The Coronavirus pandemic has shaken the world and made everyone realize and review their priorities in some way or the other. The new uncertainties of life have once again underlined the need of having a financial cushion to fall back on. With over 1.5 million deaths among 70 million infected people across the world3, the pandemic has also made people realize the importance of having a term life insurance plan. Term insurance offers life cover to the policyholder for a specific time-period. In case of death of the insured individual during the policy term, the company pays the death benefit to the insured’s nominee.
The primary purpose of taking life insurance is to provide financial security to the family of the policyholder. For example, if a policyholder has a term life insurance cover of Rs 1 crore for a policy term of 35 years. If the policyholder dies within the term period of the policy, 35 years in this case, the insurance company would pay the entire sum of Rs 1 crore to the policyholder’s nominee. By opting for a term plan, you ensure that your loved ones can continue to live their lives and achieve their financial goals even if you are not there to personally take care of them. So your wife/husband can stop worrying about how to afford the wedding of your children. Your children can still go to the college of their choice. They can all still live in the house you bought for them but could not pay off the loan for.
How it works
When you buy term insurance, insurance company considers factors such as your age, your health condition and your risk profile before they set a premium or give the go-ahead for the application. You get a relatively lower premium quotation if you are young and are in good health.
Upon death of the insured during the term of the policy, the insurer will pay the sum assured under the policy to the nominees. The policyholder can decide whether they want to receive the amount in lump sum, or in monthly installments subject to terms and conditions mentioned under the product. This death benefit—, which is not taxable subject to satisfaction of conditions mentioned under Section 10(10D) of the Income Tax Act , 1961—may be used by the nominees to settle healthcare costs, or loans, among other things.
Standard individual term life insurance policy
Earlier this year, the insurance regulator IRDAI made it mandatory for all insurance providers to offer a standard, individual term life insurance policy called ‘Saral Jeevan Bima’ from January 2021. With a plethora of options to choose from different insurers, IRDAI said the idea is to introduce a product with “simple features and standard terms and conditions”1. As per the IRDAI guidelines, this standard individual term life insurance policy would offer only a pure risk cover, which will pay the sum assured in lump sum to the nominee in case of death of the insured person during the policy term. This sum assured can be between Rs 5 lakh and Rs 25 lakh.
Under this policy, one can choose a policy term of 5 years to 40 years, subject to maximum maturity age of 70 years. One can choose from three premium payment options – regular premium, single premium, or limited premium payment term for 5 years and 10 years.
Death benefit under this standard individual term life insurance policy is also clearly defined by the IRDAI. There would be no maturity benefit under this plan.
Benefits of term insurance policy
Term life insurance serve the needs of all individuals, especially those with dependents. Upon the death of the policyholder, the policy payout can replace the lost income, depending on the person’s income and the sum assured chosen. This means that even if the income-earning member of the family is gone, the family can continue to live their life without any compromises due to financial reasons. These policies are also well suited for those who need specific amount of life insurance coverage for a defined period. For example, when you opt for a loan, it is advisable to get a term cover of a matching amount. In case of an unfortunate event of death, the burden of the loan would not be passed on to your family. While the primary purpose of a term plan is to provide you a life cover, a term plan comes with some other benefits as well.
Tax Benefits: A term insurance plan comes with tax benefits. You can avail a deduction of up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961 for premium paid on your insurance plans, subject to provisions stated therein. Moreover, in case of death, the death benefit paid to the nominee is tax free under Section 10 (10D) of the Income Tax Act, 1961subject to provisions stated therein. Although, a tax benefit is not why you should have term insurance, it is an added benefit that comes along.
Affordable premiums: The premiums for term plans are relatively lower compared to other life insurance products. Moreover, the early you get a term plan, lower would be the premiums that you need to pay. So, these plans make easy additions to your financial portfolio, adding a lot of value, without burdening your monthly budget.
Once you are convinced to buy a term life insurance policy, you can choose from options offered by Bajaj Allianz Life Insurance. The company offers a simple and hassle-free claim-settlement process. The claim settlement ratio is an important factor to consider before buying a term plan. Bajaj Allianz Life had a claim settlement ratio of 98.02 per cent2. Also, apart from offering standard individual life insurance plan, Bajaj Allianz Life has a comprehensive product portfolio for different needs of different individuals. Some of the features of term plans offered by Bajaj Allianz Life Insurance include critical illness cover, which pays the policyholder a lump sum amount if he/she is diagnosed with a critical illness, subject to policy terms and conditions. One can also choose from riders like accidental disability rider and waiver of premium benefit at a nominal extra cost.
So whether you choose the standard individual term insurance plan or any other term plan that suits your specific needs, a term life insurance policy is a safety vest that everyone must have. Amid the uncertainties of life, one thing you can make certain is that the future of your loved ones is secure.
Disclaimer: This content is distributed by Bajaj Allianz. No TNIE Group journalist is involved in the creation of this content.
Source:
1https://www.irdai.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo4264&flag=1
2Individual Claims Settlement Ratio for FY 2019-2020
3https://www.worldometers.info/coronavirus/
https://www.unfpa.org/sites/default/files/pub-pdf/EN-SWOP14-Report_FINAL-web.pdf
https://www.ibef.org/industry/insurance-presentation
https://www.bajajallianzlife.com/life-insurance-guide/term/term-policy-features.html
https://www.investopedia.com/terms/t/termlife.asp
https://www.bajajallianzlife.com/life-insurance-guide/term/what-is-term-insurance-meaning.html