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Clarify All Doubts Related To Term Insurance

Term insurance is an affordable life insurance product which gives financial protection and stability to your loved ones in case of any unforeseen circumstances. It provides specific amount of coverage for a specific period of time. In case of death of the policyholder, the nominee gets the sum assured as a lumpsum. Some insurance companies also offer survival or maturity benefit under which the policyholder will get back sum of all premium instalments paid over the policy period in case he survives. Term insurance provides very high coverage at very low price.

What is a life insurance?

Life insurance is a contract between an insurance company and an individual in which the company promises to pay a certain sum of money (known as sum assured) in exchange for premium payments by the individual. The plan covers specific events and pays the sum assured to the nominee when the covered event occurs. Life insurance policy is considered as one of the safest and most secured financial tool which provides protection to the policyholder as well as his family in difficult times. Life Insurance is a simple concept in which you buy a policy which offers your beneficiary sum assured of the policy as compensation either on death or maturity. It provides a lump sum amount or pay-outs in specified instalments as may be mutually decided. Online life insurance plans are also available which can be bought online through some simple steps.

What is Term Insurance?

Term plans are pure protection insurance plans which cover the risk of premature death. These plans have a definite tenure and pay a death benefit when the insured dies within the selected tenure. They are very affordable when compared to other type of life insurance and provide high coverages at very low premiums. Term plans are needed for creating a financial security in case of death of the bread-winner.

Why Should I Buy Term Insurance Plan?

If you want higher sum assured in lower premiums and create sufficient financial corpus for your family in your absence, then Term Insurance plan is the best type of life insurance policy for you. The term insurance plan is the most economical way to insure the most important years of your life. Some insurance companies also provide accidental death benefit rider under which, additional amount is paid by the insurer in case of death due to accident. Moreover, you can avail tax exemptions on the premium paid under the Income Tax Act.

Are there any benefits of buying term insurance plan at an early age?

Premium of a term insurance plan depends on the age at which the policy is bought by the insured person. If you buy a term plan at an early age, the premium would be lower. Moreover, you would be able to avail coverage from an early age and create financial security for your family without any delay. Since you are buying the plan young, you would be free from medical complications and thus the policy would be issued instantly and at affordable premiums. Lastly, you would also be able to lower your tax liability as the premiums that you pay would be allowed as a tax-free deduction from your income.

Why should I compare and buy term insurance online?

There are numerous life insurance companies and each have a variety of term insurance plans available with them. Hence it becomes necessary to first compare all the products available in the market and select the one that best suits your requirements. This is where PolicyAnchor comes into picture. You just have to enter few details about yourself and the amount of coverage you need and PolicyAnchor will show you a list of quotes from the leading insurers. You can browse through all the plans, compare benefits and features, add riders available from the insurer and then shortlist the one which you think fulfils your needs the most. You can then fill up the proposal form, submit relevant documents and make payment. Your policy will be generated post medical tests if necessary and the policy copy will be sent to your registered email.

What are the steps required to buy a term insurance cover online?

Buying a term insurance policy online is a very simple and easy process as shown below:
  • Visit PolicyAnchor website and click on Term Insurance under Life insurance option
  • Fill in the form with your details, select the sum assured amount and then calculate the amount of premium to be payable on the insurance policy.
  • A list of quotes would be available to you from various insurers based on the details submitted
  • You can browse through the various plans on offer, compare their benefits and riders, and select the one that you think is best for you
  • You can then proceed to the proposal forms, fill up all the details as accurate as possible and keep all the supporting documents ready for upload
  • After completing the proposal form, you can proceed to the payment page. The premium can be paid through various online modes available like credit or debit card, internet banking, UPI or wallets if available. You can also choose the frequency of premium payment i.e. annual, half yearly, quarterly or monthly.
  • Post successful payment, the details are submitted to the insurance company for approval.
  • The insurance company scrutinises the proposal form that you have submitted and if the company is willing to take your risks, the policy would be issued. Once the policy is issued, you would be notified. The soft copy of the policy will be sent to your registered email address and the hard copy will be mailed to your residential address which you mentioned on the application form.

What are the required documents for buying a Term Insurance Policy online?

Following are some of the required documents for buying a term insurance policy online. For complete list, you can refer the insurer’s website.
  • Address Proof- Driving License/Bank statement or passbook with latest entries/Passport/Voter ID/ Aadhaar Card/Ration Card
  • Id Proof-Aadhaar Card/Voter ID/ Passport/ PAN Card
  • Standard Age Proof-PAN Card/ Aadhaar card / Passport/Voter Id card/Marriage certificate/Ration card/Birth certificate/Driving License
  • Passport-size photographs of the individual
  • In some cases when the premiums are too high then Income documents of the individual are also required to calculate the amount of insurance cover that is to be provided. In such cases, the income proof would have to be submitted which can be - Salary slips of last 3 month/ Income Tax Returns/ Employer Certificate/ Latest bank statement/ Latest Form 16

What are the major Inclusions in a term insurance?

The inclusions are generally mentioned in the copy of the term insurance policy. You should go through the fine print of the policy copy before buying the policy to check the major Inclusions in the policy. Major Inclusions in Term Insurance Plan are stated below.
  • Death of the Policyholder- all types of death are covered in term insurance policy which may be due to natural causes, accidental death or death due to illness.
  • Maturity of the Insurance policy is covered in all plans (except pure term plans) wherein the policyholder will receive premiums payment throughout the tenure in case of survival.
  • If accidental rider is taken, accidental death would be covered and result in the payment of an enhanced death benefit
  • If critical illness rider is taken, specified critical illnesses would be covered under the plan
  • If the disability rider is taken, permanent total and partial disabilities would be covered under the policy

What are the major exclusions in a term insurance?

There are certain exclusions in term insurance plan as not all situations are covered in an insurance policy. The insurance provider would investigate in case the policyholder’s unnatural death. The sum assured in the term insurance policy is not paid if the death of the policyholder occurs due to any of the following reasons:
  • If the insured commits suicide within 12 months of buying a policy or 12 months of renewing a lapsed policy, such a death would be excluded.
  • In case a critical illness rider is chosen, there is a survival period depending on the insurer’s policy terms. If the insured dies during this survival period, after the diagnosis of the critical illness, no rider benefit would be paid in such a case.
  • If you hide an important fact from the insurance company at the time of buying the policy and death occurs due to such hidden fact, the company can reject your claims. In that case, the policy would become null and void and no claim would be paid. Important fact is considered to a fact which impacts your risk. For instance, if you are a chain smoker and you do not mention your smoking habit at the time of buying the policy, you are said to be hiding an important fact. Later on, in case of death due to lung cancer, the company would find out that you hide your smoking habit. In such cases, the policy would be void and no claim would be paid.

What Are The Term Insurance Riders?

The term insurance riders are the benefits that you can add to your basic term insurance policy by paying an additional premium. Basic term coverage may not fulfil your each and every life insurance need and you might feel the requirement to augment your coverage. Riders act as the coverage enhancers and you are charged to avail various term insurance riders which can be profitable in the longer stretch of life.

What are the benefits of buying a term insurance?

Some of the key benefits that you get on buying an online term insurance is as follows:
  • High sum assured – As term insurance is the most affordable life insurance plan, you can opt for a high sum assured at pay low premiums for it. For e.g. premium for a one crore term insurance cover can start from Rs 500 per month. Such large covers can compensate for expenses like outstanding home loans in case of death and protect your family from a huge financial burden. And your premium will remain fixed throughout the tenure of your policy.
  • Covers against critical illness – Along with providing life cover, some insurers give you the option to opt for protection against various critical illnesses. For a small addition in premium, the policy will offer you lumpsum payment benefit against illness like heart attack, kidney failure, cancer etc on detection or as per the policy terms.
  • Disability benefit – Under this benefit, in case the insured suffers a total or permanent disability, the insurance company will pay all your future premiums. As a result, your life insurance cover remains active even if you are not able to make further premium payments.
  • Accidental death benefit – With this benefit, the insurance company gives additional pay-out in case of an accidental death of the policyholder. This additional amount can be upto Rs. 2 crores. For example the if the sum assured opted for the term insurance is Rs 1 crore with accidental cover benefit of Rs. 1 crore, the insurer will pay a total of Rs 3 crores to your family in case of accidental death.
  • Terminal illness benefit – Life threatening illness can have a serious impact on your financial condition. Hence few life insurance companies provide terminal illness benefit to policy holders. Under this, the insurer will give 100% pay-out of your life cove amount before death to help in your fight against the illness.
  • Tax benefit – You can claim income tax benefits on the amount paid in form of premium for life insurance cover under section 80C under Income Tax Act. You can also claim tax benefit under section 80D for the premium paid for critical illness rider if opted with your term insurance plan. Also, in case of death, the lumpsum pay-out by the insurer to your family becomes tax free under Section 10(10D).

How much term insurance cover do I need?

The amount of term insurance coverage depends on a number of factors like your annual income, existing liabilities, inflation etc. Ideally, your term insurance coverage should be at least 10 to 15 times your annual income. This will make sure that in case of untimely demise, your expenses for the next 10-15 years will be taken care of by the lumpsum pay-out. It is always recommended to have sufficient term insurance cover so that your family’s financial security remain unaffected after you.

How should I choose the duration of my term insurance plan?

Selecting the correct tenure of your term plan is as important as the amount of cover you opt for. The longer tenure you choose, the higher will be the premium amount. While buying term insurance plan, basically you are intending to cover the important years of your life, i.e., when you are earning. Hence it is mostly recommended to take life cover till your planned retirement age. By then, all your major expenses like child’s education and marriage, building a house etc are mostly taken care off.

What Is The Minimum And Maximum Age To Acquire The Term Insurance Policy?

Generally, the age eligibility criteria to acquire term insurance ranges from 18 to 65 years. While the maturity age can range up-to 99 depending on the insurance company policy. The age-range to enter and exit such plan can vary from insurer to insurer. While you choose the term of the policy, you need to consider your age and the maturity age till what you can avail the term insurance and decide accordingly. For instance, you are 30 years old, while the exit year is 75, so the term of the policy can go up to (75-30) 45 years in your individual case. Some companies are providing coverage upto 85 years & some are providing whole life benefit i.e. upto 99 years.

Do I Need To Undergo Various Medical Tests To Acquire Term Insurance?

Depending on factors like sum assured you opt for, your risk profile, age and medical history, the insurance company may tell you to undergo medical test. However in some cases, if risk profile is good and age is less, a questionnaire will be sufficient.

What Are The Factors Taken Into Consideration While Deciding The Premium?

While determining the premium amount of your term plan, the insurance company takes into account following factors:
  • Age:Your age is the number one factor for calculating the premium for term insurance cover. Younger policy holders pay lesser premiums. As you age, the premium increases since the likelihood of pay-out by the insurance company also increases. However, once you have bought a term insurance plan, your premium remains fixed throughout the policy period.
  • Tenure: Another important factor that decides your premium amount. The longer the duration, the higher is the premium outflow. For e.g. a person opting for a 30 year policy has a higher probability to die in the policy period compared to a person opting for a 10 year policy. Hence he has to pay higher premium.
  • Gender: Your gender also plays a role in determining your premium. Life expectancy of women is more than men and pose a lesser risk of claim. Hence they may pay lesser premium than men for the same life insurance cover.
  • Lifestyle: Your lifestyle can also reflect in understanding your risk profile. People with smoking and drinking habits have to pay higher insurance premiums as they are more likely to suffer from life threatening disease
  • Premium payment frequency: How you choose to make payment also plays a role in your total premium outflow. The insurance company charges higher premium if you have selected to pay the premium on quarterly, semi-annually or monthly basis.

What is the procedure for death claim settlement in term insurance?

Before making a claim to the insurance company, the nominee should make sure the insurance policy is active and all the insurance premium have been paid on time. The nominee has to also check the policy schedule to make sure that the situation under which death occurred is covered in the policy and not present under the exclusion list. Once this is checked, the nominee should intimate the life insurance company to start with the claim process. Some of the details required during intimation are policy number, name of the insured, date and place of death, cause of death, nominee detail confirmation etc. The claim intimation form can be downloaded from the insurer’s website or the physical copy can be obtained from the nearest branch. The claim form needs to be filled with accurate information and then submitted to the insurance company for claim process along with the required documents. Once the insurer receives all the documents, they are obligated to settle the claim within 30 days from the receipt of all necessary documents as per the regulations of IRDAI.

What documents are required for death claim settlement in term insurance?

A death claim requires the following documents to be submitted by the nominee to the Life Insurance company:
  • The death certificate of the insured
  • Original documents of term insurance policy
  • ID proof of the nominee, beneficiary or the claimant
  • Age proof of the life insured if it was not provided at the time of buying the policy
  • Police FIR if death occurred due to an accident
  • Medical reports and hospital records for accidental death claim cases
  • Any other relevant required document as required by the insurance company

Who is a nominee? Can nominee be changed later?

Nominee is a person chosen by the policyholder and he/she will receive the term insurance policy money in case of death claim. While appointing nominee, the policyholder details like name, address, age and relationship with nominee. Nominee details can be changed later by filling up a nomination form and submitting it to the insurance company before the policy tenure is over or death claim is made.

Is there a time limit to file a term insurance claim?

A term insurance claim should be filed at the earliest so that the settlement is received easily and quickly. There is no specific time limit to file a term insurance claim. However, in case of delay in filing the claim, the insurance company might get suspicious about the reason for delay and there might be investigations into the claim. This would delay the payment of claims.

Can I claim from 2 term insurance policies?

Yes, you can claim from two or more term insurance policies without any problem. You would receive the full claim amount from both the policies irrespective of the amount already received under one policy.

What are the reasons behind term insurance claims getting rejected?

Some of the most common reasons for rejection of term insurance claim are as follows:
  • Hiding or giving inaccurate information about your health history, smoking habit or any pre-existing ailment while filling up application form is considered as misrepresentation and can become a basis for claim rejection
  • If you are not paying premiums, your term insurance policy will lapse and your claim intimation will be rejected
  • If the reason of death in not covered under the term insurance policy, your claim will be rejected. For e.g. suicides are covered only after one year of policy period. Similarly death due to drug overdose or participating in hazardous activities like war are mostly excluded and not covered in the policy.
  • If nominee details are not provided or you failed to update correct information about nominee, your claim might get delayed or rejected as per the company policy
  • If death occurs soon after the policy is bought, the claim might get rejected. Every insurance company has a contestability period which can range from 1 to 2 year. In case of death during this period, the insurance company can launch an investigation into the reason of death and can reject the claim if any information is found inaccurate or suspicious. However if the case is found to be genuine, the claim will be settled.

How long can it take for a life insurance company to pay death claim settlement to the nominee?

As per IRDAI guidelines, a life insurance company has to process a claim settlement within 30 days of receipt of claim form and all relevant documents. If any additional documents are needed for verification, the entire settlement process cannot exceed 6 months. Post this, the company has to start paying interest on the claim amount.