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What is a Term Insurance Plan? The Definition

It is an insurance plan that covers the insured (policyholder) for a pre-decided term (period). If the insured passes away during the coverage term, then the insurance company provides the sum assured to the beneficiary of the insured.

Also known as a pure life insurance plan or protection plan, term plans are the simplest of insurance plans. You can purchase it for a pre-decided period – say 5, 10, 20 years or more. The plan would offer the utmost financial protection to your family if you were to meet with an untimely demise during the policy term.

How does a term insurance plan work?

When you purchase a term insurance plan, you are essentially entering a contract with the insurance company. You pay premiums to the insurer at predefined time intervals – say annually, semi-annually, quarterly or once a month for a predefined period – say 5 years, 10 years or more. In return, the insurance company pays your family with a lump sum amount in case you die before the completion of the term period.

Generally, term insurance plans offer a period ranging from five to thirty years. The policyholder has to pay the premium for the pre-decided term, after which, the policy lapses.

However, term insurance plans do not offer any maturity benefit. If the insured survives the defined period, then the plan does not offer any benefits to the insured or his/her family. Since there are no maturity benefits; term plans generally have a lower premium compared to regular life insurance policies.

Why should you buy Term Insurance?

You would have heard this quote by George Bernard Shaw, “Family means no one gets left behind or forgotten.

Your family is the most precious asset to you. And, it’s your duty to ensure that they are taken care of, even while you aren’t around. This is where term insurance plans come into the picture. It helps you financially provide for your family, even when you meet an untimely demise and leave the world.

Here are a few reasons why term life insurance is an absolute must for all:

1. It is Affordable

Compared to other life insurance plans, a term plan is pocket-friendly. It fits all budgets and is available in a wide range of premiums, starting from a few hundred rupees. It’s the simplest form of life insurance and helps you provide for your family, in an emergency without straining your regular budgets.

The death benefit offered to your beneficiaries is based on the premium you pay. It’s simple – if you meet an untimely death during the policy period, the insurance company pays your family members. There are no hidden clauses or conditions.

2.The Death Benefit is Tax-free

Unlike other insurance plans, where the maturity amount is taxable, the death benefit offered to your family by the term insurance plan is tax-free. You don’t have to pay any tax on it, and your family receives the sum assured as it is, without any losses.

This is because you have already paid the tax for the premium amounts. So, the benefit amount does not attract any further taxes.

While tax-free benefits are the norm, there are certain situations where your beneficiary may have to include the benefit as taxable income. Get in touch with your insurance agent to know more.

3. Change the Policy Type Without any Penalties

When you purchase a term plan, you are entering into a contract with the insurance provider to pay the premiums regularly for the policy period. However, if you find that the conditions are not favourable for you, you can alter the policy type and other conditions or even drop off the policy at any time without attracting any penalties.

4. Enjoy High Death Benefits

This is one of the biggest appeals of term insurance policies. You can avail huge death benefits, in case the untimely death of the policyholder. The death benefit offered by term plans is several times that of the total premium paid.

5. Receive Timely Payouts

Of all the different types of insurance policies in India, term insurance plans have quick turnaround times. You don’t have to wait for a long period to receive the death benefit offered by the plan.

This is because the terms and conditions of term plans are straightforward, and there is no need for deep investigative work by the insurer to verify the validity of the claim. So, most insurance companies pay the death benefit as soon as a claim is made.

6. Living Benefits

Generally, term insurance plans do not provide any living benefits. However, of late, in an attempt to attract customers, several insurers offer living benefits too. You can choose the right term insurance plan based on your requirements and the benefits offered.

7. Premium Remains the Same

The premium you pay for term insurance plans remains the same for the entire tenure. This helps you easily budget for the premium payments out of your regular monthly expenses.

8. A Wide Variety of Plans from Different Insurers

In India, the insurance industry has grown by leaps and bounds in the last few years. Today, there are a large number of insurance companies – both private and public, offering a wide range of term insurance plans with different quotes. You can compare the various quotes and term plans available on the market, to pick the right plan that meets your requirements perfectly.

9. Guaranteed Returns

Term plans are not linked to the market’s fluctuations. You are assured of the death benefit, and you get it exactly as mentioned in the policy document. This makes term plans, one of the best ways to protect your family’s future, in case of an emergency.

10. Protect Your Family Financially Even When You are No More

There’s no doubt that losing a family member is a nerve-wracking situation – emotionally, mentally, and financially. While you never know what will happen in the future, you can soften the blow for your family members, during an emergency.

With a term plan, your family members need not have to run around trying to secure their financial future, especially when the breadwinner of the family meets an untimely demise. The term plan offers them the large death benefit, which helps them maintain the previous standards of living, they were accustomed to.

Term Insurance

Top 5 Benefits of Term Insurance

1. High Covers at Low Premiums

One of the biggest benefits of term insurance plans is that they offer high coverage at low premium costs. For example, a 28-year old non-smoker can get a life cover of up to Rs. 1 crore by paying a premium of around Rs. 500 per month.

Remember that the premium amounts are likely to increase as you age. Hence, the earlier you buy term cover, the lower are the premiums you have to pay.

2. Simple Terms and Conditions

One of the biggest complaints regarding insurance policies is that they are difficult to understand. Term insurance is the simplest insurance plan out there – it offers pure life cover. There are no maturity benefits, therefore you need not worry about the investment component, associated risks, etc.

All you have to do is pay the premium for the policy period, and the insurer offers you death coverage, which gets paid to your beneficiary, in case of your death during the policy period. You can easily purchase a term insurance plan from an insurance agent or get it directly online.

3. Tax Benefits under Section 80C and Section 80D

While saving tax should not be the sole aim of purchasing an insurance policy, it’s an added advantage with term insurance. Both the premiums, as well as the death benefits, have significant tax benefits.

Benefits under Section 80C

Under Section 80C of the ITA, insurance premiums up to Rs. 1.5 lakhs are exempted from taxation annually. You can also avail tax benefits for the insurance premiums you pay for your spouse and dependent children.

Benefits under Section 10D

Under the term insurance plan, the beneficiary receives the death benefit if the policyholder expires within the term period. This death benefit (along with maturity benefit if any) are fully exempted from taxation under Section 10D of the ITA.

4. Choose from Different Death Benefit Options

While most term plans offer a lump sum as a death benefit, you can also opt for a fixed monthly income, lump sum + fixed monthly incomes, lump sum + increasing monthly incomes, and so on. Monthly income can help your family meet their regular expenses, while the lump sum option helps them take care of big expenses – like education, marriage, etc.

5. Choose from a Wide Range of Riders

Riders are add-on covers to your standard term insurance policy. Riders help to enhance the benefits of the basic term plan. You can choose from different riders by paying an extra premium.

For instance, consider the WOP rider (Waiver of Premium), which allows the policyholder to stop paying premiums when he/she meets with a critical illness or is dismembered in an accident. By choosing the WOP rider, you stop paying the premium, but the cover continues.

Other popular rider covers include critical illness cover, accident benefit rider, and more.

Term Insurance

Key Features of Term Insurance Plans

Policy Term

Generally, the minimum policy term is five years, and the maximum coverage period can vary from 20 years to the whole life span of the insured. If you are paying the premium as a single amount, the policy term is generally 5 to 15 years. This is a great option if you can make the entire premium payment as a bulk sum.

On the other hand, if you cannot afford bulk sum premium payments, you can opt for smaller premium payments paid – monthly, quarterly, semi-annually, or annually.

Tips to Choose the Policy Term: Insurance experts recommend choosing a longer policy term, since the premium is fixed for the entire policy period, and you can pay the same premium amount for the entire policy cover.

Choice of Plan

You can choose from several types of term insurance plans based on your specific requirements. The two major classifications are – single life basis and joint life basis. A single life basis plan offers coverage only for the insured party, generally the breadwinner of the family.

A joint life term plan, as the name implies, offers coverage for both the adults in the family – the husband and wife, under a single plan. Most joint term plans offer the sum assured on the death of either of the people insured under the plan. Once you receive the death benefit, the plan ceases to exist. Some joint term plans also offer sum assured on the death of both the people insured in the plan.

Entry Age

Generally, the minimum age for qualifying for a term plan is 18 years, and the maximum age is 65 years. The premium is lower when you choose a term plan during your younger years. On the other hand, if you opt for a term plan in your late 40s or 50s, you are likely to pay a higher premium amount.

Maturity Age

The best term plans are those that offer coverage for the entire lifetime of the insured. However, most term plans offer coverage only up to 60 to 75 years. Remember that term plans that offer long coverage are likely to have higher premiums. This is because the risks borne by the insurance provider increases with age and the insurance company reflects this in the premium.

Survival Benefits

Most term plans do not have any survival benefits. However, of late, due to demand from investors, several insurance companies have started offering survival benefits as part of term plans. These plans are known as TROP (Term Return of Premium) plans. TROP plans are popular with investors who are looking for insurance combined with savings. Make sure to read the policy document carefully to understand if it includes any survival benefits and whether it’s worth it.

Death Benefits

This is the amount your family receives on the death of the policyholder. The sum is provided to the nominee or the assignee, in case of minor nominees. Depending on the type of term plan, the death benefit remains constant for the entire policy period (standard term plans), increase as the remaining policy period decreases (increasing plans), decrease as the remaining policy period decreases (decreasing plans).

You can choose to receive the death benefit as a lump sum payment, lump sum payment along with annuities dispersed annually, quarterly, or monthly or just as annuities spread over a predefined number of years.

Maturity Benefits

Generally, standard term insurance plans do not offer maturity benefits. If you require maturity benefits, then you can opt for TROP plans.

Rider Benefits

Also known as add-on covers, these are optional benefits that you can choose to extend the coverage offered by your term plan. You can choose the preferred rider benefit by paying an extra premium. Look for term insurance plans that offer add-on covers at nominal rates.

Popular add-on covers include:

  • Critical illness rider
  • Hospital cash rider
  • Accidental death benefit rider
  • Waiver of premium rider
  • Total and permanent disability rider

Tax Benefits

Term plans offer excellent tax benefits. You can avail a waiver of tax for premiums paid for term plans under the Section 80C and Section 10D of the ITA (Income Tax Act) of 1961.

Top Term Insurance Providers in India

All life insurers in India offer term plans. Currently, there are 24 life insurance companies in India. Of these, LIC is the only public sector company, and the rest are private insurers. Most of the private insurance companies are joint ventures between banks (public/private sector) with other international/national financial companies.

The IRDAI granted entry to private insurers in India in the year 2000. Here is the list of all life insurers in India in alphabetical order.

1. Aditya Birla Sun Life Insurance Company

Company Overview

Founded on 4th August 2000, Aditya Birla Sun Life Insurance Company Limited (ABSLI) is one of the leading private sector life insurance companies in India, that has been operational for nearly two decades.

ABSLI is a wholly-owned subsidiary of ABCL (Aditya Birla Capital Limited). ABSLI is a joint venture (51: 49) between the Aditya Birla Group from India and Sun Life Financial Inc, one of the leading global financial services providers in Canada.

Aditya Birla Sun Life Insurance was earlier known as Birla Sun Life Insurance Company. The company offers a wide range of life insurance policies catering to all categories of customers.

Popular Term Insurance Plans:

  • ABSLI DigiShield Plan
  • ABSLI UltimaTerm Plan
  • ABSLI Income Shield Plan
  • ABSLI Life Shield Plan

2. AEGON Life Insurance Company

Company Overview

It’s a joint venture between the Times Group in India and one of the world’s top financial organisations, Bennett, Coleman & Company. Aegon has been in the insurance sector for over 170 years and has a presence in more than 20 countries across Asia, the Americas andPopular Term Insurance Plans: Europe. With a turnover exceeding a billion dollars, AEGON Life Insurance has earned the trust of millions of customers, spanning continents.

Popular Term Insurance Plans:

  • Aegon Life iTerm Plus Insurance Plan
  • Aegon Life iTerm Insurance Plan
  • Aegon Life iReturn Insurance Plan
  • Aegon Life iTerm Forever Insurance Plan
  • Aegon Life Easy Protect Insurance Plan

3. Aviva Life Insurance Company

Company Overview

Aviva is a British insurance company headquartered in London. Aviva has over 33 million customers spread across 16 countries. It’s the largest general insurance company in the UK. In India, Aviva Life Insurance Company is a partnership between Aviva and Dabur, one of the most trusted business houses in the country.

Aviva was awarded the title of “Most Trusted Private Life Insurance Brand of the Year 2018” by TRA.

Popular Term Insurance Plans:

  • iLife
  • Aviva Life Shield Advantage
  • Aviva Life Shield Premium
  • Aviva Sampoorna Suraksha
  • Aviva Extra Cover
  • Aviva iLife Total
  • Aviva iLife Smart

4. Bajaj Allianz Life Insurance Company

Company Overview

Bajaj Allianz Life Insurance is a partnership between Bajaj Finserv (the Financial Services division of Bajaj Motocorp) and Allianz SE, a top financial services provider in Europe. The company was started in 2001, and today serves as a one-stop solution for a wide range of life insurance products like ULIPs, endowment plans, investment plans, group plans, child plans and traditional insurance plans like term insurance plans. Today, Bajaj Allianz has over 600 branches across India.

Popular Term Insurance Plans:

  • iSecure
  • iSecure More
  • iSecure Loan
  • Life Secure
  • LifeStyle Secure
  • eTouch Online Term

5. Bharti AXA Life Insurance Company

Company Overview

Bharti AXA Life Insurance is a joint venture between Bharti, one of the biggest business houses in India with presence in over 18 countries across Asia and Africa, and AXA Group, headquartered in France. AXA Group is a global leader in financial protection and wealth management and has over 103 million clients across the world. Bharti holds a 51% stake in this partnership, while AXA holds the remaining 49%.

The company is one of the fastest growing insurance companies in India and has over 143 offices pan-India.

Popular Term Insurance Plans:

  • Bharti AXA Life Premier Protect Plan
  • Bharti AXA POS Saral Jeevan Bhima Yojana
  • Bharti AXA Life Flexi Term
  • Bharti AXA Life Income Protection
  • Bharti AXA Life Secure Confident
  • Bharti AXA Life Elite Secure

6. Canara HSBC OBC Life Insurance Company

Company Overview

Founded in 2007, Canara HSBC OBC Life Insurance Company is a JV between three major banks in India – Canara Bank, Oriental Bank, and HSBC Insurance Holding Ltd, the insurance wing of HSBC bank. Canara Bank holds 51% shares, Oriental Bank of Commerce has 23%, and HSBC Insurance has 26%.

The company has over 10, 000 branches across the country via its three major bank partners and offers regular training to its vast staff to keep them updated with the various policies offered by the company. This life insurance company has over 115 million customers and is one of the biggest private life insurance providers in India.

Popular Term Insurance Plans:

  • Guaranteed Income Plan
  • Easy Bachat Plan
  • Moneyback Advantage Plan
  • Jeevan Nivesh Plan
  • Smart Suraksha Plan

7. DHFL Pramerica Life Insurance Company

Company Overview

Situated in Gurgaon, DPLI Ltd is one of the recent entrants in the life insurance industry. The company offers a wide range of plans that offer financial protection to clients. Though the company entered the industry only recently, it has managed to grow at a staggering rate.

It currently employs 3470 employees across 134 branches across India. As on 30th April 2019, the company has more than 22 million customers and manages assets worth over 4544 crores.

Popular Term Insurance Plans:

  • DHFL Pramerica TruShield
  • DHFL Pramerica U-Protect
  • DHFL Pramerica Family Income
  • DHFL Pramerica Family First

8. DHFL Pramerica Family First

Company Overview

Established in 2011, Edelweiss Tokio Life Insurance Company is a fairly new entrant in the Indian insurance market. The company is a joint venture between the Edelweiss Group of India and Tokyo Marine Holding one of the biggest insurance companies in Japan.

The company offers a wide range of life insurance plans, including term plans, saving plans, child plans, retirement plans, and endowment plans. Apart from its broad range of insurance plans, the company also offers several add-on covers that help customers extend their coverage.

Popular Term Insurance Plans:

  • Edelweiss Tokio Life – Zindagi +
  • Edelweiss Tokio Life – Simply Protect
  • Edelweiss Tokio Life – MyLife +
  • Edelweiss Tokio Life – Protection
  • Edelweiss Tokio Life – Income Replacement
  • Edelweiss Tokio Life – Total Secure +

9. Exide Life Insurance Company

Company Overview

Exide Life Insurance Company is one of the first private life insurance companies in India and commenced its operations in 2001. The company was earlier known as ING Vysya Life Insurance Company Ltd. Today, it’s 100% owned by Exide Industries Ltd, one of the leading businesses in India in the power sector.

The company has a vast network of over 200 offices across India and has a team of 35,000+ insurance advisors. It’s often listed as one of the top 10 life insurance companies in India.

Popular Term Insurance Plans:

  • Exide Life Elite Term Insurance Plan
  • Exide Life Smart Term Plan
  • Exide Life Term Rider
  • Exide Life Term with Return of Premium Plan

10. Future Generali India Life Insurance Company

Company Overview

Future Generali India Life Insurance Company is a JV between the Future Group (one of the biggest retailers in India and the brand behind India’s popular brands like Big Bazaar, Central, Food Bazaar, eZone, and Home Town), Generali Group (an independent Italian financial services and insurance company) and Industrial Investment Trust Limited. The company commenced operations in 2007, and today has a vast network of over 104 branches across the country, with over 13.8 lakh policies sold and 95.15% claim settlement ratio.

Popular Term Insurance Plans:

  • Future Generali Flexi Online Term Plan
  • Future Generali Express Term Life Plan
  • Future Generali Care Plus
  • Future Generali Term with Return of Premium
  • Future Generali POS Term with Return of Premium

11. HDFC Standard Life Insurance Corporation

Company Overview

HDFC Standard Life Insurance Corporation is a joint venture between HDFC (Housing Development Financial Corporation), one of the top private sector banks in India and Standard Life Plus. The company was started in 2000 and today has over 27 retail and 8 group products in its business portfolio. The company was awarded the eBusiness Leader Award in 2013 and was adjudged as India’s best Workplace in 2017.

One of the biggest appeals of HDFC Standard Life Insurance Corporation is that the company offers a robust online portfolio, where existing customer can log into to view all their policy details, and new customers can use the online site to purchase plans without any hassles.

Popular Term Insurance Plans:

  • HDFC Life Click 2 Protect Plus
  • HDFC Life Click 2 Protect 3D Plus
  • HDFC Click 2 Protect Health

11. ICICI Prudential Life Insurance Company

Company Overview

ICICI Prudential Life Insurance Company was the first private sector life insurance company in India, and it started operations in December 2000. Up till then, India had only one life insurance company – the LIC. ICICI Prudential Life Insurance Company is a JV between ICICI bank ltd, one of the leading private sector banks in India and Prudential Plus, a global financial services firm.

In 2017, the company became the first insurance company in India to be listed on both the NSE and BSE. In 2018, the company was adjudged as the “Life Insurance Provider of the Year 2018” at the Outlook Money Awards and was felicitated with the Gold Award.

The assets under management by the company were around 1604 billion rupees in March 2019.

Popular Term Insurance Plan:

  • ICICI Pru iProtect Smart

13. IDBI Federal Life Insurance Company

Company Overview

IDBI Federal Life Insurance Company is a partnership between two major banks in India – the Federal Bank, IDBI Bank with Aegas – Insurance Company in Europe. Thanks to the widespread network of the two banks, IDBI Federal Life Insurance Company has over 2137 branches across the country.

IDBI Federal Life Insurance Company is one of the most trusted insurers in India and was ranked as the top 10 insurers by the annual survey conducted by Economic Times.

Popular Term Insurance Plans:

  • IDBI Federal Life Insurance – iSurance Flexi Term Plan
  • IDBI Federal Life Insurance – Income Protect Plan
  • IDBI Federal Life Insurance – Termsurance Sampoorn Suraksha Micro-insurance plan
  • IDBI Federal Life Insurance – Termsurance Life Protection Plan

14. IndiaFirst Life Insurance Company

Company Overview

This is again another joint venture between Indian banks and a foreign firm. Andhra Bank and Bank of Baroda entered a JV with Legal and General, a UK based investment firm to launch India First Life Insurance Company.

Headquartered in Mumbai, the company has a huge network across the country thanks to its founding banks. The company has over 4800 operational offices pan-India and serves over 1000 towns and cities across the country.

Popular Term Insurance Plans:

  • Online Term Plan
  • India First Life Plan
  • Star First Combi Plans

15. Kotak Mahindra Life Insurance Company

Company Overview

Headquartered in Mumbai, Kotak Mahindra Life Insurance Company is a joint venture between Kotak Bank (of the Kotak Mahindra Group) and Old Mutual Fund. It’s one of the fastest growing private insurance companies in India and had over 20 million customers in 2018. The company has a wide range of life insurance products ranging from traditional protection plans to other investment plans like retirement plans, child plans, saving plans, ULIPs, and much more.

Popular Term Insurance Plans:

  • Kotak Saral Suraksha
  • Kotak Term Plan
  • Kotak eTerm Plan (only available online)
  • Kotak Income Protection Plan

16. Life Insurance Corporation (LIC) India Company

Company Overview

Life Insurance Corporation (LIC) is India’s oldest insurance company. The company was started on 1st September 1956, and is headquartered in Mumbai. Before 2000, it was the only insurance company in India. Post liberalisation, after opening the Indian economy to other private players, now there are several private insurance companies in India, while LIC is the only state-owned insurance company.

Popular Term Insurance Plans:

  • LIC’s Anmol Jeevan II
  • LIC’s Amulya Jeevan II
  • LIC’s e-Term

Rider Plans from LIC:

  • LIC's Linked Accidental Death Benefit Rider 
  • LIC's Accidental Death and Disability Benefit Rider 
  • LIC's Accident Benefit Rider  
  • LIC’s New Critical Illness Benefit Rider
  • Lic's New Term Assurance Rider - (Uin: 512b210v01)

17. Max Life Insurance Company

Company Overview

Mitsui Sumitomo Insurance Co Ltd of Japan and Max Financial Services Ltd of India entered a joint venture partnership to launch Max Life Insurance Company. The company commenced operations in 2000 and is the largest non-bank private sector insurance company in India.

The claims settlement ratio is 98.74% for the fiscal year 2018 – 19. Max Life Insurance has 239 offices across India, and the AUM is over 62,000 crores and the sum assured is 7,03,972 crores for the last financial year.

Popular Term Insurance Plans:

  • Max Life Online Term Plan Plus
  • Max Life Smart Term Plan
  • Max Life Super Term Plan
  • Max Life Premium Return Protection Plan

18. PNB MetLife Insurance Company

Company Overview

PNB MetLife Insurance Company is a joint venture between PNB (Punjab National Bank) and MetLife International Holdings, LLC. The company has over 1800 corporate clients, 3.6+ million individual clients, and is present in 7000 locations across India. The company has been operational in India since 2001 and has a strong portfolio that includes – 13 protection plans, 16 savings products, 5 pension products, and 8 optional riders.

PNB MetLife Insurance Company offers insurance products for the four different stages of life – children’s education, family protection, long term investment and savings, and retirement covering the entire “Circle of Life.”

Popular Term Insurance Plans:

  • PNB MetLife Mera Term Plan
  • PNB MetLife Grameen Ashray
  • PNB MetLife Aajeevan Suraksha Plan
  • PNB MetLife POS Suraksha
  • PNB MetLife Family Income Protector Plus
  • PNB MetLife Serious Illness Rider

19. Reliance Nippon Life Insurance Company

Company Overview

Reliance Nippon Life Insurance Company is one of the biggest non-bank private life insurers in India, with over 10 million policyholders and a huge distribution network of over 727 branches across India, and employs over 55,492 insurance advisors. With a claim settlement ratio of 97.71%, Reliance Nippon Life Insurance Company is one of the fastest growing insurance companies in India.

The company was rated as one among the Top 3 Most Trusted Life Insurance Service Brands of 2018 in the Brand Equity survey. The company is a subsidiary of Reliance Capital, one of the top financial services companies in India.

Popular Term Insurance Plans:

  • Reliance Nippon Life Digi-Term Insurance Plan
  • Reliance Nippon Life Term Plan

20. Sahara Life Insurance Company

Company Overview

Sahara Life Insurance is the first wholly Indian-owned private life insurance company in the country. The company commenced operation on 30th October 2004 and since then has been providing innovative insurance products that cater to different categories of people. The company offers endowment, term assurance, unit-linked, money back, group insurance plans, and riders.

Popular Term Insurance Plans:

  • Sahara Sanjeevani

21. SBI Life Insurance Company

Company Overview

SBI Life Insurance Company is one of the top popular insurance companies in India, right next to the LIC. The company commenced operations in the year 2001 as a joint venture between BNP Paribas UK (the Property and Insurance arm of Paribas, one of the biggest banks in the world) and SBI (State Bank of India). It is the biggest private sector life insurance company in India and offers a huge range of life insurance policies to cater to all requirements and to customers across all categories.

Popular Term Insurance Plans:

  • SBI Life – eShield
  • SBI Life – Poorna Suraksha
  • SBI Life – Sampoorn Cancer Suraksha
  • SBI Life – eIncome Shield
  • SBI Life – Smart Shield
  • SBI Life – Saral Shield
  • SBI Life – Saral Swadhan +
  • SBI Life – Smart Swadhan +
  • SBI Life – Grameen Bhima

22. Shriram Life Insurance Company

Company Overview

Shriram Life Insurance Company started operations in 2005 and is a joint venture between the famous micro-financial services provider, Shriram Group and Sanlam Group, a global financial services provider based in Cape Town, South Africa and the Piramal Group, a global business conglomerate with presence in 30+ countries and across industries like textiles, pharma, etc.

The company has a network of over 550 offices across India and has earned the trust of loyal customers for over a decade. Competitive pricing, availability in Tier-I as well as Tier-II and Tier-III cities, and operational efficiency are the top draws of Shriram Life Insurance Company.

Popular Term Insurance Plans:

  • Shriram Life Online Term Plan
  • Shriram Easy Life Cover
  • Shriram Life Smart Protection Plan
  • Shriram Life Secure Plus Plan
  • Shriram Family Protection Plan
  • Shriram Life Cash Back Term

23. Star Union Dai-Ichi Life Insurance Company

Company Overview

Star Union Dai-Ichi Life Insurance Company is a joint venture between Union Bank of India, The Bank of India and Star Union Dai-Ichi Life Insurance Co Ltd, the second largest life insurance company in Japan and one of the top 10 largest life insurance companies in the world.

Star Union Dai-Ichi Life Insurance Company is committed to providing the right products that provide its customers with the best benefits. The company has a large number of customers from rural and low economic backgrounds. So, the premiums offered by the company are generally low to cater to people across economic and social backgrounds.

Popular Term Insurance Plans:

  • Sud Life Family Income Benefit Rider - Traditional
  • Sud Life Accidental Death And Total & Permanent Disability Benefit Rider
  • Sud Life Abhay

24. TATA AIA Life Insurance Company

Company Overview

TATA AIA Life Insurance Company is a partnership between India’s top business house, the Tata Group, and the AIA Group. The majority of shares are held by Tata & Sons (75%), and the rest are with AIA Group.

True to all its other ventures, Tata is customer-focussed in its insurance company too. TATA AIA Life Insurance Company offers a wide range of life insurance policies, excellent customer service, hassle-free and quick claim settlements, making them one of the top private insurers in India.

Popular Term Insurance Plans:

  • Tata AIA Life Sampoorna Raksha
  • Tata AIA Life Sampoorna Raksha+
  • Tata AIA Life iRaksha TROP
  • Tata AIA Life iRaksha Supreme
  • Tata AIA Life Maha Raksha Supreme

Inclusions and Exclusions of Term Insurance Plans

A term insurance plan works like a parachute for your life. While, optimistically, you should never have to claim it, but in the worst case, it protects your family from financial emergencies.

The general principle of term plans is this – if the insured passes away during the policy period, the nominee(s) can approach the insurance provider to claim the death benefit. Once the necessary documents are processed – like furnishing the death certificate, etc., the insurance company pays the sum assured to the nominee, either as a lump sum or as monthly payouts depending on the policy’s terms and conditions.

While this may sound simple, there are chances of things not working in your favour. Hence, it’s essential that you understand the terms and conditions of the policy, before signing on the insurance contract.

All insurance companies have different terms and conditions for their term plans. However, some generic inclusions and exclusions are applicable to all insurers. Here, you can find the different types of death that are covered/not covered under term plans:

Natural Death And Death Due to Health Issues

Natural death and deaths due to illnesses and diseases are covered by term plans. If the insured passes away naturally, or after being hospitalised or bed-ridden due to any critical illness or other medical conditions, the beneficiary is provided the sum assured as the death benefit by the insurer. The beneficiary has to submit a death certificate issued by the local authorities to support their claim.

Accidental Demise

Term plans provide death benefits for the demise of the insured in a road, rail, water or other accidents. Additionally, most term plans have a rider accidental death benefit clause that helps the beneficiary receives more than the basic sum assured if the insured passes away in an accident. To verify the claim, you have to provide the insurer with details of the road accident, FIR copy (if filed) and other supporting documents.

While accidental deaths are covered under term plans, there are certain exceptions. If the insured was driving under the influence of alcohol or other drugs, then the claim may not be accepted. Additionally, if the insured does not hold a valid driving license, then the claim is not accepted by the insurance provider.

Death due to Adventurous Activities

If the insured passes away while engaging in adventure sports like bungee jumping, skydiving, paragliding, rafting, parachuting, etc., the claims are not supported. Make sure to read your policy document carefully to know whether adventure and winter sports activities are included.

If you engage in adventure sports activities frequently, then you can check whether your term policy has riders that provide coverage for these.

Death Due to Suicide

While the actual terms and conditions regarding suicides vary from one insurance provider to another, here are the standard inclusions and exclusions:

  • If the insured commits suicide within the first 12 months of the commencement of the policy, then the beneficiary will receive up to 80% of the total premiums paid, until now. This is the condition for non-linked plans.
  • On the other hand, if the policy is a linked policy, then the beneficiary will be refunded 100% of the total premiums paid.
  • If the policyholder commits suicide after one year of the commencement of the policy, then the death benefits of the policy are nullified, and the beneficiary receives no payments. The policy is also terminated.

Only a few insurance providers offer coverage for death due to suicide. Hence, it’s essential that you read the policy documents carefully before purchasing it.

Death Due to Self-inflicted Injuries

If the insured passes away due to self-inflicted injuries and other hazardous activities, then the insurance company will reject the claims made by the beneficiary. No death benefits are provided to the beneficiary.

Death by AIDS/HIV

If the insured passes away due to HIV/AIDS and other sexually transmitted diseases, then the insurance company will not accept the claims of the beneficiary.

Death Due to Alcohol/Drug Abuse

The insurance company will not pay any death benefits if the insured passes away due to intoxication or drug abuse.

Death Due to Homicide

This is a complicated one, and claim processing often takes time. The insurance company does a thorough investigation from their side, along with monitoring the reports provided by the local authorities. If the insurance company finds any involvement of the nominee in the murder, then the claim gets rejected. Additionally, the claim is put on hold, until the beneficiary is cleared by law.

Death due to natural calamities like Tsunami

If the death of the insured occurs due to tsunami and other natural calamities, then the company is not liable to provide any death benefit. On the other hand, if the insured has chosen rider benefits for death due to natural calamities, then the insurer will pay the claim.

Death due to Lifestyle Habits like Smoking

It’s mandatory for smokers to declare their habit while applying for the policy. This is because smokers have lower mortality rates compared to non-smokers, hence the insurance company considers them as high-risk.

If the insured fails to declare his/her smoking habits and dies later due to illnesses caused by smoking, and the insurance company comes to know of this (through their investigation process), then the company has the right to deny the claim.

Death due to Pre-Existing Medical Conditions

Generally, all term plans have a specific waiting period for various lifestyle diseases and critical illnesses. The waiting period can range from 3 months to 4 years, depending on the policy type and the illness.

If the insured passes away before the completion of the waiting period, then the company will not accept the claim. On the other hand, if the insured passes away after the waiting period, then the company considers the death as death due to a medical condition and pays the sum assured to the beneficiary.

Death Due to Involvement in Criminal and Illegal Activities

Term insurance policies do not offer coverage for death due to criminal and illegal activities. Taking part in riots, street racing, etc. are considered as unlawful, and the insurance company has the right to deny your claims.

Make sure to read the fine print, understand the inclusions and exclusions mentioned in the policy documents, to avoid any disappointments for your family later.

Types of Term Insurance Plans

Today, insurance companies offer a wide range of term plans with exciting features and impressive benefits, to appeal to customers and to stand out among other standard term plans on the market.

The major types of term plans are:

Regular Term Insurance Plans

As the name implies, this is a standard term insurance plan. It offers no-frills and extra features. It provides life coverage for a specific period. You need to pay a pre-decided premium amount to avail this plan. The premium amount remains the same for the entire policy period.

There are no maturity benefits. You can opt for single pay premiums or periodic premium payments depending on your specific requirements. The death benefit amount depends on the premium you pay. Higher the premium, higher is the insurance cover.

When the policy matures (at the end of the policy period), the plan ceases to exist, and you no longer have to pay premiums.

Benefits:

  • This is the most basic type of life insurance cover
  • Low premiums, with high sums, assured
  • Simple, easy to understand

Group Term Insurance Plans

These are term plans that are offered to groups of individuals like employees of an organisation. This plan offers coverage to each and every member of the group, who are insured under the plan.

One of the biggest draws of group term insurance is that it is cheaper than buying insurance individually for each team member. The coverage offered by group term insurance is more or less similar to the coverage offered by standard term plans.

The biggest drawback of group term insurance is that the individual is no longer covered, once they quit the firm or their membership to the group ends.

It’s mainly used by employers and other organisations to provide coverage for its employees. If any of the employees meet with a fatal accident, the employer is likely not to face legal issues and other compliance requirements, since they have provided life coverage for the employee.

Most group term plans have a minimum number of participants. For instance, if a group plan states that it will cover groups of 20 people or more, an employer employing 10 people will not be able to avail this plan.

Benefits:

Easy to join – Participating in a group term insurance plan is quite easy. For instance, if you wish to participate in the group plan offered by your employer, all you have to do is fill a form available with the HR team and submit it, and you’re enrolled.

No medical check-ups – Most group term plans do not require you to undergo any medical check-ups. This is because the insurance company offering the group plan prices the policy based on the risk of all the members involved.

Policy ownership – The original policy document and other related documents are in the custody of the employer. This is known as the master contract. All members who are insured under the policy receive a document known as certificate of insurance, which verifies that they are part of the policy. The certificate of insurance is not the actual policy document, but proof of insurance.

Choose your preferred beneficiary – Just like standard term plans, each individual covered under the group plan, can choose his/her preferred beneficiary.

Add-on covers – You can extend the coverage offered by group term plans by choosing add-on covers. If you choose add-on covers, you have to pay an additional premium, on top of the premium paid by your employer.

Drawbacks:

Limited Coverage – While the main benefit of a group plan is similar to individual term plans, the lists of illnesses covered and other features are not as exhaustive as standard term plans. Additionally, the coverage offered is limited based on several factors like – number of members covered, annual salary, number of dependents, time of membership/employment, etc.

Convertible Term Insurance Plans

When you choose a convertible term plan, you can convert the policy into a permanent one during the policy period. Some insurers offer this feature as an add-on cover to their standard term plan, while others offer this feature as a standalone plan.

You can convert the term plan into a permanent life insurance policy, as long as you meet the terms and conditions set by the insurer.

Benefits:

  • One of the biggest benefits of convertible term insurance plans is that the policyholder need not appear for a medical check-up when converting the plan from term to permanent. This is hugely beneficial for people who have aged, or their health has deteriorated. This helps them avail whole life coverage, which would not be possible otherwise.
  • Make sure to pay all your premiums on time, so that you can avail the choice of converting it into whole term later when needed.
  • Choose a convertible policy now, if the premiums for whole life insurance are high. This way, you can convert the policy later on when required and when you are able to afford it.
  • Watch out for the timeframe within which you should convert the plan. Some plans do not allow you to convert after a specific period.
  • Remember that in convertible term plans, the time you take to wait for conversion increases the plan’s rate. Every year you delay, the cost of conversion increases by 10 to 15%. If you are sure that you want whole life coverage, then it makes sense to convert the plan as early as possible.

Drawbacks:

  • Convertible term plans are generally expensive. The insurance premium is higher than standard term plans, even before you convert the plan into a whole-life insurance policy. While the premium is higher, the coverage offered by convertible plans is the same as the standard term plan. The higher cost is for the provided conversion facility.

What’s the Difference between convertible and renewable life insurance?

When you are looking to purchase convertible term plans, you would probably come across another similar term, renewable term plans. While both these sound the same, they are two different products.

Renewable term plans can be extended even after the end of the policy period. The premiums for the renewed period are higher than the premiums for the original policy period. On the other hand, convertible plans allow you to convert the plan from a particular period to whole life coverage. Renewable plans usually do not offer whole life coverage.

TROP (Term Return of Premium) Plans

Commonly known as TROP plans, these are a type of term insurance plans, but they are slightly varied. If the insured survives the policy period, then the total premium they have paid during the policy period is returned to the insurer, after deducting tax. TROP plans ensure that the amount you spend for the policy is returned to you at the end of the policy period.

Salient Features of Term Return of Premium Plans:

  • It works just like a standard term insurance plan, but it offers a refund of all premiums paid, on the maturity of the policy, if the insured survives.
  • You can add various riders and add-on covers to the TROP plan to extend the coverage.
  • TROP plans generally have a higher premium compared to standard term insurance plan. This is because you are repaid all the premiums if the insured survives.
  • You can avail tax benefits on the premiums you have paid for the TROP plan under Section 80C of the ITA. Additionally, the TROP plan offers you tax benefits under Section 10D for the death benefit received by the beneficiary.
  • Some insurance providers offer returnable TROP plans. In this case, if you choose to discontinue the premium payment, the insurance company refunds all the premiums you have paid till date after deducting the expenses incurred like medical check-up fees (if any) and stamp duty charges. Check if your policy offers this option, while choosing a TROP plan.
  • You can also choose TROP plans that allow you to stop paying premiums after a specific period, say five years. In such cases, the death and maturity benefits you receive will be reduced based on the premiums you have paid till date, and the total premiums you have to pay under the plan.

Factors to Keep in Mind, while Choosing TROP Plans

  • Make sure to read the policy document carefully. This gives you an idea of all that’s included in your plan, and other terms and conditions.
  • Ensure that the sum assured by the TROP plan is sufficient for your family to live comfortably, in case if something were to happen to you.
  • Choose a reputed insurance provider. Make sure that you don’t fall for misleading advertisements and evaluate the credentials of the insurance provider before investing in the plan. Check the claim settlement ratio and the customer service of the insurance provider before choosing a particular insurance company.
  • Make sure to understand the premium frequencies and other conditions before you choose the plan.

TROP Plans Vs. Fixed Deposits: Which works better?

Very often, you come across people who claim that fixed deposits are better than TROP plans. This is because they believe that the interest rates offered by fixed deposits work better when compared to the inflated premiums of TROP plans.

While a TROP plan refunds all your premiums at the policy maturity date, there are no interests or other incentives. On the other hand, fixed deposits yield high returns – including the principal amount as well as the compound interest.

The survival benefit offered by TROP plans is indeed lower than the returns earned by fixed deposits. But, what fixed deposits don’t offer is the – vital life insurance coverage. TROP plans offer a huge death benefit if the insured passes away unexpectedly. This is the most important benefit of TROP plans, and the survival benefit is secondary.

Decreasing and Increasing Term Plans

Let’s take a closer look at these two popular term plans.

Decreasing Term Life Insurance: In this policy, both the death benefit and the premium regularly decrease at a certain rate throughout the policy period. Generally, these plans are offered by banks and other NBFCs to insure properties offered as collateral. Banks use these plans as a worst case scenario, to ensure that they get back the amount loaned, even if the borrower is not able to pay back the amount. The duration of decreasing term life insurance ranges from one to fifty years.

The idea behind decreasing term life insurance is that the policy holder’s requirements for high death benefits decrease with age. This is because, as the insurer grows older, he/she would have finished all his financial commitments like – providing for children’s education, building a retirement fund, etc.

However, remember that decreasing term plans do not work well for individuals who don’t have any other form of life coverage. If you can afford only one life insurance plan, then it makes sense to opt for a pure term insurance policy, since the death benefit offered by these plans remain the same throughout the policy period.

You can use the decreasing term life insurance for personal asset protection. Several small businesses also use this plan to protect the loans they avail for operational expenses.

Increasing Term Life Insurance: This is the opposite of decreasing term plans. Here, the insurance coverage increases regularly at specific intervals during the policy term. The cover keeps on increasing and reaches a point where it is 1.5x higher than the original cover.

The main purpose of increasing term life insurance is to provide the beneficiaries respite from inflation. Additionally, it ensures that the death benefit provided to the beneficiary is substantial to help them meet their financial requirements, in the absence of the breadwinner.

With that said, since the death benefit increases with time, the premium of these policies is higher compared to standard term plans. Increasing term plans are mostly chosen by young couples who plan to start a family in the future and would like to save for the financial protection of their future family.

Generally, the sum assured keeps on increasing by 5% every year, until it reaches twice that of the initial coverage. After this, the sum assured doesn’t increase, and it remains constant.

Joint Term Insurance Plans

As the name implies, these are term insurance plans that couples can choose together. Both the partners can be covered under the same policy. Instead of taking separate term plans for the husband and wife, these term plans offer comprehensive financial coverage for both the husband and wife under a single plan.

This plan ensures that whether the husband or wife passes away unexpectedly, the surviving member receives a lump sum death benefit that can be used to bring up children. This plan is ideal for families with dependent children.

Salient Features of Joint Term Insurance Plans

  • Some joint term plans offer payouts based on the first claim. This means, if one of the insured dies during the policy period, the insurance provider offers the death benefit to the surviving member, and the policy ceases immediately.
  • Other joint term plans offer separate death benefit for both the members.
  • Other types of joint term plans offer payouts to the surviving member at the death of the other person. Additionally, these plans continue providing a regular payout in the form of monthly incomes to the surviving member for a specific period.
  • You can enjoy tax benefits on the premium (under Section 80D) and tax benefits on the payouts (under Section 10D) for joint term plans.
  • Accidental death benefit cover, as well as terminal illness coverage, is also offered by certain joint term plans.

Joint Term Life Plans Vs. Individual Term Life Plans: Which should I choose?

If you and your partner are looking to purchase a term plan, then you would most probably be confused between joint plans and individual plans. Here, we breakdown the features of both, so that you can choose the right plan that works for you.

Joint Term Life CoverIndividual Term Plans
A single plant that offers life coverage for both spouses.You require two separate policies to avail life coverage for both.
Single premium payments.Premium has to be paid separately for both the plans.
The terms and conditions for both the husband and wife remain the same. You can choose different terms and conditions, for the husband and wife, depending on the individual’s insurance needs.
If you purchase a joint plan, with a single payout, then the nominee will receive only a single death benefit, in the case of an accident, involving the death of both the insured.When you choose two term plans for the husband and wife, the nominee receives two separate death benefits, offering a huge sum.
In a joint plan, that offers a single death benefit, after the death of the first spouse, the surviving member has to take a fresh policy for his/her insurance coverage. This may be a huge disadvantage, especially if the surviving member is old as it would require higher premiums. In individual term plans, both the husband and wife continue to get life coverage, irrespective of the death of the other members.
In case of separation or divorce, joint term plans present complications as who would be responsible for the premium payments, death benefits, etc. Individual term plans present no such complications as the separated husband and wife can pay their premiums separately.
The premium for joint term plans is lesser when compared to individual term plans.Since there are two separate plans, the total premium paid will be higher than that of joint plans.
Easy to manage, simple documentation.Have to maintain the documents for two separate plans.

Online Term Insurance Plan

Though it is not a specific type of term insurance, this term has become popular in the last few years. Today, you can pick up any of the above types of term plans online. Several insurance companies sell term plans directly from their website. This avoids the need for insurance agents and other mediators.

Customers can check out all the information about the various term plans offered by an insurance provider, compare different plans, and choose the right one that works for them.

How is Term Insurance better than other Life Insurance Plans?

Very often, most insurance buyers do not opt for term insurance since it offers only death benefits, and there are no other maturity benefits. Even though term plans may not offer added benefits like other life insurance plans like ULIPs, having term insurance is critical. Here are a few reasons why term insurance is better than other life insurance plans.

Guaranteed Financial Protection

If you are looking to create a financial net for your family, in the event, something unexpected were to happen to you, then term plans are the best choice. It provides a way to secure the financial well-being of your dependents in your unfortunate demise.

Adequate Coverage with affordable premiums

This is one of the biggest benefits of term insurance. Generally, term insurance plans offer high coverage at affordable premiums.

Choose Riders to Increase Benefits

You can increase the coverage by choosing different riders like accident coverage, critical illness, and more. Additionally, when you choose TROP plans, you get back the premiums paid (after tax deductions) as survival benefit.

Quick claim settlements and low claim rejection ratios

Since there are no complicated conditions, claim settlements are faster and hassle-free. Your family members do not have to go through a lengthy claim process with the insurance team.

Who should you purchase a Term Insurance policy?

Term insurance offers immense benefits for all. Anyone who has financial dependents benefit immensely from term plans.

The premiums you pay for term insurance are deductible from your taxable income under Section 80C of the ITA. This means you get double benefits from term plans – financial protection as well as tax-saving. Additionally, the death benefit your beneficiary receives from term plans is free from taxation under Section 10D of the ITA.

To phrase it in a nutshell – term plans offer three major benefits: financial protection, tax saving, and pocket-friendly premiums. It’s highly recommended that anyone who is looking for these three benefits in a life insurance plan must include term plans in their portfolio.

Let’s take a closer look at the benefits offered by term plans for people at different stages of life:

Young Professionals

These are people who are just starting their career, and the majority of them wouldn’t have entered matrimony, so they do not have any financial dependents. However, this situation is most likely to change in a few years, when they get married or need to support ageing parents.

It’s highly recommended that young professionals opt for term cover as soon as they start earning a stable income. This is because the premium for term plans increases with age, and you are likely to get a better deal by starting early. On the other hand, if you wait to choose term plans after you have settled down, you are most likely to pay higher premiums.

And, since the premiums remain the same for the entire policy period starting earlier gives you the most benefits.

Newly Married Couples

Insurance plans are the last thing on the mind of newly married couples. However, insurance experts recommend that you secure your partner’s financial future by opting for term plans at this stage of life.

Gifts like roses, chocolates, and vacations provide your partner only with momentary joy. The financial protection offered by term plans assures the insured person of a financially stable future.

Married couples should purchase term plans as early as possible. You can opt for joint term plans to reduce the premium and to get life coverage for both partners under a single plan. While choosing joint plans, you have the flexibility to choose the required type of coverage:

  • Receive a lump sum after the death of one of the insured and terminate the policy
  • Or choose a separate sum insured for both the insured

Parents

Parents are the only source of financial support for their young children. They take care of all the needs of children – providing them with nutritious food, quality education, and seeing to all their other needs big and small.

The demise of either parent – be it the father or mother, can jeopardize the future of young children, making them lose out on the lifestyle they were accustomed to. With a term plan, you can protect the financial future of your children, even if something unexpected were to happen to you and you leave the world.

Term plans provide your children and surviving partner with a lump sum payment that can be used to manage your child’s critical expenses.

Taxpayers

If you are looking to save tax on your insurance premiums, then term plans are a good choice. The premiums you pay for yourself, and your spouse are tax deductible under Section 80C of the ITA. If you are looking for an easy way to reduce your overall tax burden, then term plans are a great choice. However, remember that term plans offer plenty more benefits than just tax saving.

SIP Investors

The basic principle of SIP plans is that you invest a fixed sum monthly for a specific period. This amount is invested in mutual funds that help you build your wealth over time. However, if the investor were to die unexpectedly in an accident, then the SIP plan payments would be halted. You can avoid this situation by choosing term plans. The lump sum payment received as death benefit would help your beneficiary continue your SIP plans even after your demise.

People About to Retire

Even if you have failed to take term plans in your young age, it’s not too late. Several term plans offer coverage for people in their 50s and 60s. Retirees must opt for term insurance so that they can leave an inheritance to their families and secure the financial future of their dependent spouses.

Who doesn’t need Term Insurance?

While insurance experts recommend that term insurance is mandatory for all adults, there are certain situations in life, where you may not need it. Here are a few instances:

Low-income Earners

Low-income earners may find it difficult to pay the premiums from their meagre budget. If such is the case, then you can focus on building your savings, on meeting immediate expenses, before worrying about insurance.

However, the biggest benefit of term insurance is super-affordable premiums. You can purchase a term plan for as low as Rs. 500 per year.

People with no dependents

If you are not married, don’t have any children or ageing parents to take care of, you need not include term insurance in your portfolio.

However, if you are interested in doing some good after you’re gone, you can transfer the proceeds of your insurance plan to an educational institution, charity, or NGO of your choice.

If you have group life insurance

Several workplaces offer life coverage for their employees, via group life insurance plans. However, most group plans terminate once you quit the job or the coverage offered may be very less. In such cases, check with the administrator at your office, to see if you can include additional coverage on top of the plan provided by your employer.

Super wealthy

The super wealthy have sufficient funds to keep their family comfortable, even when they are no more. Such people don’t require term coverage.

Term Insurance Cover: How much is enough?

The insurance coverage required varies from individual to individual and depends on – personal and financial circumstances. You need to look for a cover that replaces your income and helps to meet the expenses of your dependents when you are no more.

The formula for calculating insurance cover:

Recommended death benefit = Resources (income and liquid assets) – Financial obligations (debt and expenses)

Insurance experts recommend that you should choose a life cover that is 10 – 12 times that of your annual income.

Here are the top factors to consider while deciding the coverage:

Financial Obligations

You need to consider all the financial commitments that you have. This includes everything you need to pay for immediately, as well as in the future.

Start by analysing your debts. If you have any outstanding debts – home loan, car loan, personal loan, etc. it falls on the shoulders of your dependents. If in the case, your dependents are unable to pay off your debts, the assets – like your house or car, fall into the hands of the creditor and could be taken away.

The death benefit cover you choose should include the cost of paying off all your outstanding debts.

Number of Dependents

Your life cover should include the cost of raising a child, providing for a non-working spouse, and caring for ageing parents. If you have several dependents and you are the sole breadwinner of the family, then you need to look for term plans that offer large life cover.

Even if you don’t have any dependents right now, you have to consider the future where you may get married, start a family, support your retired parents, etc.

Major Expenses Like Education of Kids, Wedding of Children, etc.

Apart from the regular expenses, your life cover should also provide for future expenses. The two major expenses are – children’s education and marriage. Plan for what higher education will cost in the future – say 10, 15 years down the line and include this amount in the life cover you need.

Financial Stability of Your Family

When you are calculating the life cover, you need to consider the regular expenses of your family like – rent, food, medical expenses and other discretionary expenses like clothing, entertainment, etc.

A good life cover is one that continues to provide for your family’s lifestyle, even when you are no more.

Burial and Funeral Expenses

Today, burial and funeral expenses have increased significantly and can cost anywhere from around tens of thousands of rupees to a few lakhs. Make sure to factor this cost in your life coverage, so that your family is not burdened with financial pressure on top of the emotional toll that they experience on your death.

The Health and Age of the Insured

Health and age not only play a role in determining how much life coverage you need but also help you decide how long you need the coverage. Also, remember that insurance premiums increase with age since older adults fall into the high-risk category.

Affordability

While everyone wishes for a very large life coverage that runs to a few crores, it’s not practically possible for all. This is because with an increase in life cover, the premiums you have to pay an increase. So, while calculating the coverage, check whether you can afford the premium.

Steps to calculate the life coverage you require:

  • Identify your resources (after-tax income, other income sources, and liquid assets)
  • Calculate your Financial Obligation = Expenses + Debt
  • Financial Obligation – Liquid Assets = Coverage Gap
  • The coverage gap is the amount of insurance cover you need.
  • While choosing the final cover, opt for a sum that is a few times higher than the coverage gap.

Recommended Life Cover at Various Stages of Life:

People aged between 18 to 24 years – Young people in this age group do not have much financial obligations or responsibilities. They are likely to have no dependents. In such cases, a term plan with a small cover may appear to be the right choice.

However, it’s highly recommended that you consider your future requirements and opt for term plans with large cover. This is because premiums are likely to be low at this stage of life, and you can get a good deal.

People aged between 24 to 30 years – Most people are likely to get married at this stage, and there arises the need to protect the spouse’s financial requirements. Additionally, parents are likely to start thinking of retirement and will become dependent on children. Financial obligations like home loans, car loans also increase.

Choose a term plan that offers 10 to 15 times your annual income, along with providing for all your outstanding debts.

People aged between 30 to 50 years – Majority of individuals are married, settled, and have children during these years. Life cover becomes absolutely critical to protect and secure the financial future of your family. You require a life cover that takes care of – day to day expenses of your family for the next ten to fifteen years, children’s education costs, as well as your outstanding debts.

People aged above 50 years – Children would have become financially independent by now. Your only major concern would be for providing for your spouse in the case of your death.

Choose a life cover that meets your regular household expenses for the next 10 to 15 years, as well as medical expenses. However, it’s highly recommended that you opt for health insurance separately and not confuse it with term coverage.

Simply put, the life coverage of your term plan should provide for:

  • All outstanding loans
  • Money for your spouse and dependents to spend the next 10 to 15 years of their life, till they obtain a financial footing
  • Children’s education and marriage expenses

Remember that your life insurance cover should be big enough to take care of all present and future needs of your family – spouse, children, and ageing parents.

The 1 Crore Death Benefit Term Insurance Plan

This is one of the popular term insurance plans. As the name implies, this plan offers a death benefit of Rs. 1 crore to the beneficiary on the demise of the insured within the policy coverage period.

Generally, insurance experts recommend choosing term plans that offer 15 to 20 times your annual income as coverage, especially if you are the sole breadwinner of the family. This amount would help your spouse and children manage the essential expenses of the household in your absence, as well as take care of big expenses like housing loans, higher education fees, etc.

Additionally, the death benefit amount should consider inflation rates as well. Generally, the rate of inflation is around 6 to 7% every year.

The one crore death benefit plan considers all these factors and arrives at the amount of 1 crore as a substantial amount for surviving partner and dependent children to be able to secure their future financially.

Highlights of the 1 Crore Death Benefit Plan:

Helps your family maintain their standard of living

Life is unpredictable. No one knows what may happen tomorrow or a few years down the line. Additionally, with inflation and rapidly increasing living costs, it’s essential that you secure your family’s financial future.

The one crore death benefit offered by this plan provides a tidy sum that cushions your family members from a major financial crisis after your demise. It is sufficient to take care of your children’s educational needs, daily household expenses, to pay off any pending loans like home loans, car loans, personal loans, etc. and to provide for future expenses like the wedding of your children, higher education and more.

While the loss of an individual can never be compensated, this term plan helps to compensate for the financial loss that occurs on the demise of a family member. It cushions your family from a bad financial blow, after your death.

Acts as a Substitute for your Missing Monthly Income

The nominee can choose to receive the one crore death benefit as a lump sum payment or as monthly payouts for a specific period. Monthly payouts are a great choice, especially if the insured is the sole breadwinner of the family. The monthly payouts act as a substitute for your salary and can pay for your family’s expenses, till they get back on their feet.

Rider Benefits

Apart from the standard death benefit offered by this term plan, you can choose any one or several rider benefits based on your financial requirements.

Low Premiums

The IRDAI (Insurance Regulatory Development Authority) has set several rules and regulations that all insurance companies who offer term plans must adhere to. The basic condition is that the insurance company must offer large cover at low premiums. The premium for a healthy, non-smoking individual in their 20s or 30s is extremely low and quite affordable.

Additionally, you can enjoy a further reduction of the premium by purchasing the policy online directly with the insurance company, instead of using an insurance agent. This is because the insurance provider doesn’t have to pay agent commissions; hence, they can offer lower premiums for policy purchasers who purchase the plan directly.

It’s a Great Value for Money

The 1 crore term plan is a great value for money and a smart investment. The premium of the plan remains the same for the entire policy period; thereby you need not pay anything extra later.

However, if you develop a life-threatening habit like smoking, then you have to report it to your insurer, which may alter the premium rates.

Purchase the Policy Online

You can purchase this term plan online without the need for going through an insurance agent. Check out the policy document online and get your queries clarified by the customer support team of the insurance provider.

Use online premium calculators to figure out the coverage and corresponding premium. Fill in the application form, submit the required documents, pay the first premium, and get the policy issued immediately.

Deaths Due to Accidents

The death benefit is valid even in case of accidental deaths. The sum assured would be paid to the beneficiary. Additionally, by choosing accidental death cover as a rider, you can ensure that the beneficiary receives a guaranteed sum that is several times higher than the proposed death benefits.

Protects Your Family Against Loans

As mentioned above, the lump sum payment can be used to settle off all your outstanding loans and other debts, thereby freeing your family from your financial obligations.

Valid Outside India

This is another huge benefit of term plans. The cover is applicable, even if the policyholder moves outside India in the future. On the death of the insured, the surviving beneficiaries can approach the insurance provider in India, to settle their claims.

Above all, Offers Huge Peace of Mind

Knowing that you have taken the right steps to protect the future of your loved ones is a huge relief. This helps you be stress-free and enjoy peace of mind.

For whom does this policy work the best?

All regular salary earners in the age group 30 to 40 can choose this plan to safeguard their family from the unpredictabilities of life. This plan is highly recommended if you are the sole breadwinner of your family, and you have a dependent spouse and children. Additionally, if your family’s income is between 5 lakhs to 7 lakhs, then the 1 crore death benefit term plan is a great choice, to help your family maintain their standard of living, after your demise.

While choosing this plan, look for insurance providers who offer coverage that lasts well into the 60s of the policyholder.

Which insurance companies in India offer the 1 crore death benefit plan?

Some of the popular insurers who offer term plans with 1 crore-coverage include:

  • Aviva Life Insurance
  • Bharti AXA Life Insurance
  • Max Life Insurance
  • HDFC Life Insurance
  • SBI Life Insurance
  • ICICI Prudential Life Insurance

With that said, while 1 crore may seem like a major amount today, ten or twenty years down the line, the amount may not be all that big, considering inflation and increasing lifestyle costs. So, make sure to read the policy document and consider all the terms and conditions before choosing this term plan.

How to choose the best Term Insurance plan?

Very often, while choosing term insurance plans, most people consider only the premium costs. While premium costs play a huge deciding factor, it shouldn’t be the only deciding factor. You have to consider these five other features, which help you pick the best term insurance plan that meets your financial requirements.

5 Major Factors to Consider while Choosing Term Insurance Plans:

1. Claim Settlement Ratio

The claim settlement ratio gives the number of ratio of the total claims paid out by the insurer in a year to the total number of claims filed in a year. Higher the ratio, the better are the chances of your beneficiary claiming the death benefit from the insurer without any hassles.

2. Solvency Ratio

This number gives you a clear idea of the financial status of the insurer. The insurance company you choose must be financially capable of settling all outstanding claims. According to the IRDAI, all life insurers in India are required to maintain a solvency ratio of 1.5 or more.

For instance, let’s say there’s a natural disaster, and plenty of lives are lost, in a very short period. The insurer is likely to receive a large number of claims within a short period. When the company has a high solvency ratio, it indicates that the insurer has adequate financial backing to settle all these claims quickly.

Simply put, the future financial security of your family depends on the financial stability of the insurer. Hence, it’s essential that you choose an insurer with a high solvency ratio.

3. Critical Illness Cover

A term plan protects the financial future of the dependents in the death of the breadwinner of the family. However, death is not the only situation where your family’s financial security is threatened.

Critical illness like brain surgery, kidney replacement, or cancer can cost a lot of money and drain your family’s savings. With critical illness cover included under the term plan, the insurer provides your family with the sum assured on diagnosis of critical illness of the insured.

You can use this amount to pay for the medical expenses of the insured, even when they are alive. Critical illness cover is a huge boon and protects your family from rising medical costs. Additionally, the premium amounts paid for critical illness cover are tax-exempted under Section 80D of the ITA.

You can receive the sum assured for critical illness by submitting the diagnosis and other supporting documents provided by your healthcare provider.

4. Number of Add-On Covers

While term insurance plans are pure life insurance plans, several insurers today offer rider benefits (or add-on covers) to increase the coverage offered.

Some of the popular add-on covers include whole life coverage, critical illness cover, accidental death benefit, etc. Look for insurers who offer a range of add-on covers so that you can increase the coverage as and when needed.

5. Finally, the Premium Cost

Once you have shortlisted term insurance plans using the above factors, you can consider the premium cost to make your final choice. However, as mentioned above, don’t compromise on essential benefits, just for the sake of reducing a few hundred rupees of premium. Remember that all term insurance premiums are eligible for tax deduction under Section 80C of the ITA.

Further, you can reduce the overall premium cost by purchasing the term policy online instead of using insurance agents. This reduces premium costs by up to 30 to 40%.

FAQs: Term Insurance Plans

1. What should be the tenure of my term insurance plan?

You need to be very careful in choosing the period of your term plan. Opt for term plans that offer you coverage up till the time you turn 70 or 75. By then, you would Generally, insurance companies divide smokers into three categorieshave finished off all your financial goals, and your dependents are most likely to be financially independent.

Most term plans offer coverage up to 60 years, while several plans offer whole life coverage too. Choose after careful consideration of your specific requirements.

2 Can I change the duration of the plan, midway or once the policy is issued?

No. The duration cannot be changed once the policy is issued. So, make sure to choose the tenure very carefully during the policy proposal.

3. Can the premium amount of term plans change during the policy tenure depending on market conditions?

No. As per IRDAI rules, the premium remains the same for the entire tenure.

4. I am an occasional smoker. Should I declare my habit while purchasing a term plan?

Yes. It doesn’t matter whether you are a chain smoker or an occasional smoker. If you have smoked during the last twelve months, you are bound to declare yourself as a tobacco user.

If you fail to disclose this information to the insurer, there are chances that your insurer may charge you additional penalty fees later on, or in the worst case, may even reject the claims submitted by your beneficiary.

5. What type of smoker should I declare myself as, while filling my term policy application?

Generally, insurance companies divide smokers into three categories

  • Preferred Smoker – A smoker who is otherwise fit and healthy
  • Typical Smoker – A smoker who has minor health issues
  • Table-rated Smoker – A smoker who has major health issues

Irrespective of whether you are a regular smoker or an occasional smoker, you have to disclose your smoking habits. Insurance companies have a set of medical tests that can detect whether you are a smoker or not.

6. I have purchased a term plan in India. But, I will be going overseas, and my resident status will change to NRI. Is my term plan still valid?

Yes. Your plan continues even when your resident status changes to NRI. However, you have to intimidate the change to your insurance company. Your insurer will ask you to provide the supporting KYC documents to prove your NRI status like visa, resident permit, overseas address, etc. Failing to intimate the change of your status to the insurer can lead to your policy being cancelled.

At the time of claims settlement, the amount can be sent directly to the foreign bank account used to pay the premiums. The claims can be paid in Indian rupees or an overseas currency, depending on your preferences.

7. I recently came across another term plan offered by another insurer who offers better benefits. Can I change my existing policy from one insurer to another?

No. It is not possible to switch your plan from one provider to another in term insurance.

8. What happens if the death occurs immediately, say within a few months, after purchasing the policy. Will the claim still be honoured?

Yes. The insurance company is legally obligated to pay the death benefit to your beneficiary, even if the death occurs within one year of taking the policy. However, this depends on the specific terms and conditions specified by your insurer. Additionally, the insurer may take some extra time to verify if the death was natural, and there was no foul play involved.

9. Can my beneficiary resubmit the claim if it was rejected the first time?

Yes. Sometimes the insurer may reject the claim due to some discrepancies in the supporting documents and for any other reason. Your beneficiary can approach the grievance centre of the insurance company to file their claim once again. If he/she is not satisfied by the response provided by the insurer, he/she can take the matter to the IRDAI for resolution.

10. Can I change the nominee during the policy period?

Yes. When you purchase a term plan before your marriage, you are likely to name your parents as the beneficiary. However, later, as you build a family, you may wish to include additional nominees like your spouse, children or change the nominee.

All insurers allow you to change the nominee at any time during the policy period. Get in touch with your insurance company, and let them know of the changes. You don’t have to submit any documentation to change nominees.

11. Is it safe to buy a term policy online?

Yes. Purchasing term policies online is highly safe. Most insurance providers offer an online website where you can check the details of all the term plans offered by the insurer, calculate premium costs, and then choose the right plan that works for you.

Pay the premium online using your credit or debit cards, internet banking account. All insurers offer secure payment gateways, so you need not worry about online frauds and other malicious activities.

Once you pay the premium, the e-copy of the policy is mailed to you, and the actual policy document is sent to your address.

Another huge benefit of purchasing a term policy online is that the premium rates are cheaper compared to regular offline policies. Since there are no insurance agents involved in the process; the insurance company need not pay commissions to the agent, which reduces the cost of the policy.

12. Can a diabetic person purchase term insurance?

Yes. You can purchase term insurance easily when you have your diabetes under control. You can avail term policies at moderate premium rates if you take the right treatment to control diabetes. Similarly, people who take insulin to control diabetes also can avail term insurance.

However, people who have diabetes along with other lifestyle diseases like blood pressure, cardiac problems, may have to pay higher premiums depending on the level of health risks. Additionally, if you have complicated health issues, then your term plan proposal may even be rejected, or you may have to pay additional premiums.

13. What are the types of deaths covered in term plans?

Generally, deaths due to illness, accidents, and natural death are covered under term plans. However, death due to a natural disaster, terrorist attack, suicide, and murder are not usually covered. Make sure to read your policy document carefully to know the inclusions and exclusions.

14. What will happen if I start smoking after I take the policy?

When a person starts habits like drinking or smoking, it reduces life expectancy and leads to several illnesses. Hence, it’s essential that you reveal your new habit to your insurer, to avoid claim rejections later on.

15. What happens if I don’t die within the policy period?

Term insurance plans generally do not offer any survival benefits. When your policy matures, it is terminated. However, several insurers offer the option of extending the policy for additional years. If you have completed all your financial obligations and wish to leave behind a legacy for your family, then you choose this option.

16. What are the benefits offered by term plans for female applicants?

Generally, the premium of all term plans is lesser for women compared to men. This is because women have longer life expectancy than men. Additionally, insurers offer other benefits for women like coverage of women-related critical illnesses like cervical cancer, breast cancer, etc.

Who can be a nominee under term plans?

You are free to choose anyone as your nominee. Generally, most people choose family members like a spouse, children, grandchildren, siblings or parents as the beneficiary.

18. My friend and I have chosen the same term plan with the same coverage for the same number of years. Why is the premium different for my friend and me?

Several factors affect the cost of premiums. The major factors include – duration of the policy, the sum assured, age, health conditions, and other lifestyle habits like smoking, drinking, etc.

For instance, a 25-year-old non-smoker will have lower premiums compared to a 35-year-old-chain-smoker. Additionally, your health conditions also play a huge role in determining premium rates. If you have lifestyle diseases like diabetes, hypertension, etc. then you are likely to pay higher premiums.

So, policy premiums vary from individual to individual, even for the same plan.

19. Will I have to undergo medical checkups while taking a term plan?

Yes. Most insurers require you to undergo a basic medical check-up like blood pressure, blood sugar, etc. while you apply for a term plan.

20. Are there any special medical tests that must be taken?

Yes. This depends on several factors like the sum assured, age of entry, age at maturity, family history, etc. Your insurer may ask you to undergo certain special medical tests to verify that you are in good health.

For instance, if the applicant is overweight, the insurer may request an ECG, glucose tolerance test, etc. For underweight applicants, X-ray of the chest and lungs are usually mandatory.

Latest & Update Term Insurance News

Exide Life Guaranteed Wealth Plus – A New Comprehensive Life Plan from Exide Life 9 Jul 2021

Exide Life has launched a new comprehensive life plan to help customers fulfil financial needs at various life stages. The plan offers continuous life cover as well as income payout, throughout the policy tenure. Speaking on the occasion of the produ...

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Exide Life has launched a new comprehensive life plan to help customers fulfil financial needs at various life stages. The plan offers continuous life cover as well as income payout, throughout the policy tenure. Speaking on the occasion of the product launch, the Director (Strategy) of Exide Life Insurance stated that the plan will help policyholders build wealth over the years, guaranteeing up to 350% returns. The plan is available in two variants – Income Variant (Pay Premiums for 6 years and receive payouts for 30 years) and Lump Sum Variant (Pay premiums for 6 years and enjoy life cover and receive a lump sum on policy maturity). The maximum entry age is 60 years, and the minimum entry age is 3 years for the lump sum variant and 11 years for the income variant.

PNB MetLife Launches Century Plan, a Comprehensive Life Insurance Plan 23 Jun 2021

To help customers meet financial needs at various stages of life like children’s education, long-term wealth generation and retirement, PNB MetLife has launched the Century Plan. It’s a non-linked, participating life plan that offers three different ...

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To help customers meet financial needs at various stages of life like children’s education, long-term wealth generation and retirement, PNB MetLife has launched the Century Plan. It’s a non-linked, participating life plan that offers three different income options like Super Income, Smart Income and Future Income. The plan offers income starting immediately, with a lump sum paid on maturity. It offers coverage for up to 100 years of the policyholder. It’s a smart option if you want an insurance cum investment plan.

Term Insurance Premiums to Get Costly from April 202116 Mar 2021

Several life insurance companies have spiked premium costs for term plans by 20% to 30%. The new premium rates will be effective for plans taken after March 31, 2021. If you haven’t yet taken a term plan, then it’s recommended that you opt for one ri...

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Several life insurance companies have spiked premium costs for term plans by 20% to 30%. The new premium rates will be effective for plans taken after March 31, 2021. If you haven’t yet taken a term plan, then it’s recommended that you opt for one right now to enjoy lower premiums, before plan costs increase from April. Browse our collection of best term plans on the market and choose the right one that fits your insurance needs.

Delaying Term Insurance Purchase can Increase Premium Costs by 45% to 70%5 Feb 2021

A recent insurance price index report reveals that delaying the purchase of a term plan by ten years increases the premium costs by 45% for a 25-year-old and 70% for a 35-year-old. People who purchase a term plan when they are 55 are likely to pay 4x...

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A recent insurance price index report reveals that delaying the purchase of a term plan by ten years increases the premium costs by 45% for a 25-year-old and 70% for a 35-year-old. People who purchase a term plan when they are 55 are likely to pay 4x more premiums than the price paid by a 25-year-old. Hence, it’s highly recommended that you start a term plan as early as possible and lock-in the premium prices. Check our site for the best insurance quotes from leading insurers and choose the right plan that works for you.

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