If you have a family or dependents, securing their future is essential. Term insurance is one of the simplest and most effective ways to provide financial security and peace of mind. Let’s understand its importance and key details.
What is Term Insurance in India?
- Definition: A life insurance policy providing financial protection for a specific term.
- Purpose: Ensures that your family receives financial support in case of your untimely demise.
- Key Feature: It’s a pure protection plan, meaning there’s no savings or investment element unless specified.
Why Should You Consider Term Insurance?
- Financial Security: Protects your family from financial hardships.
- Debt Protection: Covers liabilities like home loans and mortgages.
- Mental Peace: Knowing your family is secure reduces stress and enhances risk-taking ability for financial and career decisions.
- Maintain Lifestyle: Maintains your family’s current lifestyle in your absence.
Types of Term Insurance
- Level Term Plan: Fixed coverage throughout the policy term.
- Increasing Term Plan: Coverage increases yearly to match inflation.
- Decreasing Term Plan: Coverage decreases over time, ideal for loans.
- Return of Premium Plan: Refunds premiums if you survive the term.
- Joint Term Plan: Covers both spouses in one policy.
Types of Premium Payment Options
- Regular Premium: Paid monthly, quarterly, or annually throughout the policy term.
- Single Premium: One-time payment at the start of the policy.
- Limited Premium: Premium is paid for a shorter duration, but the policy remains active for the full term.
Factors Affecting Premium
- Age: Younger applicants pay lower premiums.
- Health: Healthier individuals pay less.
- Job Type: High-risk jobs like construction or mining attract higher premiums.
- Education: Higher education may lead to lower premiums.
- Lifestyle: Smokers pay almost double the premium of non-smokers.
- Medical Tests:
- Below 35: Usually not required.
- Above 35: Mandatory to check health risks.
How Much Term Insurance Do You Need?
- A general rule: 15–20 times your annual income.
- Consider future expenses like children’s education, loans, and medical costs.
- Use term insurance calculators to calculate the exact coverage.
Who Can Take Term Insurance?
- Individuals aged 18–65 years.
- People with stable incomes.
- Anyone with financial dependents.
- Ideal for securing a 360-degree financial plan for your family.
Documents Required
- Identity Proof: Aadhaar, PAN, Passport, or Voter ID.
- Address Proof: Utility bills, Aadhaar, or rental agreement.
- Income Proof: Salary slips, ITR, or bank statements.
- Age Proof: Birth certificate or school leaving certificate.
- Medical Records: Required for health assessments.
Benefits of Term Insurance
- Death Benefit: Financial support for your family in case of your demise.
- Tax Benefits:
- Premiums: Deduction under Section 80C.
- Death benefit: Tax-free under Section 10(10D).
- Additional Riders:
- Critical illness cover.
- Accidental death benefit.
- Waiver of premium in case of disability.
Benefits of Term Insurance on Mentality and Risk-Taking Ability
- Provides the confidence to take calculated risks, like starting a business or making investments, knowing your family is financially secure.
- Encourages long-term financial planning without worrying about unforeseen events.
- Reduces anxiety, allowing you to focus on personal and professional growth.
Loans Against Term Insurance
Term insurance in India policies generally do not allow loans.
Maturity Benefits
No maturity benefits are offered in traditional term insurance unless it is a Return of Premium Plan.
Surrender Value
Term insurance policies do not provide any surrender value.
Suicide Clause
- Within 1 Year: Premiums are refunded; no death benefit.
- After 1 Year: Nominee is eligible for the death benefit.
Reasons for Claim Rejections
- Non-disclosure of health issues or lifestyle habits.
- Incorrect nominee details.
- Missed premium payments leading to policy lapse.
- Filing claims for exclusions not covered in the policy.
How to Choose the Right Insurer
- Check Claim Settlement Ratio (CSR): A higher ratio indicates better reliability.
- Compare policy features, terms, and riders.
- Look for affordable premiums with adequate coverage.
- Verify the insurer’s authorization with IRDAI (Insurance Regulatory and Development Authority of India).
Golden Advice from Badi Bahen
If you have dependents, whether or not you follow financial plans or consult financial advisors, term insurance is non-negotiable. Here’s why:
- Learn First: At Badi Bahen, we don’t force you to Financial Planning or take Advisory. Our goal is to help you understand financial concepts, become aware, and grow financially literate.
- Must-Have: But, whether you call it advice, request, or prayer, we strongly urge you to get term insurance to protect your family.
- Transparency is Key:
- Provide true and authentic information when applying for term insurance.
- Hiding or giving false details can lead to claim rejection.
- If you’ve given accurate information and face issues during claims, Badi Bahen will stand with you and ensure you get your rightful claim.
- Authorized Insurers Only: Always take insurance from companies authorized by IRDAI.
- Lifestyle Impact: Smokers, note that smoking doubles your premiums.
Conclusion
Term insurance is the foundation of a secure financial future. It’s affordable, provides high coverage, and ensures your family’s financial stability during difficult times. Take term insurance as a part of your 360-degree financial plan, understand it well using insurance analysis tools, and stay prepared. Remember, Badi Bahen is here to guide you every step of the way, ensuring your family’s future is safe and sound.
