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As a life cover, Term insurance offers Death Benefit to the Beneficiary in case the Insured person dies during the term of the policy. And, in case the insured does not die during the Policy period, the Coverage ends and there cannot be made payout or death claim. The USP of term plans is that they offer high cover at very low pricing. And, certainly the term plans differ from person to person in number of aspects that include policy term, plan choice, entry age, death benefits, Maturity benefits, and additional optional benefits.
Policy term: The minimum policy term varies from 5 years to 25 years to whole of life in case of equated monthly Premium payments. For policies with single premium payment, the policy term varies between 5 years to 15 years.
Plan choice: With term plan, people can choose plan either on single life basis or joint life basis.
Entry age: As far as term insurance is concerned, the minimum entry age is 18 years while the maximum Age Limit is 65 years. There are also available optional add on benefits as well.
Death Benefits: In case the death of the insured during the plan term, the nominee or Assignee (if the policy has been assigned to someone else), receives the total/assigned death benefit.
Maturity Benefits: Term insurance does not offer any kind of survival or maturity benefits. For maturity benefits one can opt for TROP (Term Return of Premium) plan.
Additional optional benefits: There do exist numbers of additional optional benefits with term insurance plans such as critical illness, accidental death/disability or accelerated sum assured.
Entry age: The minimum entry age is 18 years while the maximum entry age is 65 years.
Policy term: The minimum policy term is 5 years while the maximum policy term varies from 30 to 55 years
Maturity age: Term plans generally come with maximum maturity age of 75 years to whole of life.
Annual premium: Term plans can be bought with minimum annual premium of INR 2000. The maximum annual premium depends on the sum Assured and the age of the applicant.
Premium payment mode: The premium can be made either in one time single premium or regular (yearly, half yearly, quarterly, and monthly).
There are number of flexibilities that come with term insurance plan. People can choose preferred sum assured, premium payment option, policy term, and add on protection as per their choice.
People opting for term life insurance plans can avail tax benefits under section 80C and section 10 (10D) of the Income Tax Act 1961. Also, the premium paid for the Critical Illness benefit can be deducted under section 80D.
In order to choose best term life insurance plans, following factors can be taken into consideration
The death benefit coverage you require: The death benefit coverage depends on number of factors with prominent among them being the annual income, dependents, and liabilities. Generally, the life cover should be of 15-20 times of annual income. In case of married person with children, the life cover should be higher. And, in case the person has home loan to pay off, the life cover should be higher.
The term of coverage of your term plan: Most of the time, people buy the term insurance plan with term period equals to the time they expects to have financial dependents.
Keep Inflation into consideration: One needs to keep inflation into consideration while paying premiums and coverage benefits.