It is necessary to create enough wealth to secure your family’s future, especially in your absence. There are various types of insurance that you can opt for to safeguard their interests. One of them is a term insurance plan, specifically designed to protect the people financially dependent on you in case of your untimely demise. A term plan works on the simple principle where you pay the premium and get covered for a predetermined period.
What is a Term Plan?
A popular insurance product, a term plan is a pure death benefit policy that gives life cover to the insured against his/her premature death. The nominee gets the corpus in a lump-sum payout.
It is important to note that a term plan does not come with a maturity benefit, which means that the sum assured will be paid to the nominee only. If the insured outlives the plan tenure, there will be no payout. However, it acts as a safety net for your loved ones who can manage their living expenses in the unfortunate event of your death.
Term insurance is one of the few insurance policies in India that come with a large sum assured of Rs. 1 crore or more, which varies depending on the insurance company, plan features, age, income, etc.
Term insurance is quite affordable in terms of premium payments. You get a good sum assured even after paying a conservative premium, making the term plan an affordable insurance option.
How are Premiums Decided?
Here are some factors that affect your term insurance premiums:
Age: The younger you are, the lower the premium you pay.
Gender: Based on a few studies that show a lower death rate in women, some companies offer discounted premiums to women.
Sum Assured: Like any other insurance product, the higher the sum assured, the higher the premium amount.
Lifestyle: The lifestyle choices of the insured also have a bearing on the amount of premium paid. An insurance company will charge more premium from a smoker than a non-smoker.
Term: Term is an important factor that affects your premium. Longer durations will require higher premium payouts. Most insurance companies issue term policies for a duration of 5 to 40 years or till the insured reaches the age of 99.
When Should I Buy a Term Plan?
The straight answer to this question is as soon as you start working. There are multiple reasons for this.
Anyone between the ages of 18 to 65 can opt for term insurance. However, your 20s is a good time to get into the insurance market and plan for your family’s future.
Since most people land their first jobs in their 20s and start earning a basic amount, they have relatively lower incomes and quite a few expenses. With dependent family members to handle at this juncture, a term plan offers an affordable solution in case of the insured’s sudden death. As the product comes with a high sum assured amount with low premiums, term insurance is a good option right at the start of your career.
The first preference of insurance providers is young and healthy applicants when it comes to providing insurance. People starting their careers have a stable income and are healthy overall tend to enjoy lower premiums than their older counterparts.
It makes sense to opt for online term insurance ,which means you will be buying directly from the insurance provider. This leads to savings in processing costs and broker commission, the benefit of which is ultimately passed on to you in the form of lower premiums.
Benefits of Term Plan:
The premiums paid under a term plan are exempted under section 80(C) of the Income Tax* Act up to ₹ 1.5 Lakh. Another tax benefit of the term insurance policy is the death benefit received by the nominee, which is also tax-exempt under section 10(10) D, only if the annual premium is less than 10% of the total sum assured.
Term policies can be assigned towards other bank loans you take. In the case of your demise, the lender will simply get the outstanding loan amount from the death benefit, and the remaining amount will be passed on to your nominee. This can be of great help to your loved ones in the repayment of loans even after you are gone.
Since the basic premise of a term policy is to secure your family’s regular income in your absence, you can live a stress-free life knowing that there are enough resources for them to live a good life. With various critical illnesses grappling even the young generation, it is imperative to think practically and plan.
Conclusion:
A term insurance policy provides long-term benefits to the insured and their loved ones at a very affordable cost. Everybody from young professionals and newly married couples to even working parents should opt for a term plan.
You can opt for Tata AIA term insurance, which allows online premium payments. This product helps you plan your family’s future financial health better.
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FAQs
You can purchase life insurance when you are at least 18 years of age and a maximum of about 65 years of age. However, the ideal age to purchase a term policy is when you are in your 20s. Then, you can get a huge sum assured at an affordable premium.
What is the best age for term insurance coverage? ›
Let's look at the policy terms you can choose based on your age:
- In Your 20s. If you're currently in your 20s, select at least a 40-year term or opt for coverage until the age of 99. ...
- In Your 30s. Like when you're in your 20s, a 40-year term or coverage until the age of 99 is ideal for your 30s. ...
- In Your 40s. ...
- In Your 50s.
If you can fit the monthly premium into your budget, your 20s are the best time to buy affordable term life insurance coverage. If you have a spouse and dependent children who rely on you for financial support, your coverage needs will likely be more significant than a single, childless person.
When should you buy term insurance? ›
It is advisable to buy a term plan as early as possible in life, as that is right time to buy term insurance plans, along with ensuring that you get the desired life coverage. term life insurance early in life is also much cheaper as compared to later stages in your life.
When should I choose term life insurance? ›
Consider term life insurance if you:
Want some flexibility in case your needs or circ*mstances change. Have other financial assets to leave behind as an inheritance.
What is the thumb rule for term insurance? ›
The thumb rule for term insurance is to have coverage that is at least 10 to 15 times your annual income.
Should I get term life insurance at 60? ›
You could need life insurance in retirement if you want to cover your final expenses and estate taxes, have outstanding debt, still earn income, or want to provide a tax-free inheritance to your loved ones. Otherwise, you probably do not need life insurance after retirement.
When should you stop buying term life insurance? ›
Therefore, if you're buying term life insurance primarily to replace your income, you may not need it after retirement. Once your kids are grown up, the house is paid off and you're living off your retirement savings, life insurance is one more thing you no longer need to worry about.
How much term life insurance do I need at age 65? ›
You can also use this term life insurance calculator to estimate your need and get a quote, or use a rough estimation method based on your expected earnings. Consider getting up to 30X your income between the ages of 18 and 40; 20X income at age 41-50; 15X income at age 51-60; and 10X income for age 61-65.
What happens to term life insurance at age 80? ›
Some term policies will cover you past age 80. However, these policies may cost so much compared to how much they pay out that you might want to put that money into savings or explore a different kind of life insurance policy.
Drawbacks of term life insurance
If you outlive the term of your term life insurance, the policy expires and has no value. If you're looking for a way to leave money behind, a term life insurance policy most likely isn't a good fit. No cash value. Term life insurance doesn't build cash value.
What are the negatives to buying term life insurance? ›
Term Life insurance Cons: If you outlive the term length, your coverage will end and you won't receive any benefits. You will not be covered your entire lifetime and your policy will not accumulate cash value like an investment account does.
What is the best amount for term insurance? ›
It is recommended to have a term insurance cover that is at least 10 to 12 times of your annual income. This amount can be adequate to meet future needs and manage inflation rates.
At what age do I no longer need term life insurance? ›
Many people in their 60s and 70s may no longer need life insurance. They may have already paid off the house, stopped working, sent the kids off to care for themselves or accumulated enough assets to offset the need for life insurance. But sometimes buying or maintaining a life insurance policy over age 60 makes sense.
At what age does term life insurance get expensive? ›
“Every birthday puts you one year closer to your life expectancy and thus, you are more expensive to insure,” says Huntley. He estimates that rates increase every year by 5% to 8% in your 40s, and by 9% to 12% each year if you're over age 50.
Does Suze Orman recommend term life insurance? ›
That's why Orman says it's best to set up a term life insurance policy that will remain in effect until your children reach early adulthood. In fact, in a recent podcast episode, Orman suggested getting life insurance that will last until your kids reach age 23 or 24.
When should you stop getting term life insurance? ›
If your family can afford daily expenses, pay their bills, and retire in comfort without the use of life insurance funds, you may want to consider canceling your policy.
Is term insurance good for people over 65? ›
Types of Senior Life Insurance Plans
The older you are, the less variety there may be in term lengths. It is also possible that the fees will rise as you age. However, term life insurance is still a popular choice for those that are looking for a policy that can still provide benefits for their loved ones.
What is the best length for term life insurance? ›
20-year term life insurance is the most popular term length and can help cover the income of new parents or newlyweds as their family grows. 30-year term life insurance can help cover large, long-term financial obligations, such as a mortgage or college debt.
Can I get term life insurance at age 72? ›
At the age of 70, every year of waiting will cost you more, and the longer you wait, the less of a term you can get. At 70, you can buy a 20-year policy, but if you wait until you are 72, you can only buy a 15-year policy, and at 80 you can only buy a 10-year policy and you will pay a lot more. Stay on budget.
