Term Insurance

Posted in: Insurance | on: June 27, 2011

What is Term Insurance?

Term insurance is a kind of pure life insurance that benefits only during the death valid over certain period of time. The valid period of the insurance is defined as the term. The term will be 5, 10, 20 and 30 years. No other benefit will be obtained from this insurance. It is one of the old death benefit insurances. There will be no cash returned after the completion of the whole term of this insurance. In case of death of the insured person, the assured money will be provided to the registered nominees.

Tenure of Term Insurance

Tenure is the validity period of the insurance. Depending on the age of the person, it is determined. Minimum age to avail this insurance is between 18 and 65 years and the maximum will be 80 years.

Types of Plans in Term Insurance

Based on the term of the insurance, there are five types of insurance plans.

Level Term Life Insurance:

Level term insurance is the common type of insurance in which the premium remains the same during the entire term. It is based on the assured sum. Terms are usually 10 years, 15 years, 20 years and 30 years. Some policies of this kind have a property of renewal at the end of the current term.

Premium Return Life Insurance:

As the name depicts, when the insured person is alive after the completion of the tenure of the policy, all the premiums he paid will be returned to him. This type of insurance has high rate of premium compared with the other policies.

Decrease Life Insurance:

The assured sum is decreased during the tenure of insurance. Premium rate is less in this case.

Increase Life Insurance:

In this type, there will be a gradual increase of the assured sum. The increase will be 5% every year till the sum reaches 50% of its value. The premium rate is higher in this type compared with others. It is more risky than any other types.

Features of Term Insurance

Life insurance provides better security for the family of the insured person.

Good Tax Benefits:

Term insurance provides good tax benefits. Premium paid under Insurance have deductions in tax. But the benefit has a property to change. So acquiring better knowledge from the tax advice is vital.

Term of the Policy:

Policy term is held lifelong from the minimum of 5 years. Monthly instalment policies have a minimum of 5 years to the maximum of 25 years and above. Tenure of 5 - 15 years is the minimum and maximum years for those opt for single premium policies. Choices are made according to the convenience of the person.

Age flexibility:

The minimum age to enter the insurance policy is 18 years and the maximum age is 65 years. People looking for long term policies should choose during their younger age. The premium rate increases in accordance with the age of the person. Mostly, the insurance coverage is not held beyond 65 - 70 years of age. Policies with high age of maturity have higher rates of premium. Risks are also high in this case.

Benefits of survival, maturity and death:

Term insurance hardly comes with the survival benefits that if the person survives after the tenure he can get the premium paid for the whole term. One can choose the TROP plan to avail the premium returns. TROP is the short form of Term Return of Premium. But the standard insurance policies are not provided with the survival benefits. The policy holder should check the terms and conditions of the policy before the process. After the decease of the policy holder, the nominee can get the coverage amount. It is defined as the death benefit. Based on the type of plan, whether it is an increasing plan or decreasing plan or standard type, the coverage will be provided.

Documents Required For the Term Insurance

Some documents are mandatory for all the policies. The required documents are as follows. Recent photograph, PAN card, age proof documents like passport, driving license, birth certificate, address proof documents like voter ID, electricity bill, ration card and telephone bill, income proofs like Income tax returns, employment certificate and others are the required documents.

Exclusions of Term Insurance

The term insurance covers particular unexpected happenings. If the death is due to any known self-error, there will be no coverage. Death due to drug addiction, suicide, war, terrorist attacks and self-action of the policy holder are excluded from the insurance coverage. Then there will be no settlement of money in these cases.

Term Insurance Claim Process

After the death of the policy holder, the dependents of the holder should file for the claim of amount. There are easy steps to do the claim. First, the information about the death of the policy holder should be informed in time. Secondly, necessary documents are to be submitted. The needed documents are original policy papers, death certificate of the deceased, medical informative records and other documents. Finally, after the document submission, the claim will be settled quickly after the verification process of the documents.

Eligibility Criteria

The minimum age to avail the term insurance is 18 years and the maximum age the coverage comes is 75 years. One can enter at any point of age between the above said ranges into the term insurance. Depending on the age at the time of entry, maturity try will be calculated. The assured amount varies between insurers and the minimum will be Rs. 25 lakhs.

Best Term Insurance Plans

In the market, there are many insurers available. Choosing the best and suitable insurer is with the applicant’s choice. Let's see some term insurances in detail.

LIC Term Insurance

Among the five term insurances of LIC, the LIC e term insurance is the pure term insurance. It provides a least amount of Rs. 25 lakhs. The minimum and the maximum coverage period are from 10 to 35 years. One can benefit till the age of 75. Many add-ons and riders are allowed in LIC term insurance.

HDFC Term Insurance

HDFC term insurance provides wide range of options. There exists life cover, extra life cover with the benefit of accidental death, income cover and income plus cover. Joint covers also available. It provides 10 - 40 years of coverage with the maximum age of up to 75 years.

ICICI Term Insurance

ICICI term insurance is fully provided online. The minimum and the maximum policy tenure are 5 and 45 years respectively. The maximum coverage age will be 75 years. There exist three options viz., Life, life plus, life and health provided by the insurer, depending on the need of the policy holder.


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