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Pure Term Insurance

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Pure Term Insurance Plan

What is a Pure Term Plan?

Pure term plan is the actual and ideal form of life insurance offering only death benefit. There is no element of saving or investment under a pure term plan. Pure term plan is also known as “level term plan” because the sum assured and the premium under the plan remains the same throughout the policy term and does not vary.

Key Benefits of a Pure Term Plan

Following are the key benefits of a Pure Term Plan

Pure term plan only offers a death benefit to the nominee if the life insured dies during the policy term. Death benefit could be further handed over as a lump sum or as income or combination of both as opted under a plan by the insured at the time of taking the policy. There are no maturity benefits under a Pure Term Plan.
The sum assured, and the premium does not change and remains constant throughout the policy term.
The premiums paid towards pure term insurance policy offers tax benefit under section 80 C up to Rs 1.5 L of the Income tax act. It also offers tax rebate under section 10 (10 D) which allows death benefit as a tax-free amount.
Pure Term Insurance Plan

Key Features of a Pure Term Plan

Following are the key features of a Pure term plan:

Entry Age

The pure protection term plan offers only death benefit therefore the insurance company charges only mortality cost (cost of providing death benefit at an age) and nominal policy administration cost.

There is no element of saving or investment in a term plan. That is why there are no maturity benefits under a pure term plan.

The cost of a term plan on a per day basis could be as low as equal to a cup of coffee. Wondering how?

Let us have a look at the Premiums from different Life Insurance Companies for an:

  • Insured: 25-year-old Male, non-smoker,
  • Policy term: 35 years
  • Sum assured: 1 Crore
Insurance Company Term Plan Premium (Per day) Premium (Monthly) Premium (Annually)
Max Life Insurance Co. Online Term Plan Plus Rs 20.77 Rs 623 Rs 7080
HDFC Life Click to Protect 3D Plus Rs 23.93 Rs 718 Rs 8344
Aegon Life I Term Rs 18.9 Rs 567 Rs 6521

Lesser the age, cheaper is the premium because at early ages there is lesser risk for a person to die and get death benefit from an insurance company.

Easy to Buy

With online term plans fitting into the Indian insurance landscape, anyone to have an internet connection and a device like a laptop, smartphone, etc. to buy a pure term plan. There are no hassles of meeting different agents and getting confused about which one to buy. Now anyone can buy a pure term plan easily by comparing the term plans offered by different insurance companies online. The premium payment can be made through multiple payment options like credit card, debit card, net banking, cheque, payment wallets, etc. easily.

Flexible Premium Payment Options

Level Term plans offer premium payment options such as:

  • Regular Pay: Paying premium regularly till the end of policy term based on the premium payment frequency such as monthly, quarterly, semi-annually or annually.
  • Limited Pay: This premium payment option says that you need to pay the premium for limited years like 10 years, 15 years, 20 years, etc. or till you are 60 years of age and enjoy the coverage till the end of policy term. It does not mean people have to pay a lesser premium, but the premium which was spread out for the entire policy term is now spread out for limited years. This helps people to pay their premiums during their working lifespan so that once they retire, they do not have to carry the burden of paying the policy premium.
  • Single Pay: As the name suggests, the entire premium is paid to the insurance company in a single payment only.

Rebates

Term plans offer a rebate or special discount to people opting higher sum assured or risk cover under their term plan as higher sum assured means lower servicing cost per unit of sum assured for the insurance company. Also, insurance companies offer the rebate to the female lives as the mortality data or statistics show that females tend to live longer than males. So, the insurance companies offer special premium rates to females buying term insurance plans.

Tax Deduction

The premiums paid towards a term insurance policy offers tax benefit under section 80 C up to Rs 1.5 L of the Income tax act. It also offers tax rebate under section 10 (10 D) which allows death benefit as a tax-free amount.

Death Claim Pay-out Options under a Pure Term Plan

Pure term plan pays for the untimely death of the person insured. On submission of all claim documents by the nominee, the insurance company processes the death claim. There are various options for disbursing the death claim under a pure term policy which are:

  • Lumpsum Pay-out: The entire sum assured is payable as lump sum amount to the nominee and the policy terminates.
  • Partly lumpsum + Partly as Income Benefit: Some percentage of the sum assured is payable as a, and the rest of the amount is staggered as income for specified years like for 10 /15/20 years to the family on the monthly or yearly basis.
  • Income Benefit: The entire death benefit is payable as monthly/yearly income to the nominee.

The claim pay-out option is given to the person insured while filling the proposal form and is decided at the policy inception only.

Enhance policy coverage through Riders

Riders are additional benefits which can be added to the pure term plan by paying a nominal extra premium. Following riders or add on’s could be added to get a complete coverage against sudden accidental death, disability, and disease.

  • Accidental Death Benefit Rider: Covers death due to the accident and pays an extra amount in such scenario over and above the base policy sum assured.
  • Critical Illness Rider: This rider pays a fixed amount to the insured if he or she is diagnosed with listed critical illnesses under the policy.
  • Waiver of Premium: This rider waives off the premium due to illness or disability occurred to the insured person as mentioned in the policy contract.

(There could be other riders which can be bought and are available on a plan to plan or company to company basis).

How can you buy a PureTerm Plan?

Pure term plan can be bought through an online or offline mode based on your feasibility and convenience.

  • Online Mode: One can buy an increasing term plan online directly from the company’s website or a registered insurance web aggregator’s website.
    Traditionally, a term plan was bought through an intermediary like an agent or a broker. Insurance company gives commissions to the intermediaries for selling offline plans. Such commissions are part of the premium paid by the customer.
    But with online insurance plans, the customer can buy term plan directly from the insurance company’s website or from the registered insurance aggregator’s website where the premium is lesser than that of an offline term plan.
  • Offline Mode: Once can go to the insurance company’s branch, connect with an agent or a broker to buy an increasing term insurance plan.

(In a nutshell, the Pure Term Plan is an ideal life insurance plan which should be in the kitty of all earning people to safeguard the standard of living and provide monetary support and income flow to their family members.