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To explain what is term insurance, it is a type of life insurance that ensures the financial security of your family by providing them with the selected sum assured in case of your untimely death during the policy term. These term life insurance plans offer high life cover at low premiums along with tax benefits as per the prevailing tax laws.
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Term Insurance Meaning:
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.
Term Insurance Definition:
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 of term insurance plan :
You can easily increase your sum assured with the life stage benefit in term insurance.
Term Insurance premiums are much more affordable for non-smokers than for smokers.
You can enhance the base cover of your policy using the available term insurance riders.
To understand what is term insurance, you need to take a look at the term insurance meaning.
Term insurance offers tax benefits under sections 80C, 80D, and 10(10D) of the IT Act, 1961.
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.
Term Plans
Term insurance plans are better for people looking to secure a large life cover for their family at low 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 understand the term insurance meaning and check their T&Cs for better clarity.
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. 487 per month.
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:
Accidental Death Rider
Accidental Total Permanent Disability Rider
Terminal Illness Rider
Hospicare Rider
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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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.
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.
Let us now understand what is term life insurance and how does it work. 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 how term insurance works with the help of an example:
If you are confused about how much term insurance life cover 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.
Before deciding which term plan to buy, you need to learn about the term insurance meaning. To understand the term insurance definition, 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 premiums.
Updated on: Dec 24, 2024
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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