Term Life Insurance Plan Meaning
Term life insurance plan is a type of life insurance plan in which there is a legally binding contract between the policyholder and the insurance company. In this contract, if the life assured dies during the policy term, the death benefit is provided by the insurance company to the person nominated by the life assured.
A term life insurance plan requires you to pay premiums for it at regular intervals. You can avail life cover through your term life insurance plan only by paying regular premiums.
Through term life insurance plan, financial assistance is provided to the family members of the insured person in the absence of the insured person. It is worth noting that no maturity benefit is provided to you in a term life insurance plan. If the policyholder survives the life assured till the policy term then no benefit will be provided to him.
How Does Term Life Insurance Plan Work?
As we told you above that term life insurance plan is a type of life insurance plan which provides an amount of money as death benefit to the person nominated by the insured in case of death of the insured during the policy term.
You can buy a term insurance policy for any number of years as per your convenience. You can also buy it for cover ranging from 1 year to whole life. Now for as many years as you buy term policy, you are provided coverage through term plan for that many years. If death of the life assured occurs during the term policy term then the death benefit is provided to the nominee by the life assured.
One has to pay premiums regularly to keep one’s term insurance policy in force. The insurance company gives you the option of paying premium monthly, quarterly, half-yearly, annually and in one lump sum. Your term plan cover lapses if you do not pay your premiums on time. Hence it is essential that you keep paying your premiums on time to continue with the term plan coverage.
A term policy is much cheaper than a normal life insurance policy. The premium charged is less as compared to life insurance and it provides maximum life cover. Through this policy, you can secure the financial future of your family even in your absence.
It is worth noting that if the life assured survives the term policy term then no benefit is provided to him. But now such term insurance plans are being offered by insurance companies in which maturity benefits are provided to you if you survive the policy. In this, the premium paid by you is returned. Though you have to pay additional premium to avail this facility, only then you can get back the premium you paid after the expiry of your policy term.
You are provided with tax benefits u/s 80C of the Income Tax Act 1961 on the premiums paid for the term policy and are eligible for tax benefits u/s 10(10D) of the Income Tax Act 1961 on the death benefit.
Key Features Of Term Life Insurance Plan
The main features of Term Life Insurance Plan are as follows-
- In term life insurance plan, death benefit is provided to the nominee by the insured in case of accidental death of the insured.
- No maturity benefit is provided in term insurance policies. But now such term plans have also come in which the premium is returned to you on completion of the policy term of the term plan.
- Term insurance plans give you the option of increasing your term coverage by adding riders.
- You can choose the premium payment frequency for term life insurance plans as per your convenience. In this, you get the option of paying premium on yearly, half-yearly, quarterly or monthly basis.
- You can take the death benefit as per your convenience. You can choose to pay your death benefit as a lump sum or as regular payments or even as a monthly income.
- Tax benefits are provided to you on the premiums paid under the term plan.
- Read Also Open an Account in IndusInd Bank
Benefits Of Term Life Insurance Plan
Following are the benefits of Term Life Insurance Plan :
- Death Benefits:
In case of death of the life assured during the term life insurance plan term, the sum assured is provided as death benefit to the nominee by the life assured. Through this the financial liabilities of the family members of the insured person can be met.
- Maturity Benefits:
No maturity benefit is provided in a term life insurance plan. But now such term insurance plans are also offered by insurance companies in which all the premiums paid by the insured are returned if he/she survives at the end of the policy term. This is known as term plan with return of premium .
- Riders:
In a term life insurance plan, the life assured can increase his term life cover further if he wishes. For this, he can increase his cover by adding riders to it. In a term insurance plan, the insured gets the option of adding multiple riders, such as permanent disability rider, critical illness rider, accidental death benefit rider, etc.
However, you have to pay some additional premium for adding these riders. But you can enhance the coverage of your term life insurance as per your requirement through these riders.
- Whole Life Cover:
Through a term life insurance plan, you can get the benefit of life insurance for your entire life. A term plan offers you the option of availing life cover till the age of 99 years. You can avail a term life insurance plan either for a few years or for the whole life i.e. up to 99 years.
- Low Premium:
A term life insurance plan offers you maximum coverage at low premiums. Compared to other life insurance products, a term insurance plan requires you to pay the minimum premium while the coverage you get through it is maximum. You can choose your life insurance coverage as per your requirement for which you have to pay minimum premium.
- Tax Benefits:
You are also provided with tax benefits in term life insurance plans. You are eligible for deduction under section 80C of the Income Tax Act 1961 on the premium paid for term life insurance plan. The death benefits received under term life insurance plans are also eligible for tax exemption as per section 10(10D) of the Income Tax Act, 1961.
Eligibility For Term Life Insurance Plan
Eligibility for buying term life insurance plan is as follows-
- You have to possess minimum and maximum age eligibility for a term life plan.
- You have to get a medical test done.
Documents Required For Term Life Insurance Plan
The documents required for buying term life insurance plan are as follows-
- Duly filled form
- Medical Test Report
- Identity proof (any one of the following):
- Aadhar card,
- PAN card,
- Passport,
- driving license.
- Age proof (any one of the following):
- Aadhar card,
- Birth certificate,
- Matriculation Certificate.
Term Life Insurance Plan Premium
To avail the benefits of a term life insurance plan, you have to pay regular premiums. You can choose the premium payment frequency for this as per your convenience. If you do not pay your premium regularly then your term insurance policy will lapse. Therefore, in order to continue with your termination policy, what is required is that you keep paying the premium for your term plan regularly.
The following premium payment frequency options are provided to you by the insurance company for term life insurance plans-
- Monthly,
- Half-yearly,
- Qutaerly,
- Annually
How To Buy Term Life Insurance Plan?
You can buy a term life insurance plan through both online and offline channels.
To buy term life insurance plan through online medium, you have to visit the official website of the insurance company from which you want to buy term insurance plan. After that you will have to give some general information there and you will easily be able to buy a term insurance plan through the online medium from the official website of the insurance company.
If you want to buy term life insurance plan through offline mode, then for this you have to go to the branch of the insurance provider company or you can also buy term life insurance plan through an insurance representative.