What is Term Insurance?
Term insurance is a type of life insurance that provides financial protection to your dependents in the event of your untimely death during a specified term or period. It’s designed to ensure that your family remains financially secure, even if you are not there to provide for them.
In Simple Terms: Term insurance is a life insurance policy that covers you for a certain “term” or period. If you pass away during this term, your beneficiaries receive a sum assured to help them manage financial needs and continue with their lives.
Features of a Term Insurance Plan
- Simplicity:
- Pay a premium to get a significant life cover amount. It’s straightforward and easy to understand.
- Flexibility:
- Choose the length of the term, the coverage amount, and the way your family receives the payout (lump sum or regular payouts).
- Affordability:
- Provides high coverage at a low cost because it’s purely a risk protection cover with no investment component.
- Riders/Add-ons:
- Customize with additional benefits like critical illness cover or accidental death benefits to enhance your policy.
Benefits of Buying Term Insurance
- High Sum Assured:
- Offers substantial coverage, helping your dependents manage daily expenses, debts, and future costs like children’s education.
- Peace of Mind:
- Knowing your loved ones are protected allows you to focus on the present without financial worries.
- Tax Benefits:
- Premiums and benefits received may offer tax advantages under existing tax laws, making term insurance a financially savvy choice.
- Financial Protection:
- Provides substantial financial support to your family, ensuring stability and security.
How Does a Term Plan Work?
Example: Arun, a 32-year-old IT professional, chooses a term insurance plan with a 30-year policy term and an adequate sum assured to cover his family’s future expenses.
- During Policy Term: If Arun passes away, his family receives the sum assured, which helps them maintain their lifestyle and cover expenses.
- Peace of Mind: Arun can focus on his career and family life, knowing his family’s financial future is secure.
- Tax Savings: Premiums offer tax benefits and the sum assured is tax-exempt, adding to Arun’s financial benefits.
Term Insurance Plan: Inclusions and Exclusions
Inclusions:
- Death Benefit: Sum assured paid to the nominee in case of the policyholder’s death.
- Accidental Death Benefit (Optional Rider): Extra sum assured for accidental death.
- Critical Illness Benefit (Optional Rider): Lump sum amount for specified critical illnesses.
- Terminal Illness Benefit: Early payout if diagnosed with a terminal illness.
- Tax Benefits: Premiums and benefits may be tax-exempt under current laws.
Exclusions:
- Suicide: Death due to suicide within the first year of the policy.
- Intoxication/Substance Abuse: Death from substance abuse or intoxication.
- Criminal Activities: Death due to involvement in illegal activities.
- Dangerous Activities: Death from high-risk activities without proper disclosure.
- Pre-existing Conditions: Conditions not disclosed may lead to exclusion of claims.
Our Term Insurance Plans
- ABSLI Income Suraksha Plan:
- Life cover up to 70 years.
- Flexible premium options and increasing income protection.
- Premium: ₹24.38k/year for 10 years.
- ABSLI Salaried Term Plan:
- Life cover up to 70 years.
- Option to choose death benefit payout (lumpsum or monthly) and inbuilt terminal illness benefit.
- Premium: ₹800/month.
Term Insurance Riders
- Accidental Death Benefit Rider: Extra coverage for accidental death.
- Critical Illness Rider: Lump sum for specified critical illnesses.
- Waiver of Premium Rider: Waives future premiums in case of critical illness or disability.
- Income Benefit Rider: Provides regular income in addition to the sum assured.
Types of Term Insurance Plans
- Level Term Insurance: Constant sum assured throughout the policy term.
- Increasing Term Insurance: Sum assured increases at a predetermined rate.
- Decreasing Term Insurance: Sum assured decreases over time, suited for loan protection.
- Return of Premium (TROP) Plan: Refunds premiums paid if you outlive the policy term.
How to Choose the Best Term Insurance Plan
- Assess Your Coverage Needs: Consider financial obligations, future goals, and desired lifestyle.
- Consider Policy Term: Align the term with your financial liabilities or retirement age.
- Check Flexibility: Look for options in premium payments, coverage adjustments, and add-on riders.
- Consult Experts: Seek advice from financial advisors or insurance experts.
Choosing Higher Sum Assured
- Adequate Coverage: Ensures enough support for future needs considering inflation and rising costs.
- Debt Repayment: Helps clear any outstanding loans or mortgages.
- Education and Lifestyle: Covers education expenses and supports family lifestyle.
- Long-Term Security: Provides financial stability for various life stages and needs.
Documents Needed to Buy Term Insurance
- Identity Proof: Government-issued photo ID (Aadhaar card, PAN card, etc.).
- Address Proof: Recent utility bills or other documents confirming residence.
- Income Proof: Recent salary slips, income tax returns, or Form 16.
- Age Proof: Birth certificate, PAN card, or passport.
- Medical Reports: Medical tests or reports if needed.
- Bank Proof: Bank statements or a cancelled cheque.
- Photographs: Passport-size photographs.
How to File a Claim for Term Insurance
- Intimate the Claim: Notify the insurance company about the policyholder’s death.
- Submit Documents: Provide claim form, death certificate, policy document, ID proof, and any additional documents.
- Claim Processing: The insurer verifies and assesses the claim.
- Claim Decision: The insurer decides on the claim based on policy terms.
- Disbursement: Upon approval, the claim amount is disbursed to the nominee.
Tips: Keep documents organized, ensure the nominee is informed, and seek assistance if needed.