vertical of Policybazaar and ensures the effective execution of the company's overall strategy. Santosh is also responsible for the Term Insurance for Women domain in Policybazaar.com and educates the mass about its importance and benefits.

Term Insurance Meaning & Definition

What is Term Insurance? What is Term Insurance?

To understand what is term life insurance or term insurance meaning, you need to understand that term plans are essentially a type of life insurance that offers a death benefit in case of the policyholder’s untimely death during the policy term. This amount is paid to the nominee of the policy and help them pay off any remaining loans that you might leave behind in your absence.

When understanding what is term insurance, it is also essential to know that it is one of the most affordable types of life insurance that provides large life cover at low premium rates. Term plans are considered an important financial product for long-term financial planning. Let’s discuss more about what term insurance meaning is; along with the features and benefits offered by term plan :

#Did You Know These Facts About Term Insurance?

If you get married or have children, you can increase the base sum assured of your term insurance plan.

Term Insurance is more expensive for smokers than for non-smokers.

If you are a woman, you can buy term insurance at much lower premiums than men.

Once you buy term insurance at a particular premium rate, your premium is locked for the whole policy term.

NRIs can also buy term insurance from India and secure their loved ones.

Why Do You Need Term Insurance Plan?

As we have discussed what is term insurance plan, it is important to understand why term insurance is a must buy for everyone.

  • Family’s financial security : If you are the sole breadwinner of your family, buying a term plan would take care of your family's financial needs in case of your absence. The insurer will pay out the life cover to your nominee in case of your untimely death, which can help them take care of their financial needs.

  • Protect your Assets: If you have taken a loan like a personal loan, education loan, or home loan, the repaying of loans can stress your family in your absence. The money from your term insurance plan covers your loans, ensuring your family doesn't have to deal with the financial responsibility.

  • Lifestyle-related risks: As you age, the risk of a lifestyle-related illness increases. Certain term insurance plans include critical illness protection, which safeguards your family in unexpected situations and provides financial security during your lifetime. To explain the term insurance meaning, this plan ensures you're financially protected if you face severe health conditions like cancer or heart attacks.

one crore term plan
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Term Plans

₹1
Crore

Life Cover

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₹50
LAKH

Life Cover

@ Starting from ₹ 8/day+

₹75
LAKH

Life Cover

@ Starting from ₹ 12/day+

Why is Term Insurance Better?

Term insurance plans are better for people looking for a large life cover at affordable premiums. With these plans, you get the flexibility and ease to customise the plan per your needs. However, certain types of term insurance have different benefits, and thus, you should always check their T&Cs for a better understanding.

What are The Important Key Features of Term Insurance?

Now that we have understood what is term insurance plan, you should also be aware of the term insurance meaning for your family members by going through the features of term insurance plans. Here is a list of some key features and usp of term insurance :

  • Large Life Cover at Low Premiums: Term insurance plans are affordable life insurance products. The premium amount you are required to pay for term insurance plans is typically much lower than other life insurance policies. You can get 1 crore life cover for a monthly premium of Rs. 473/-.

  • Riders: You can add term riders to your term plan to increase the coverage amount of your base plan at affordable rates. Here are the different term insurance riders available in India:

  • Additional Cover: Many insurers provide the option of enhancing the base sum assured of the term plan during the policy term. For example, you can increase the sum assured after getting married, having a child, or buying a new house on loan.

  • Attractive Features: While understanding the term insurance meaning, many people find out that some insurers offer industry-first features like voluntary top-ups, premium breaks, housewife insurance, and financial surrogates for people with low income backgrounds.

  • Flexibility in Paying Premiums: Term plans allow you to pay premiums at your convenience. You can pay the premiums yearly, semi-yearly, monthly, and quarterly. Also, you can select the most suitable premium payment term from a one-time, regular payment or limited premium payment option.

  • Tax Benefits: As tax-payers, you must wonder about term insurance tax benefits. With term plans tax benefits, you can claim up to Rs. 1.5 Lacs on premium amounts paid u/s 80C of the ITA, 1961 and u/s 80D on hospital/medical riders. You can also claim tax exemption u/s 10(10D) of the ITA, 1961.

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Who Should Buy Term Insurance Plans?

Ideally, everyone within the eligibility age should buy term insurance as the basic term insurance meaning is that it provides financial security to your loved ones in your absence. This means everyone, whether they are salaried, self-employed, or housewives, should buy term plans to ensure that their family is able to maintain their current lifestyle in the event of their untimely demise.

  • Young People: Young individuals can secure their dependent parents and get a large life cover at affordable rates.

  • Parents with Kids: Parents with young children can buy term plans to ensure that their kids are able to pursue higher education.

  • Newly Married: People who are newly married can protect their spouse with term insurance and ensure they are able to maintain their current lifestyle.

  • Housewives: Now, term plan for housewives is also available to secure the financial future of their husband, kids, or families.

  • Self-employed: Self-employed individuals can also buy term insurance by presenting their surrogate income proof documents.

  • Non-resident Indians: Term insurance for NRIs helps to secure thier family living back in India at low premiums and get high life cover.

What are the 5 Things to Consider Before Buying a Term Insurance Plan?

Apart from learning what is term insurance, here is a list of term insurance factors to consider and choosing the company to buy the best term insurance plans in India.

  • Claim Settlement Ratio (CSR): CSR indicates the total death claims settled by an insurance company annually. The higher the CSR, the better the reliability and credibility of the company.

  • Solvency Ratio: This ratio indicates the financial strength of the insurance company to settle claims. Always buy from an insurance company whose solvency ratio is at least 1.5.

  • Add-ons: Choose a term insurance plan that offers multiple benefits such as accidental death benefit , income benefit and waiver of premium.

  • Insurance Cover: Determine the amount you want covered based on your age, loan liabilities, income and lifestyle.

  • Critical Illness Cover: Buy term plan with a critical illness cover. This can help cover the high medical treatment costs in case of a critical illness.

Note - It is suggested to use term insurance calculator to calculate the insurance coverage amount that would be required to protect your family financially.

How Do Term Insurance Plans Work?

Working of term insurance plan is very simple. Term insurance plans work by providing life coverage for a fixed term, and in turn, the policyholder has to pay regular premiums. These premiums can be paid for a specific period of time or the entire policy period, depending on the premium payment term you choose.
Let us understand this with the help of an example:

How term plan works How term plan works

How Much Term Insurance Life Cover Do I Need?

If you are confused about how much term insurance life cover do you need , you can get the answer to your question by using a Human Life Value calculator. HLV is an easy-to-understand numeric process of calculating the life cover amount that you need. The simple thumb rule that can be used to calculate HLV is to have a term insurance cover that should be at least 15 to 20 times your annual income. This amount should be sufficient to meet future requirements and manage the rates of inflation.

For example, if a 30 year old male has an annual income of Rs. 5 Lakhs, the right life cover for him would be 1.25 Crores.

Human Life Value Calculator Human Life Value Calculator

Wrapping it Up!

Before deciding to buy a term plan, you need to understand the term insurance meaning. To understand term life insurance, you need to ask, “What is term insurance?” Term insurance is one of the most affordable types of life insurance plans and ensures your family’s financial stability in your absence. You can easily compare and buy term plans online from Policybazaar and get high life cover at low prices.

FAQs

  • What is term insurance meaning?

    Ans: To understand what is term insurance meaning, we need to understand what is term plan. Term insurance is a financial product that ensures your family’s financial security in your absence. In case of your untimely death, the insurer pays the life cover to the nominee, which helps them meet their financial obligations.
  • 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 is paid to the nominee if the policyholder suffers an untimely death during the policy term.
  • What is an example of a term insurance?

    Ans.Let us understand the term insurance meaning with the help of an example: Suppose Karan’s friend told him about what is term insurance and encouraged him to buy a plan suitable for him. Karan bought a 1 crore term plan at a premium of just Rs. 473 per month. If Karan suffers an unforeseen death during the policy term, then the insurer will pay the sum assured to the nominee of the policy. This payout can help Karan’s family take care of their monthly expenses and live a financially stable life.
  • Which is better term or life insurance?

    Ans. Between term or life insurance, the better option depends on a person’s individual needs. To make the right decision, you first need to understand term and life insurance. Now, if you need a large life cover at low premiums, you can opt for a term insurance plan, but if you need a savings plan that offers wealth creation benefits, you can look at the different types of life insurance plans available in India.
  • Is it good to take term insurance?

    Ans. Yes, it is always considered a good idea to have a term insurance plan. This is because a term insurance plan provides a large life cover at affordable premiums to your family in your absence. Not only that, but you can also enhance the base cover using add-on riders to make it more comprehensive at nominal premiums.
  • 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 a policyholder’s death within the policy term, whereas a life insurance plan offers both a death benefit and maturity benefit to the life assured. You should always try to understand what is term insurance and life insurance before making a suitable choice.
  • 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 for NRI is 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. To answer what is term insurance riders, you need to understand its meaning. 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. Let us take a look at what is term insurance tax benefits. 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. However, different insurers may have different T&Cs. Thus, you should always check with the insurer and understand what is term insurance rider benefits and features.
  • What are the Exclusions Under a Term Insurance Plan?

    Ans. Here is a list of all the exclusions of a 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 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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What Is Term Insurance Reviews & Ratings
5 / 5 (Based on 5 Reviews)
(Showing Newest 5 reviews)
Babita
Gurgaon, May 06, 2024
Thanks Policybazaar
I had been hearing about term insurance plans for a while, but didn’t quite know what it was. Thanks to Policybazaar, i now understand what is term insurance and was able to buy a plan in minutes.
Sunil
Mumbai, May 06, 2024
Great content and explaination
All thanks to Policybazaar, I was able to understand what is term insurance and how it protects me and my family. 
Prem
Patna, May 06, 2024
Easy buying process
Thank you Policybazaar for helping me understand the importance of what is term insurance and making the entire buying process so easy.
Mohan
Bangalore, May 06, 2024
Thanks I found best term insurance plan
Policybazaar helped me understand what is term insurance and allowed me to buy the best plan for myself at such affordable premiums.
Anuja
Kerela, May 06, 2024
I bought suitable policy thanks policybazaar
I didn’t realize Term insurance was so easy and simple to understand. Thanks to Policybazaar, I was not only able to understand what is term insurance, but also buy a suitable policy.
Current Version
Jul 11, 2024
Written By
Rhishabh Garg
Reviewed By
Santosh Agrawal
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