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Features of Term Insurance

Everyone wishes to have financial security along with peace of mind at every stage of their lives. Term insurance is a financial tool that can help you achieve financial security for your loved ones along with peace of mind. Term insurance has several beneficial features such as affordable premiums, tax benefits, return of premiums among others.  Thus considering the features of a term insurance you should definitely consider securing your loved ones with the same.

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You may not always be around to take care of your family. And that’s when a term plan ensures your family is well protected.

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Features of Term Insurance

Features of Term Life Insurance

Features of Term Life Insurance
July 24, 2024

Table of Content

 

Here are some features of term insurance.

1. Affordable

2. Easy to Buy

3. Term Plan with Return of Premiums

4. Staggered Claims Payout Option

5. Flexibility in Paying Premiums

6. Offers Rebate

What is Term Insurance?

A term life insurance plan is the simplest way towards family protection. It provides death benefits to the nominee or family of the policyholder in case policyholder dies during the policy term. It allows you to collect a high, assured amount as a life coverage. All you need to do is pay just a few thousand rupees as payment and ensure a safe future for your family.

The features of term insurance include a lower interest rate with higher returns, flexible payouts and payment options. It is beneficial to consider buying your term insurance online as it allows you to compare multiple plans and choose the plan that offers higher coverage at a lower cost.

Features of Term Insurance

Term insurance features many benefits that make it an excellent option for investors who wish to ensure financial independence for their families. Here are some important features of term insurance:

1. Affordable

One of the features of term life insurance is its affordability. Term insurance plans usually have a tenure of five years to 30 years, which means that they have low premiums. This is a cost-effective plan that makes sure that policyholders have access to comprehensive coverage without compromising their financial plans. You can use a term insurance calculator to find calculate the term insurance premium.

2. Easy to Buy

Buying a life insurance policy is a very simple and straightforward process. Many insurance providers allow policyholders to compare different term plan features and select the one that suits their needs. Buying a term plan does not require a lot of documentation and can be completed quickly. 

3. Term Plan with Return of Premiums

One of the main term insurance features is that these plans offer a return of premium. With a term insurance with return of premium, if the policyholder survives the policy tenure, all premiums paid during the term are returned. This gives a sense of security to policyholders, ensuring that they will receive some benefit irrespective of whether the policy term is completed or not.

4. Staggered Claims Payout Option

Another one of term life insurance features is the staggered claims payout option. It is not necessary to choose a lump sum payout option. the beneficiaries of the policy can choose to receive the death benefit in installments. This can be in the form of fixed monthly income or increasing monthly income. This provides regular support over a long period of time.

5. Flexibility in Paying Premiums

Term plan features also include flexible premium payments. Policyholders have the option of paying their premiums annually, bi-annually, quarterly, or monthly as per their convenience. 

6. Offers Rebate

Certain features of term life insurance include rebates for healthy individuals. Insurance companies offer many discounts on premiums for those policyholders who maintain good health.

How do term insurance plans work?

Unlike various other types of life insurance, term life insurance does not have an investment component. The main aim of term life insurance is to offer financial protection to beneficiaries in case of the policyholder’s death. Let us take a look at how term insurance plans work.

  • Purchasing the insurance

The first step in buying a life insurance is to select the right features of term insurance. This includes choosing the coverage, the term of the policy, and any riders that may be included. Many insurance providers offer an online calculator that helps customers decide their coverage based on their financial plans.

  • Following the rule

Policyholders must follow all the policy rules, including paying premiums. Failing to pay the policy premium on time can lead to the cancelling of the policy. One of the term life insurance features offered to policyholders is a waiver of premium rider. This ensures that the term plan remains active in case the policyholder cannot pay the premium due to specific reasons.

  • Receiving the benefits in return

In case the policyholder passes away during the term of the policy, the death benefit will be received by the beneficiaries. This can be in the form of a lump sum payout, a monthly income option, or a combination of both.

Benefits of term insurance plans

Here are some of the benefits of term insurance -

  • Payout options

Term life insurance offers a variety of payout options that include lump sum option or monthly income payout. These options allow flexible decision-making to plan the financial future of those you love.

  • High coverage and low premium

One of the features of term insurance is that it provides high coverage at a low premium cost. This makes it a cost-effective way to ensure financial protection. This feature is very useful for individuals that have high financial liabilities.

  • Disability support

Some features of term insurance include disability support. They provide financial support in case the policyholder becomes disabled and is unable to pay the policy premium. This ensures the financial stability of the policyholder’s family.

  • Riders

Term insurance policies offer the option of riders that allow policyholders to increase coverage. These include the critical illness rider, waiver of premium rider, and the accidental death benefit rider.

  • Premium payment mode

Term insurance offers flexible modes of payment. Policyholders can choose the frequency of their payments. This helps them to manage their financial plans and keep the policy affordable and convenient.

  • Tax benefits

Under the Income Tax Act 1961*, purchasing a term insurance plan can provide tax benefits under section 80C. The premiums paid for the policy are tax-deductible, making the insurance a tax-efficient investment.

How are term insurance premiums determined?

The term insurance premiums are calculated based on a number of factors, such as the policyholder’s age, health, lifestyle and the desired coverage. The policyholder may be required to undergo some medical tests to assess how factors like smoking and the work environment can impact their health.

Summary

A term life insurance plan offers policyholders pocket-friendly protection for their families that can help them meet their financial goals at various stages of their lives. It is important to understand the workings, benefits and features of term insurance plans so that you can make a well-informed decision.

FAQs on Features of Term Insurance

Q. What are the features of term insurance?

The features of term insurance plans include affordability, flexibility in premium payment, high coverage at low premiums, and multiple payout options. In addition, these plans also offer riders that help increase the policy coverage.

Q. What is term insurance, and what are its benefits?

A term life insurance plan is the simplest way towards family protection. It provides death benefits to the nominee or family of the policyholder in case they die during the policy term. It provides benefits such as payout options, low premiums and additional riders.

Q. What is the scope of term insurance?

The scope of term insurance includes offering financial security to the policyholder, covering financial liability, and providing low premiums and flexible terms.

Q. Which is an important term in insurance?

One of the important terms in insurance is “premium”, which refers to the fixed amount the policyholder has to pay the insurance company in exchange for insurance. It is the amount you pay to ensure that the policy stays active.

Q. What are the features of general insurance?

The features of general insurance cover a variety of risks, such as health and property. Some of its main features are risk coverage, claim settlement ratio, flexible premium payments and financial security.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Disclaimer

##Individual death claim settlement ratio by number of policies as per audited annual statistics for FY 2023-24.

#Provided we have received all the relevant and required documents and no further investigation is required. Claim settlement process would be completed within stipulated timelines once the claim request is approved

^ Available under Life & Life Plus plan options

***Online Premium for Life Option, Male Life Assured, Non-Smoker, 20 years of age, Policy term of 25 years, Regular pay, Annual frequency, exclusive of taxes and levies as applicable. (Monthly Premium of 622/30=20.7).

* As per Income Tax Act, 1961. Tax benefits are subject to changes in tax laws.

ARN - ED/07/24/13426