Term insurance is the simplest type of life insurance that helps people provide financial protection to their families. However, buying a term plan requires significant research about diverse aspects, including your age, income, health status, and more. That is why most individuals ask many questions about what term insurance is before making the purchase decision.
If you want to protect your family under a term insurance plan, here is a list of term insurance FAQs you should know:
1. What does a term insurance plan cover and why should I buy one?
Term insurance, at its core, is a contract between the policy buyer and insurer. Under this contract, the insured agrees to pay a certain premium to the chosen life insurance company. In case the life insured passes away during the policy term, the nominee receives a pre-determined death benefit.
You should buy a term insurance policy to build a safety net around your family that ensures financial independence when you are no longer around.
2. How much sum assured should I choose under a term plan?
The sum assured you choose under a term insurance plan should be large enough to cover your family’s financial goals, lifestyle expenses, and current liabilities. You should also take inflation into account while selecting a specific life cover under term insurance.
3. What are the primary benefits of a term insurance policy?
Under term insurance, you can get several benefits, including substantial life coverage at a budget-friendly premium, tax benefits under Section 80C and 10 (10D), monthly income or lumpsum payouts, and much else. The exact term insurance benefits depend on the specific plan you select.
4. What is the maturity benefit under term insurance?
You will not receive any maturity or survival benefit under a pure term plan. The only benefit under such a plan is a death benefit. However, you can add the return of premium rider to your base policy to get the premiums paid back on surviving the policy tenure.
5. What should be the tenure of my term insurance policy?
The policy period selection for a term plan basically depends on several factors, one of which is your age at the time of buying the plan. The earlier you buy a term insurance plan, the longer tenure you can select. It also depends on the insurer’s assessment of your term insurance application.
As a thumb rule, your term insurance policy period should cover your working life.
6. Can I change the term plan tenure after I have purchased it?
In general, the policy period of term insurance cannot be changed once you have purchased a plan. It is because the premium payable during the premium payment tenure depends on it.
7. Does term insurance premium change during the entire policy tenure?
Once a term plan is issued in your name, its premium stays the same throughout the policy tenure. Any change in the premium also depends on the government regulations or insurer’s norms during the chosen tenure.
Recommended Read: How to Use a Term Insurance Premium Calculator?
8. Why is a term plan costlier for a smoker than that for a non-smoker?
Your lifestyle habits do have an effect on the term insurance premium. The smoking habit increases the risk to your life, which is what the insurers consider while process a term insurance application. Although the term plan premium is higher for smokers, it is still reasonably priced to provide adequate life cover.
9. What are term insurance riders?
Riders or add-ons are optional benefits that you can include into your base term plan to receive additional benefits. Furthermore, these riders are available by paying an extra premium over the base plan premium. Some of the most popular term insurance riders are critical illness rider, waiver of premium rider, and accidental cover.
10. Are all types of death covered under term insurance?
In general, all types of deaths including natural death or those resulting from an accident or critical illnesses are covered under a term plan, unless excluded explicitly.
Also Read: Various Types of Term Insurance
11. What will happen I do not die with the term insurance tenure?
Since there is no survival benefit available under a pure term insurance plan, you will not receive anything on surviving the policy tenure. Make sure you read the policy benefits beforehand and make the purchase accordingly.
12. What are the tax benefits of buying term insurance?
Getting life coverage with term insurance also makes you eligible for tax deductions. You can save up to Rs. 1.5 Lakh for paying life insurance premium under Section 80C.
13. How to choose an insurer to buy a term plan?
To select a reliable life insurance company, check for the benefits of term plan it offers, plan pricing, and most importantly, its Claim Settlement Ratio (CSR).
You May Also Like to Know About: Common Life Insurance FAQs
14. How does a term insurance plan work?
Term insurance plans are easy to understand, which attracts many people to buy the plans for life cover. They provide life cover for a pre-defined period. If the insured dies during this period, the policy nominee will receive the death benefit.
15. Is it safe to buy online term insurance plans?
Online term insurance plans are more affordable and are quite easy to purchase. The premium you pay online for term insurance purchase is processed through safe and secure gateways.
All these term insurance FAQs and their answers can help you in making an informed decision.