What is Term Insurance?

Term insurance plans are also called pure life insurance plan that provides coverage for a certain period of time or a specified “term” of years. If the insured dies during the time period specified in the policy and the policy is active or in force, then the death benefit will be paid. The premium paid on term life insurance is used to cover the risk of insuring the policyholder. This allows the policyholder to opt for higher sum assured at affordable premiums. Term insurance is the best way to financially secure your family’s future in case of any untoward scenario. It covers the policyholder for a long period of time. Generally, the policy term starts from the age at which the policy is purchased. It ends when the policyholder reaches the age mentioned in the policy. Thus, it is possible to get a term insurance policy for 50 or even 60 years at the affordable premium which may vary during the premium paying term. Term insurance plans also comes with riders which provides additional coverage asides the term insurance benefit. These riders cover additional benefits such as accidental death, accidental disability, critical illness diagnosis, terminal illness diagnosis, waiver of premium and provide extra benefits that are paid out when the conditions are met. Term insurance allows the policyholder to opt for a high sum assured. This policy provides the best way to financially secure your family’s future.

Example of Term insurance

Term insurance is an insurance product that provides financial security to the family members of a sole or co-income earner. It does this by paying a pre-decided sum of money to the family in the eventuality of the breadwinner's unforeseen death. 

The primary aim of term insurance is to extend this insurance coverage in the scenario of death. However, with the inclusion of riders, additional insurance coverage can be availed against debilitating and life-altering eventualities. These include critical illness rider, serious illness rider, accidental death benefit and accidental disability benefit. Here are two examples of how term insurance works through two different term insurance plans:

Term insurance plan without return of premiums (PNB MetLife Term Plan)

Mr A buys a basic term plan that will pay a pre-agreed sum assured to his loved ones on his death, provided the demise is within the tenure. He has the option to add extra riders to his term plan, like the critical illness rider, an accidental disability rider, and others. However, as he chose a base term policy, he will not get any returns of premiums paid in case he survives the term policy.

Term insurance plan with return of premiums (PNB MetLife Term Plus Plan)

Mrs B buys a term plan that will also pay a pre-agreed sum assured to her loved ones on her death, provided her demise is within the tenure. She also has the option to add extra riders to her term plan, like the critical illness rider, an accidental disability rider, and others. But she will receive the premiums paid as returns if she survives the term policy as she chose a term plan with a return of premium option.

In both term plans, the coverage offered remains somewhat similar, except for the riders that are customisable. The core difference is that Mrs B would get her invested money returned to her even if she survives the term plan, ensuring minimal loss.

Term Insurance Calculator

PNB MetLife Term Plan Calculator will help you calculate how much term insurance you need and the premiums payable for that amount. It does this by considering factors like your age, gender, annual income, lifestyle habits, and the desired term insurance cover amount and policy tenure, among other factors.

It considers factors shaping your life and your plan preferences to select term plans that best serve your financial requirements. The term insurance calculator will also suggest the premiums payable for each term plan and give you various premium paying modes to choose from. 

What are the benefits of term insurance?

There are many term insurances benefits that make it an excellent investment to secure the financial safety of your family.

1. Affordable premiums:

One of the major benefits of a term insurance plan is the affordability of premium. It is possible to get a cover of 1 crore Term Insurance without spending a huge amount. Term insurance premiums purely reflect the risk of covering the life of the policyholder. For Non-smokers, premiums are lesser. Insurance companies also charge lesser premiums for healthy policyholders. Women policyholders typically enjoy lesser premiums than men. All these factors make it possible for people to opt for higher covers without it breaking the bank.

2. Policy Tenure:

The tenure for a term insurance plan lasts from the age at which the policy was purchased and continues till the age specified in the policy. The term insurance policy ends when the policyholder crosses that specified age. For example, if the policyholder is 30 when he buys a term plan and the coverage under the policy is till the policyholder reaches 80 years, the policy duration is 50 years. Buy term plan online at a young age will ensure the premium is kept low and the sum assured is high.

3. Riders:

Riders provides an additional coverage that comes along with a term plan. These cover scenarios such as accidental death, disability, critical illnesses etc. These riders have additional premium that has to be paid over and above the term insurance premium. However, they provide additional benefit when the given conditions are met. For example, if a Critical Illness Rider is opted for and the policyholder is diagnosed with one of the specified illnesses, then he will receive a payout for meeting the condition covered under the rider. The rider benefit, like the base policy benefit, will have to be decided at the inception of the policy which determines the min/max coverage term & benefits of the rider.

4. Online Term Insurance Policies:

One of the biggest advantages of a term insurance plan is that these policies are easily available online. It is convenient to buy them directly from the insurance company’s website or with the support of an insurance web- aggregator or form any other insurance intermediary. Once the onboarding formalities are completed, the insurance company issues the policy document.

5. Tax Benefits: 

Term plans are counted as life insurance plans and get a tax deduction for premium paid under Section 80C of the Income Tax Act, 1961. This deduction is limited to Rs. 1,50,000 and it covers premium for self, spouse and dependent children. If the policy is taken for anyone else, a deduction will not be available. This deduction will only be allowed if premium paid is less than 10% of the sum assured. Another point to remember is that any benefit received under a term insurance policy is exempt under Section 10(10D) of the Income Tax Act. This includes payout for a term insurance rider as well. This guarantees the financial security of your family since no tax will have to be paid on term insurance benefits. The benefit can be wholly used for the family’s finances.

Why Should You Buy a Term Insurance Plan?

Benefits of having a Term Insurance Plan are Affordable Premiums, Policy Tenure, Easily Comprehensible with Flexible Payout Options. The below infographic showcases all these features in lucid way.

Who Should Buy a Term Insurance Plan?

Term insurance is for those who want to secure their loved ones in their absence. It provides financial support to the family members of the sole or co-income owner of a family unit in the case of his/her unfortunate death or other unforeseen eventualities. Term insurance plans do this by providing a guaranteed death benefit on the demise of the life insured under the term plan in exchange for premiums paid by the policyholder. These premiums are payable through a one-time lump-sum amount or periodic instalments every month, quarter, half-yearly, or annually. Term insurance policies also provides optional benefits like

a) Lump Sum payment on diagnosis of listed Critical Illness or in case of any terminal illness

b) Benefits when the life insured is permanently disabled due to accident

c) Additional payment (over and above the base sum assured) on death due to accident

Term insurance is especially vital for self-employed individuals, working professionals, married couples, retired persons, and regular tax-payers. Having a term plan can help you reach various milestones of life, such as:

• Funding your child’s higher education or marriage

• Ensuring a retirement corpus for your spouse

• Supporting your family in day-to-day expenses if you are no longer around

Term insurance is the most affordable form of life insurance with an extensive scope of coverage. It is also very flexible and allows one to increase their insurance coverage at different life stages. Term insurance plans from PNB MetLife not only offer the aforementioned benefits but also provide that extra layer of protection through additional riders for enhanced security.