Term plans are one of the fundamental pillars of the urban Indian’s financial planning
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What Are Term Insurance Plans?

Term insurance plans, also known as term plans, are low-cost life policies offered by an insurance company for financial coverage of the policyholder’s family and loved ones.
Term insurance plans are cheap because they have no intrinsic value and can be triggered only on the death of the policyholder. There is no maturity amount pay-out if the policyholder outlives the term of the plan.
A death benefit is paid by the insurance company if the insured individual loses his life during the policy term. The term insurance policy holds value only for a specific time period, which is one reason for its affordability. These policies are also known as life insurance term plans. Term plans are popular in India because they offer comparatively very high death cover for comparatively low premiums.

Why Should You Opt for Term Insurance Plans?

A term insurance policy is a must-have in every urban Indian’s financial planning. The pay-outs of a term plan play the crucial role of a safety net for your dependents if you were to depart before your time. It is especially beneficial when an individual is the sole earner in his/her family.
In addition to the pocket-friendly premiums for a comparatively high sum assured, we have listed a few more reasons why you must seriously consider opting for a term plan:
  • You can choose the term you like, even up to 100 years of age
  • With term plan pay-outs, your family can easily pay off any outstanding liabilities or loans that may still be unpaid; for example, housing loan or child’s higher education
  • Family’s aspirations can still be fulfilled with money from high pay-outs even after you are gone and your monthly salary has stopped
  • In some cases, term plan pay-outs may be used as legacy planning too
  • Premiums are low enough to be paid even after retirement
An individual should buy life insurance term plans early in life, because even though his salary increases, term plan premiums will stay the same for the entire term chosen. If you start late, you will have to pay higher premiums. Furthermore, some term plans also offer to return premiums if a policyholder survives the term.

Eligibility Criteria for Term Insurance

The eligibility criteria for term insurance plans varies from insurer to insurer. However, the minimum entry age is usually 18 years and the maximum entry age is usually 65 years.
Note that an individual may hold multiple term plans at once, but it is subject to the insurer’s underwriting and your total earnable income.

How Much Term Insurance Do You Need?

Research suggests the best term life insurance cover is 15 to 20 times annual income. If earnings today are Rs 10 lakhs per annum, the sum assured chosen should be around Rs 2 crore. Although, a little research never goes to waste. These are the costs you need to calculate before starting term insurance comparisons:
  • Will it cover immediate loans and liabilities?
  • Will it cover your children’s primary and higher education?
  • Will it cover your household expenses like monthly bill of groceries, maid servants, driver, petrol, and so on for at least 10 years?
If your term plan’s sum assured is covering these expenses, you have chosen the right amount.
Apart from this, it is important that term insurance comparisons be made in accordance to calculations for primary and higher education expenses for your children. You can calculate your children’s current annual tuition fees and multiply it by 6, 8, 10, or any number depending on the standard they currently are in. For higher education, note the current fees of the course and multiply it by around 2.5 for every 10-year period. For example, if MBA costs 15 lakhs now, it is going to cost around 40 lakhs in 10 years’ time. This is the inflation-adjusted figure.

What Is the Ideal Term for Your Term Plan?

You may think that the best term life insurance would be one that covers your family for the maximum period of time. For example, it would be nice to have a term plan that covers your family till you are 90 or 100. However, the OneInsure Research Desk suggests you do not fall into the trap of terms that are too long.
It is wise to activate a term plan for only as long as your family would be faced with any of the loans and liabilities you have to pay for. Financial emergencies will be felt only if there are re-payments that cannot be made by your family after the event of your death.
Term plans lose most of their relevance for people who have already settled their debts. And major debts are dealt with by the age of 60 or 65. At this age, your children will be working and earning for themselves. Furthermore, you would like to make investments that will hold more value; for example, investing in an FD for your grandchildren or buying them gifts. Paying a term insurance policy’s premium need not be on your priority list, and accordingly need not be made into a liability as its purpose of emergency money provision is no longer needed at that stage.

Factors You Should Watch Out for while Comparing Term Insurance Plans

Term insurance comparison is necessary for the selection of the best term life insurance policy. Along with deciding the best term, before you buy life insurance term plans, it would be beneficial to look into the following details:
  • Ensure you answer all the questions on the insurance form truthfully. If you have hidden a material fact, all claims can be rejected. And you will no longer be there to raise a complaint.
  • Reliability of the insurance providing company.
  • Compare term plans of various insurance companies before deciding.
  • Opting for an online term plan may be cheaper than an offline plan, because in online mode there are no agents involved and their incentives are not part of the premiums.
  • Make sure your beneficiaries know about the term insurance and the claim process for the same.
  • The policy is a legal document. Understand it before signing it.

How Term Plans Secure Your Family’s Future

Your death can leave your family in a very challenging situation. No amount of money can replace you or the role you play in their lives, but if your income could be replaced it would ensure your family does not suffer poverty and that their dreams and aspirations are not shattered.
Term plans are one of the best income replacement instruments available to us. Term plans are the protection net your family and loved ones require in your absence, with the best part being that it can be bought for very small premiums.
A well-planned term insurance policy purchase can provide your family with utmost financial freedom. Without insurance coverage, your death could prove to be a disaster that your family can never recover from, especially if your dependents are minors and non-earning members of society.

Difference between Term Plans, Whole Life Plans, and ULIPs

Term plans offer substantial life cover for comparatively lower premiums. They are more affordable when compared to whole life plans because they have no inherent cash value. For example, if you want to stop paying the premiums for your whole life plans and surrender your policy, you can do so. If a few basic conditions are met, you will receive a certain percentage of your total paid premiums, which is called Surrender Value. In term plans, there is no such option. If you stop paying premiums, you are no longer covered. That’s it – you are not entitled to receive any money back.
Whole life plans, also called Endowment Plans, are investment-cum-life-insurance instruments that have gradually increasing cash value. Once the policy matures, you receive pay-outs. If death occurs during the policy term, death benefits are payable to your nominee.
ULIPs, which is short for Unit-linked Insurance Plans, are market-linked investment instruments that behave and give returns just like mutual funds with some added benefits like death cover, lower fund-management charges, tax benefits, and more. Just like mutual funds, though, investing in ULIPs carries risk.
So, even though these three instruments give death cover benefits, they are different and you should think hard before you choose which one you want to go with.

Some Popular Term Plans in India

Here are some popular term plans in India with some vital information about them.

Aegon iTerm Plan

The Aegon iTerm plan is a pure term plan that provides the whole life cover option. It is cost effective because of the nominal premium amount. Note that this plan is available online only. This plan’s specialty is that it has an in-built terminal illness benefit. It also has flexible optional increase of the life cover to meet growing requirements. It offers tax benefits and also gives the options of 4 additional riders.

Why Aegon iTerm?

  • The iTerm plan provides monetary protection to family in case of your death
  • This plan acts as a cover for any financial liabilities like housing loans, personal loans, and so on
  • It’s a low-premium risk cover
  • Premiums paid are tax exempt under Section 80(C) and the maturity amount is tax free under Section 10(10D)

Aviva i-Life Total

The Aviva i-Life Total plan is a pure protection plan that is available for online purchase without any agent intervention. Being a pure term plan, it includes death benefit if the life insured expires within the policy tenure. No maturity benefit is payable if he survives the entire term. It is a simple term plan with no fringes attached.

Why Aviva i-Life Total?

  • It is a pure term insurance policy and has very affordable premiums
  • An additional rebate for female lives of 5% on the tabular premium rates for male lives
  • Tax rebates are available for large sum assured amounts

Edelweiss Tokio Life MyLife+

The Edelweiss Tokio Life MyLife+ plan is a non-participating, non-linked term insurance product that provides the flexibility to choose the death benefit as a lump sum or monthly pay-out or a combination of both. It also provides the flexibility to choose a cover for up to 80 years of age.

Why Edelweiss Tokio Life MyLife+?

  • Option to choose life cover up to the age of 80 years, so that your family has protection over a longer period
  • Option to get benefit as lump sum or as a monthly benefit or both, so that it is easier for your family to manage the benefit amount
  • Attractive premiums for higher sum assured amounts
  • Low-cost plan

HDFC Life Click2Protect 3D Plus

The HDFC Life Click2Protect 3D Plus plan is a pure term plan that provides monetary protection against 3Ds (death, disease, and disability) at an affordable cost. It is only available online. It offers 9 plan options to choose from as per one’s requirements. It has an in-built rider to waive off all future premiums on accidental total permanent disability. This is available under all options and on diagnosis of critical illnesses too (for 2 out of the 9 options). Depending on key milestone progressions in the life of the insured, an option to increase the insurance cover is available. It is a very convenient policy to buy and the premiums are also competitively low.

Why HDFC Life Click2Protect 3D Plus?

  • Provides financial protection to family in case of death
  • Offers tax benefits
  • This plan reduces the burden of treatment for several critical and terminal illnesses along with providing life cover
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