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What is Term Insurance?

Know more about what term insurance is and why you should buy it.

#Term-Insurance
4:54 min read

Term insurance is the purest form of life insurance policy that offers comprehensive financial protection to your family members against life’s uncertainties. Depending on the term insurance plan you buy, your family will get life cover or sum assured in case of your untimely demise within the policy period. Let us know more about what is term insurance and the features and benefits it offers.

What are the Key Features of Term Insurance Plans?

Now that you are aware of what is term insurance plan, you should check features and benefits of term insurance plans. Following are some of the primary term insurance benefits & features:

What is Term Insurance Max Life Insurance

  • Life Cover Against Eventualities

If you are the sole breadwinner of your family, you can help secure your loved ones against any financial setback they might have to face in your absence through a term insurance policy. The policy enables you to support a worry-free financial future for your family. You can easily take a significant life cover for a relatively small premium payable under these term insurance plans.

For example, if you are a 25-year old, non-smoker female, you can buy a Max Life term insurance plan with Rs.50 lakh life cover and pay for next 35 years, your premium will be Rs. 4,484 per annum approximately (inclusive of tax). Furthermore, you can use online term insurance premium calculators to see how your premium liability varies according to your age.

  • Term Insurance Riders

Once you know what is term insurance and choose one to buy, you can add riders to your term insurance plan. Riders will help you extend your policy benefits by paying additional premium. Term insurance riders are optional and you can opt for them easily. With Max Life Insurance, you can opt for Max Life Accidental Death and Dismemberment Rider [104B027V03; Non-Linked Non-Participating Individual Pure Risk Premium Health Insurance Rider] & Max Life Waiver of Premium Plus Rider [UIN: 104B029V03; Non-Linked Non-Participating Individual Pure Risk Premium Health Insurance Rider].

  • Cover for Critical Illnesses

In your 20s and 30s, you may think that you will never suffer from a critical illness such as cancer or kidney failure. However, if it happens, not only will your health deteriorate, but you may lose your hard-earned savings to get the necessary treatment. Although the plain-vanilla term insurance plans offer a death benefit, you can increase their coverage with a critical illness rider.

As the name suggests, a critical illness rider provides additional benefits when attached with your term insurance policy i.e. if you get diagnosed with an illness covered under the rider, a lump sum amount is paid to you to avoid any financial setback that your family might have to face for getting the treatment.

Also Read: Critical Illness Cover

Term insurance plan with critical illness cover

In your 20s and 30s, you may think that you will never suffer from a critical illness such as cancer or kidney failure. However, if it happens, not only will your health deteriorate, but you may lose your hard-earned savings to get the necessary treatment. Although the plain-vanilla term insurance plans offer a death benefit, you can increase their coverage with a critical illness rider.

As the name suggests, a critical illness rider provides additional benefits when attached with your term insurance policy i.e. if you get diagnosed with an illness covered under the rider, a lump sum amount is paid to you to avoid any financial setback that your family might have to face for getting the treatment.

Also Read: Critical Illness Cover

Term insurance plan with critical illness cover

  • Cover for Accidental Death or Disability

Accidents can happen anytime and anywhere. Depending on the severity, you may need a significant amount of money for the incurred medical expenses and compensate for the loss of income. Popular term insurance plans help you tackle such situations with accidental death or disability rider.

Max Life Insurance offers a Comprehensive Accident Benefit Rider (UIN: 104B025V03) with their term insurance plans. The rider provides extended financial protection to your family by also covering you for accidental dismemberment and death.

  • Tax Benefits

With Term Insurance plans you can avail tax benefits on premiums paid under Section 80C of the Income Tax Act, 1961. You can avail tax benefits up to Rs.1.5 lakh on the premium paid. Not only this, with the critical illness cover, you can also avail additional tax benefits on premium paid under Section 80D of the Income Tax Act, 1961.

  • Multiple Payout Options

If you feel your family members do not have the necessary know-how of handling large amounts of money as they may find it challenging to utilize a lump sum amount they receive under your term insurance policy, you can choose from multiple payout options available with Max Life’s term insurance plan.  

For instance, you can opt for term insurance plans that offer to pay a lump sum immediately on death and a fixed amount every month to your family. This way, your term insurance policy will work as a source of regular income for your family.

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How to Buy Term Insurance Policy Online?

When you consider buying term insurance policy, you need to know and understand what is term insurance plan and its meaning and know which plan will suit the requirements of your family and yourself. For instance, the life cover of term insurance you choose must be adequate to help your family pay for the regular expenses, child’s education and other liabilities.

Besides understanding what is term insurance plan and the importance of buying term insurance policy, you need to do thorough research about the term insurance plan that you need. Buying term insurance plans online is quick and hassle-free. All you need to do is follow a few easy steps.

Here is a stepwise checklist you should follow to buy term insurance policy:

1. Assess Your Financial Needs

You must fully understand the financial needs and requirements of your family and yourself before you select a term insurance policy. The policy you choose must have an adequate life cover, large enough to take care of your family’s needs in your absence.

Start with analyzing all sources of income, the number of dependents, existing financial liabilities, and the lifestyle expenses of your family. Moreover, you should consider the life goals of your spouse and children.

Term insurance plan with critical illness cover

1. Assess Your Financial Needs

You must fully understand the financial needs and requirements of your family and yourself before you select a term insurance policy. The policy you choose must have an adequate life cover, large enough to take care of your family’s needs in your absence.

Start with analyzing all sources of income, the number of dependents, existing financial liabilities, and the lifestyle expenses of your family. Moreover, you should consider the life goals of your spouse and children.

Term insurance plan with critical illness cover

This way, you will be able to select an adequate financial protection that will help your family live without worries, even in your absence.

2. Estimate Term Insurance Policy Premium

Once you have assessed your financial needs, the next step is to calculate term insurance premium that you need to pay for your term insurance policy. When you search online, you will find there are multiple types of term insurance plans available. These include basic term insurance plans, term insurance with survival benefits (term plans with return of premium), and term insurance with various payout options.

The premium payable under a term insurance policy depends on several factors such as the chosen life cover, policy tenure, type of plan, age, gender and smoking habits. One way to check how the premium varies with these factors is to use an online term insurance premium calculator.

The ideal coverage amount for a term insurance policy should be around 15-25 times your annual income based on your age.

3. Check the Insurer’s Claim Settlement Ratio (CSR)

Before you proceed to select a term insurance policy, it is crucial that you check the CSR of the insurance company you choose. CSR is the ratio of the number of claims received by the insurer versus claims settled by them during a financial year. A high CSR implies that the insurance company does its best to resolve the settlement claim filed by your nominee.

Max Life Insurance has a Claim Paid Ratio (Claim Settlement Ratio) of 99.22% for the financial year 2018-19. (Source – As per Annual Audited Financials FY’19-20).

4. Select Riders for Additional Coverage

Based on your needs and preferences, you can customize a term insurance policy with add-ons, also called riders. Term insurance riders are optional features that you can add to your basic plan to increase insurance coverage.

Max Life Insurance offers the following riders for their term insurance plans:

· Max Life Accidental Death and Dismemberment Rider [UIN: 104B027V03; Non-Linked Non-Participating Individual Pure Risk Premium Health Insurance Rider]

· Max Life Waiver of Premium Plus Rider [UIN: 104B029V03; Non-Linked Non-Participating Individual Pure Risk Premium Health Insurance Rider]

5. Pay Term Insurance Premium Online

Once you reach this step, you have all the necessary information to make a prudent decision to buy term insurance policy. The last step of this checklist is to pay the premium online.

You need to provide details of your income, profession, present address, and lifestyle habits before you choose an adequate life cover and riders. Subsequently, you are redirected to pay the premium online using any of the multiple payment modes.

For further assistance, you can also contact our customer service team, and we will be happy to help you buy the best term insurance plan that aligns with your needs.

Who Should Buy Term Insurance Plans?

Ideally, you should take a term insurance policy as soon as you start earning. The term insurance plans are necessary if you have financially dependent family members. Whether you are 18 years of age or 65 years, Max Life’s Term Plan has got you covered.

To buy a term insurance plan right away, please click here.

Why buy Term Insurance Max Life Insurance

 

Who Should Buy Term Insurance Plans?

Ideally, you should take a term insurance policy as soon as you start earning. The term insurance plans are necessary if you have financially dependent family members. Whether you are 18 years of age or 65 years, Max Life’s Term Plan has got you covered.

To buy a term insurance plan right away, please click here.

Why buy Term Insurance Max Life Insurance

Frequently Asked Questions (FAQs)

Q. What is Term Insurance Premium?

A. Now that you know what is term insurance plan, it is of utmost importance to know about what is term insurance premium. Term insurance premium is the amount you pay to the life insurance company for the financial coverage. Life insurance company provides financial coverage in exchange of the term insurance premium which provides financial protection in case of your untimely demise during the policy term. Term Insurance premium can be either monthly/quarterly/semi-annually/annually.

Q. What is Term Insurance Rider?

A. Term Insurance Riders are add-on benefits with your term insurance plans. With these riders, you can avail extended benefits with basic life cover. Max Life Insurance offers Max Life Accidental Death and Dismemberment Rider [104B027V03; Non-Linked Non-Participating Individual Pure Risk Premium Health Insurance Rider] & Max Life Waiver of Premium Plus Rider [UIN: 104B029V03; Non-Linked Non-Participating Individual Pure Risk Premium Health Insurance Rider].

Q. How much Term Insurance do I Need?

A. Experts usually propose that sum assured in term insurance should be at least 10 times of your annual income, while 15 to 20 times is always a better option to avail. But, you should calculate your term insurance cover as per your need or calculate the term insurance premium that you need to pay for the cover you want to buy. You can also use Human Life Value Calculator or Max Life Term Insurance Calculator to make these complex calculations easy for you.

Q. What are the tax benefits with Term Insurance?

A. With term insurance policy, you can also avail tax exemptions to reduce your tax burden. You can avail tax deduction on your term insurance premium up to Rs.1.5 lakh under Section 80C of the Income Tax Act, 1961. Not only this, if you opt for critical illness benefits, you can avail tax benefits up to Rs. 25,000 under Section 80D as well.

Q. What will affect my Term Insurance Premium?

A. There are numerous factors which affect your term insurance premium. Life insurance premium 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.

Max Life Term Insurance Plans

Max Life Smart Term Plan (UIN: 104N113V03; Non Linked Non Participating Individual Pure Risk Premium Life Insurance Plan)

Max Life Super Term Plan (UIN: 104N086V04, Non-Linked Non-Participating Individual Pure Risk Premium Life Insurance Plan)

Max Life Premium Return Protection Plan (104N083V01; Non Linked Non-Participating Term Insurance Plan)

ARN: July/Bg/29

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