Features of Term Insurance You May Not Be Aware Of

Confused about the taxes, riders, variants? Understand now!

#Term-Insurance
3:42 min read

You work hard all your life to provide financial security to your family. But what if something unexpected happens to you? Who will take care of your family’s financial needs in your absence? While, you can’t predict what future has in store, a few steps taken today can secure their tomorrow.

This is where a term insurance plan comes into the picture.

What is Term Insurance?

Term insurance is the simplest type of life insurance that provides life coverage for a set number of years. If the insured dies during the policy tenure, a lumpsum payout equivalent to the sum assured is paid to the nominee.

For example, a 30 year old male has a term insurance policy of say Rs. 1 crore with a policy term of say 30 years. If the policyholder meets with an unfortunate event of death before the end of the policy term, the entire Rs 1 crore will be paid to his nominee.

Term plans are the simplest to understand life insurance products and offer some very unique propositions which make it a very attractive plan. Here are some of the top features of term insurance plans you absolutely need to know:

1) Term Life Insurance is the most Cost-Effective plan

Term plans are one of the cheapest life insurance plans. As these policies do not come with an investment component, their premium is much lower than other insurance policies. But since keeping your family financially safe and independent in the unfortunate event is the most important goal, the nominal cost of term cover does not hurt.

For example, currently, a 30-year old non-smoker male can buy a term insurance policy of sum assured Rs 1 crore for a premium of Rs 750 - Rs 800 per month. You can estimate your premium cost using the term premium calculator online.

2) Pay the Policy Premium Only Till Retirement

Choose to get covered till 85 years, but pay premiums only till age 60. Is this not a win-win situation! You need not pay premiums for the entire tenure, pay only till you are working. For example, if you are just 35 years old you can cover your life with a 50 years term cover. That is, up to the age of 85. However, you can choose a premium payment tenure which falls well within your retirement age.

The benefit of a shorter premium payment tenure is that you will not have to worry about paying your life insurance premium after retirement, when the regular monthly income stops. Your term cover will continue and protect your family members even after you retire, till the policy term. However, this benefit can be availed by paying an additional premium. This is a useful feature that one must opt for since it covers your family’s financial future in case any financial liabilities continue post-retirement. Currently, only Max Life Insurance offers this unique proposition.

3) Flexibility to Receive Payout as Monthly Income in Addition to Lumpsum Amount

Remember that the payout option you choose will determine the financial security of your family in your absence. So, choose the option keeping the financial knowledge and strength of your nominee in mind. Even if you nominee is financially savvy, a monthly income will make his/her life easier. This monthly income plan will help sustain their lifestyle.

There are two types of monthly income plans you can choose:

1. Fixed monthly income plan: In the fixed monthly income plan option, the family is paid with a predetermined amount of money on a monthly basis for a particular period. For example, if the term insurance sum assured chosen is Rs. 1 crore, the nominee will receive a fixed amount of Rs 40,000 per month over ten years as monthly income.

2. Increasing monthly income plan: This increasing monthly income plan option allows the monthly income to grow annually by 10%. Choosing increasing income option can help your family tackle inflation as the value of money decreases with time. For example, in a one crore life cover, the nominee can opt for increasing monthly income every year by 10%. So, in the first year, the nominee will receive Rs 40,000 as monthly income, which will increase by 10% every year for ten years. Hence, in second year, the nominee will receive Rs 44, 000 as monthly income and so on. Thus, you can give inflation-proof financial coverage to your family.

4) Choose Riders to Make Your Term Plan more Comprehensive

The riders or the add-on benefits enhance the policy coverage by giving extra coverage to the insured. Coming with an additional cost, these riders available within the term insurance plans are:

1. Waiver of premium rider: This rider waives the policyholder's obligation to pay any further premiums if he becomes critically ill or disabled.

2. Critical illness rider: The policyholder receives lump sum amount if diagnosed with a critical illness.

3. Accidental death benefit rider: The term insurance payout is increased if the insured dies due to an accident. For example, if the insured has a term policy of Rs 50 lakh sum assured with an accidental rider of Rs 15 lakhs, the policy will pay Rs 65 lakhs to the nominee in case of policyholder’s death due to the accident.

5) You can Enhance/Increase the Insurance Cover at Major Life-Stages

As you grow, your financial responsibilities and liabilities increase too. Hence your life insurance cover also needs enhancement. Usually, you will have to buy a new policy to increase your term life cover. However, with Max life insurance term plan you can upgrade your existing term cover at significant life events like marriage, having children or buying a home.

The benefit of such an upgrade option is that you can increase your total life cover without again going through medicals or documentation.

For example, if you have taken a Rs 1 crore term cover, you can enhance it by 50% (Rs 50 lakh) at the time of your marriage totalling a total life cover of Rs. 1.5 crore now.

Be Wise When Selecting Your Plan

The primary purpose of insurance covers is to protect you and your family financially in case of emergencies. Therefore, while buying a term insurance plan, make sure that the insurer you choose is a trusted brand with strong financial background and a consistent track record of claim settlement ratio. In the insurance field, claim settlement ratio indicates the total number of claims settled by the insurer in the financial year. The higher the number, the better it is.

Disclaimer: Life Insurance coverage is available in this product. Max Life Online Term Plan Plus is a Non-Participating, Non-Linked Term Insurance Plan (UIN - 104N092V03). It provides only death benefit and no maturity or surrender benefit. For more details on the risk factors, terms and conditions, please read the product sales prospectus carefully before concluding a sale.

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