What is Term Insurance?

OkBima 16 Jan 2023
What is Term Insurance?

A term insurance plan is a form of life insurance policy that compensates the beneficiary in the event of the life assured’s untimely death during the policy’s term. In the event of the life assured’s untimely death during the policy’s term, an amount assured known as death benefit is paid to the nominee/family of the life assured.

It is highly famous because: –

  1. It is the most basic type of life insurance, and it allows you to financially protect your loved ones in the event of your death.
  2. It is cost-effective; a person can obtain a large level of coverage for a low premium.
  3. It is the most straightforward plan to comprehend, as it does not combine insurance and investment.

How does the Term Insurance works?

A term plan provides coverage for a specific length of time. It means that if the policyholder dies within the set time period, the policyholder’s nominee is entitled to the death benefit or the specified quantity insured in a lump sum or monthly instalments (as stated by the policy holder). However, if the policyholder lives longer than the policy term, that is, if he lives longer than the term period for which he purchased the policy and coverage, he or his nominee will not be entitled to any benefits.

What are the various types of term insurance plans?

Yes, there are various types of term insurance plans for you to choose!

Return-of-premium term plan- In most term insurance policies, there is no provision for a premium refund, although some companies are now offering plans with a premium refund option at the policy’s maturity. Choosing this type of term plan, however, may result in a larger premium than typical.

Level term insurance- Along with the premium to be paid, the amount of coverage remains constant during the policy’s term.

Term plans with survival benefits- Another type of term plan is one in which the policyholder has the right to receive survival benefits, but only if he or she is disabled partially or permanently.

Annual renewable term insurance- The policyholder has the option of renewing his coverage on an annual basis. This type of coverage has a cheaper initial price, but it gradually increases when the coverage is renewed year after year. The policyholder’s ability to analyse and pay for his needs annually is ensured by the plan.

Decreasing term insurance- Under this type, the amount of coverage a policyholder receives decreases as they get older. This type of insurance is appropriate for those who believe their liabilities will diminish as they age.

Increasing term insurance- As the policyholder’s age rises, the coverage increases while the premium remains same. This type of plan is critical in combating inflation problems and gives policyholders piece of mind that they will not be underinsured in the future. Because of this, the premium charged is more than for other types of term insurance.

What happens after the policy is over?

When the insurance term ends, the policyholder may or may not be able to obtain the same coverage for the same premium amount. Alternatively, if the premium payment remains constant, the degree of coverage is reduced. The premium rate is determined by a number of factors, including the policyholder’s lifestyle and health status, as well as possible death scenarios.

Any advantages of acquiring the term plan online over offline?

Term plans are already the cheapest of all, but their availability in an online manner reduces their premium rate by 60-70 percent. Furthermore, buying term insurance policies online is much easier than buying them in person because it removes the need for paper work and significantly reduces processing time. These advantages, together with the other benefits of term plans, make online term insurance plans the best term insurance plans in India.
It is best to purchase a term life insurance policy when you are younger in order to get the best deal. As a result, the premium rate is reduced significantly because there is a lower risk of mortality at a young age.

What are the benefits of Term Insurance?


The below are the many benefits that Term Insurance has to offer: –

Term plans are the most affordable term life insurance plans on the market.

They are also the easiest to comprehend.

The policyholder has the option of selecting the number of years for risk coverage.

The option to convert the plan to a whole-life or money-back plan is available.

When compared to other types of life insurance plans, higher coverage can be obtained for the same premium amount.

Because there is no investing component to the plan, all additional fees are waived.

Tax deductions are available for premiums paid on term plans.

Payments made as death benefits are not subject to taxation.

The premium amount paid might be used to secure a loan.

In the event of a permanent or partial disability, survivorship benefits are provided.

Some term plans can give additional income in the event of a loss of income due to an accident.

Some term plans also provide coverage in the event of a severe illness.

Are there any additional benefits?

The policy provides you with the many additional benefits with a nominal charge. Some of them are:

Death and dismemberment as a result of an accident

Accelerated death benefit

Rider for critical illness

Rider for hospital care

Disability, both temporary and permanent

Premiums are waived.

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