Term Insurance

Term life insurance is one of the best ways to secure your family financially in case of your untimely demise. Term insurance coverage provides a fixed amount of sum as a death benefit if you meet with life’s eventuality during the policy period.

It is a good idea to buy a term insurance policy as you only need to pay small annual premiums against a considerable sum. Moreover, the term insurance premium is also subject to tax deductions, which adds the cherry on the cake.

For example- You bought an online term insurance coverage worth Rs. 1 Crore for a 30-yearpolicy term. In the event of your untimely demise (within the policy term), your family will receive the entire 1 crore Sum Assured as a death benefit, subject to terms and conditions.

The term insurance coverage amount, thus, enables the insured’s loved ones to lead a decent life and achieve all their goals even in the absence of the breadwinner.

Moreover, buying riders like "Accidental Death Benefit Rider" helps to make the term plan more comprehensive. These additional benefits are available on payment of additional premium.

Therefore, buying the term insurance plan is a good way to offer financial security toyour family, after you are no longer with them.

The cost of a term insurance plan varies depending on various factors such as age, annual income, the amount and tenure of insurance coverage, health condition, and whether you are a smoker/non-smoker.

For example, buying Max Life Smart Term Plan (A Non-linked Non-Participating Individual Pure Risk Premium Life Insurance Plan -UIN: 104N113V03)for a sum assured of Rs. 50,00,000 and a policy period of 30 years, will cost up to Rs. 5,487 annually for a 30-year old, non-smoker male. The same term insurance plan will cost up to Rs. 10,207 annually for a 40-year old, non-smoker male. (Standard Premium for Max Life Smart Term Plan, lumpsum payout option, inclusive of GST)

The maximum age to purchase term life insurance can be up to 60 years. If you choose to purchase Max Life Smart Plan with Return of Premium optional benefit, the maximum duration that you can buy this plan is 50 years. This means, incase you are buying the term insurance plan at the age of 25 years, then you can get coverage for upto 75 years.If you purchase it at the age of 35, you can get coverage upto 85 years. However, as the maximum age for coverage is 85 years, if you buy term insurance at the age of 40, you can get coverage only for 45 years, that is, till you turn 85

Term insurance does pay your family in the event of death, both natural and accidental. Term insurance provide your family with a certain amount of money, irrespective of the reason of death. However,you should know about some exclusions like Suicide , non-disclosure of rightful facts, that can lead to the decline of a term insurance claim. To know more about such exclusions, please refer to the term insurance policy document and term Conditions.

Experts usually propose a term life insurance cover, which is at least 10times your annual income, 15 to 20 times is always a better option. Include additional cover for your liabilities in it-home loan, vehicle loan, personal loan, and you are secured.

For instance, if your annual income is Rs. 10 Lakhs, it is ideal to buy a term life insurance policy of at least Rs. 1 Crore, assuming that you do not have other liabilities. In case you have a house mortgage of Rs. 25 Lakhs cover, include this additional Rs. 25 Lakhs as additional cover in your term life insurance coverage.

Deciding on how much term insurance cover you will need or calculating term insurance premium that you might need to pay can be a tedious process. Max life Term insurance calculator or Human Life Value Calculator can make the calculations easy for you.

Yes, you can have multiple term life insurance policies. You can take all policies from either one insurer or multiple insurers. With age, your lifestyle changes and liabilities increase, hence buying an extra life cover makes sense.

The maximum coverage, be it single or all plans combined, that one can avail is calculated basis his income, age, assets, and financial liabilities.

While buying multiple term insurance policies, you keep in mind these two important points:

1. Disclose all the existing policies that you currently own to the new insurer from whom you are buying the additional policy. This will help them assess your eligibility life cover.

2. Read the policy documents very carefully to understand all the features, inclusions, and exclusions. For example, in case of death due to accident or suicide, your nominee may receive the entire lumpsum from one insurer while receiving no money at all from the other insurer. This will be the case when the latter does not cover death due to accidents or suicide.

When buying a term insurance plan, you must check for the following pointers to make sure you have bought the policy that best suits your needs –

1. Claim Settlement Ratio or claims paid ratio– This is the number of claims settled against total claims received by the insurer. You must choose the insurer with a higher claims ratio. The regulatory body, IRDAI, publishes this for each life insurer in its Annual Report.

The claim settlement ratio for Max Life Insurance is 99.22% for individual business policies.

2. Solvency Ratio– This ratio shows the financial ability of an insurer to pay it’s short-term as well as long term debts. Choose the insurer with a higher solvency ratio as it shows the strong financial strength of a company. It can be found in IRDAI’s annual report.

For Max Life Insurance, solvency ratio is 207% for FY 2019-20.

3. Quality of Customer Service– This is most critical as it shows how much the insurer cares about a valued customer. Look at the Customer Grievance rate (it is the number of customer queries resolved against total reported) in the IRDAI Annual report.

The grievance incidence rate for Max Life Insurance was 47 per 10000 policies for the year 2019-20.

4. Product Features–After shortlisting the top insurers, you must read the product features in detail and pick the one that meets your personal needs and financial goals.

Term plan offers a sufficiently large amount i.e. sum assured to the family at the time of death of policy holder. The plan covers your family from the risk of death for alimited period called a policy term.

Term insurance takes care of the family in such unfortunate times.

List of documents which are required while buying a term insurance plan are:

OfficiallyValid Documents:

• Passport
• Voter’s ID
• Job card issued by NREGA duly signed by an officer of the State Government
• Aadhaar Card
• National Population Register containing details of name, address and Aadhaar number
• Or any other document as notified by the Central Government
  
• PAN Card/Form 60 in addition
   

If the officially valid documents do not contain an updated address, you also need the following documents:

• Utility Bill (Not more than two months old) of any service provider (electricity, telephone, postpaid mobile connection, piped gas, water)
• Property or Municipal Tax Receipt
• Pension or family pension payment orders (PPOs) issued to retired
• Employees by Government Department or PSUs, if they contain the address
• Letter of allotment of accommodation from employer issued by State or Central Government departments, statutory or regulatory bodies, PSUs, scheduled commercial banks, financial institutions, and listed companies
   

Income Proof for Salaried Individuals

• Bank statement showing salary credit for the latest three months
• Latest 2 years Income Tax Returns
• Latest year Form 16
   

Income Proof for Self Employed

• Latest 2 years Income tax returns not filed in the same year along with Computation of income
• If Computation of income not available: Latest 3 years Income tax returns not filed in the same year
• CA certified Audited balance sheet and profit loss account for the latest 2 years
• Form 26 AS

While purchasing a term insurance policy online, you just need to upload the attested copy of the above documents.

Yes, Term plans can be purchased directly from the website from most of the insurers, in a matter of minutes. Buying online  gives you convenience and speed to buy term insurance plans.

Research shows that in some cases, term insurance plans available online can cost up to 8% lesser than offline plans with the same features and benefits. Key factors that influence the cost of buying term insurance online is the absence of an insurance advisor (distribution costs and commissions is saved) and savings from overheads (documentation, logistics, stationery, etc.).

To pay term insurance premiums online, you can choose from a whole host of fast and secure payment options like net banking, debit cards, credit cards, and more. Because all payments are instantly processed through a secure gateway, you are ensured peace of mind. The payment process is quick, hassle-free, and provides an instant online receipt. This is especially ideal for times when you need to furnish documents for claiming tax exemptions quickly.

It entirely depends on your annual income, your age and other factors. Ideally, the risk cover should be 10-20 times of your annual income.

A term insurance policy also offers tax deductions to lower your tax outgo. As per Section 80C of the Income Tax Act 1961, the premium paid towards term insurance policy gets a tax deduction for up to Rs 1.5 lakh. Similarly, for critical illness benefits, you can get tax benefits under Section 80D. Moreover, the benefits received by your family will also be tax-free. For any tax-payer, these tax benefits are like icing on the cake.

Yes. A term plan can be used to repay liabilities like home loan and personal loan. The nominee who receives the benefits of a term insurance policy is free to use the amount to maintain family’s lifestyle while also reducing financial burden of any kind.