A term insurance policy is designed for the main purpose of providing extensive and secure financial independence. This policy offers a lump sum payment of a death benefit at the time of claim. This ensures that your family has a corpus in your absence.
As many benefits as it offers, it is very tricky to buy term insurance. If you are new to buying insurance, you may have a long list of questions. By knowing the answers, you can make an informed decision.
Here are the most common questions that people have on term insurance:
- Does lifestyle affect term insurance?
Yes. This includes information like medical records, habits, living conditions, etc. If your lifestyle is a risky one, term insurance may be either denied for you or given at a higher premium. For example, if you have the habit of smoking, your coverage and premium may both be different.
- How are term insurance plans different from accidental insurance plans?
A unique way of looking at accidental insurance plans is that they are an ‘only if’ product. This means while they offer a death benefit, it is valid only if the policyholder dies in an accident. On the other hand, term insurance plans cover all types of death.
- Can the term insurance premium change after some time?
The answer to this question depends on you. If any factors related to your life coverage change, the insurance provider may change your insurance premium. These factors include adding any add-on covers to your policy or declaring some change in your lifestyle.
- How is term insurance different from life insurance?
While a term insurance policy offers life coverage, it is very different from life insurance. Firstly, life insurance offers maturity benefits that term insurance doesn’t. Secondly, different types of life insurance include savings and investment components that make it more expensive. On the other hand, term insurance is simply a product of high-life coverage. Hence, it is much cheaper.
- Does term insurance offer maturity benefits?
Ideally, term insurance plans offer no maturity benefits i.e. if you complete the term of the policy without having to make a plan. Hence, it may happen that you make premium payments for the whole term but don’t get anything in return. However, you can opt for an ROP term insurance plan meaning that you get the facility of having your entire premium returned to you if you survive the policy.
- Does term insurance cover a policyholder’s death outside of India?
Simply put, Yes. Term insurance plans cover the policyholder’s anytime within the policy’s term and anywhere. If the policyholder dies outside India, the family still receives the death benefit.
- Can NRIs buy term insurance?
An NRI can purchase the policy when they visit India. After the formalities related to the underwriting of the insurance policy are complete, it will be as any other policy availed by an Indian citizen.
- Does term insurance offer tax benefits?
Term insurance does offer tax benefits. Under Section 80C of The Income Tax Act, you can have a tax deduction of up to INR 1.5 lakhs in a financial year.
Many insurance providers have a great offering of term insurance plans. You should buy one of these plans as soon as you can. However, your hesitation towards making the purchase is natural, given that you may not understand the product. But, with these frequently asked questions answered above, the only thing left is to use a term insurance calculator, find a plan of your preference and buy it.