Term insurance comes under which section?
Term insurance premiums in India typically qualify for tax deductions under Section 80C of the Income Tax Act. The maximum deduction allowed under this section is 1.5 lakh per financial year. Additionally, the death benefit received by the nominee is usually exempt from tax under Section 10(10D), subject to certain conditions.
Life insurance or life insurance is a very important part of financial planning. But unfortunately, even today, most people in India are underinsured, that is, they do not have the amount of insurance they should have.
And one of the main reasons for this is that people do not have the right information about term insurance or term insurance. And that’s why today I am including this topic in the personal-finance category. So let’s first know –
What is term insurance?
If we talk about pure life insurance, then it is just a contract between an individual and an insurance company, in which the company pays a pre-determined amount to the nominee after the death of the person. And in return, the person pays some money to the company.
In technical terms, we call that amount as sum insured or insurance amount and the money that the person deposits is called premium or insurance installment.
This has become a matter of insurance, now let’s understand what “term” means.
Here the term refers to the period, i.e. a certain time period.
Why do we need term insurance?
Because you want to be sure that if you do not live in this world tomorrow, then your family will not have to face a shortage of money behind you.
Friends, I can write a lot to explain the need for term insurance.
That is, in difficult times, your own property is the biggest help, in such a time if you yourself are not able then no one else comes to your help. For example, if the lotus flower does not have water, then the sun cannot prevent it from drying up.
And term insurance plans are a way to arrange this water.
Term insurance gives you a large sum assured at a low premium, which provides a huge financial security cover to your family after a sudden death.
But why term insurance? Why not an endowment or money back policy?
Because a term insurance policy is the only policy that is designed to give only risk cover. While the rest of the policies also have many other benefits that make the policy very expensive.
For example: A 30-year-old can get insurance up to Rs 50 lakh at a premium of just Rs 5,000-6,000 per annum. Whereas in the endowment insurance plan, the insurance amount is usually given only 10 to 20 times the annual premium, i.e. only fifty thousand to one lakh rupees for five thousand rupees. Obviously, these policies have their own advantages but they are not suitable for risk cover.
But why doesn’t my advisor tell me about term insurance?
Because the premium of these policies is low from the beginning and when the premium is low, the commission will also be low and in such a situation, most advisors do not promote this product. However, this does not mean that every advisor does this, many financial advisors do give term insurance plans to their clients.
Who can take a term insurance plan?
Any person who is between 18 years and 65 years of age can take a term plan.
For how many years can a term insurance plan be taken?
It depends on the company. Insurance companies provide these plans for many periods, such as 10, 20, 30 or 40 years.
In most cases, term insurance plans are not offered to you after the age of 75 to 80 years.
Does everyone get term insurance?
No, the company takes a big risk in giving a term plan because you give a few thousand rupees and immediately your cover of several lakhs or crores starts. In such a situation, any person who has a serious illness or his life is in danger will want to take such a plan.
Therefore, before issuing such a policy, the company conducts your risk assessment by the underwriter, in which your medical test can also be done and you can be asked about your work, family health history and other things.
The company issues the policy of the risk it feels is right.
For example: If someone has high blood pressure and diabetes, the company can refuse to give him a policy.
Apart from this, the company also sees whether the family of the person on whose life the policy is being taken is really financially dependent on him. Doing so is also helpful in reducing the crime related to insurance, otherwise criminal elements can also conspire to take insurance money from the company by killing their spouse’s life by taking a big sum insured.
Can I get term insurance for anyone other than myself?
Yes, you can take term insurance or any insurance for everyone in whom you have an insurable interest. That is, when that person’s life ends, you have to suffer financial or any other kind of loss. By default, you have an infinite insurable interest in your wife and children.
For example: You can take insurance for your wife, your car but not for someone else’s wife or someone else’s car because you do not have any insurable interest in them.
Will I not be given term insurance in case of any illness?
It isn’t. Many times the company gives the policy to such individuals by charging a slightly higher premium.
I smoke cigarettes. Will I get a term plan?
Yes, you can get a term plan but you will have to pay a higher premium than non-smokers.
What if I wasn’t a smoker at the time of taking the policy, but started drinking after a few years?
So, you have to tell your insurer about this and you may have to pay a higher premium than before. But if you do not tell, then later the company can refuse to give the claim.
I’m army/army. I’m in the police. Will I get term insurance?
Yes, you will get term insurance. Just the company will fill you out a different type of questionnaire.
Keep these 15 things in mind before and after taking a term plan
1) Do not delay in taking a term plan
The younger you take term insurance, the lower the premium you have to pay. Because as you move forward, the risk on your life also increases… The death rate increases and insurance companies charge you more.
Also, looking at it from another perspective, you can say that no one has seen it yesterday… No one can say anything about what will happen, so the sooner you insure yourself, the better.
2) “Let’s find out…” Avoid
Many times people go to the market and buy expensive things quickly. But when it comes to taking life insurance, mutual funds or any other financial product, he says-
“Let’s find out…”
And the next several weeks… Months… Years… Until they keep on knowing.
This type of behavior in English is called paralysis of analysis. Avoid this and take a plan after a week of research.
3) Know the options available in term plans
There are many types of term plans in the market today. Through the internet, you must find out from a friend or an advisor about what kind of term plans are available and take the one that suits you the most.
For example: There are some plans in which the nominee gets the full insurance amount in case of death and in addition, he is paid every month for the next 10 years. Similarly, there are some plans in which you get a large part of the insurance amount in advance if there is a critical illness like cancer and the insurance of the remaining insurance amount continues.
4) Increase your cover at important stages of life
Suppose you are working today and you have taken insurance of 40 lakhs. But after 5 years when you get married… If there are children and the number of people dependent on you increases, then you should also take your sum insured.
To do this, you can take a new policy or request your old insurer to increase the cover.
5) Do not hide any information from the insurance company?
Before giving insurance, the company takes many material information from you like your health history, work, etc. Many times people think that the premium will increase or they will not get insurance if they tell all this and so they hide some things.
But by doing so, you actually breach an important principal of insurance – The Principal of Utmost Good Faith – and in such a situation, the company can refuse to claim in case of death.
Anyway, you should think that if you hide information in this way and get insurance, then in the end your purpose of providing financial security to your family will be lost. So never do this.
6) Insure a little more than you need
Maybe today you feel that 20 lakh insurance is enough. But soon due to your increased responsibilities and inflation, you will start feeling less this amount, so get a little more term insurance than needed.
7) Do not choose the longest period for insurance
Maybe you think that by the time you take insurance up to 80 years, then you will die and my loved ones will get a lot of money.
- But doing so is not right for you for two reasons-First, you need a large amount of life insurance so that if you leave at a young age or before fulfilling your responsibilities, then there is no financial crisis on the family. Generally, you will complete such responsibilities by the age of 65 years. Therefore, you will not need term insurance beyond that.
- Secondly, if you take the longest term term insurance, then you will have to pay a lot of premium. Because after 60, the risk on life starts increasing very fast and the company charges you more money to cover this risk. And it is not that this premium will be charged from you when you are sixty years old, this premium will be charged from you from the beginning as a level premium.
8) Tell your family after taking term insurance
Just a few days ago, there was a news that 23 life insurance companies in India have a total unclaimed amount of more than Rs 15,000 crore of policyholders. I am sure, a very large part of this will be such policies which the policyholder would not have told about in his house. Therefore, you must inform the right person about the term insurance plan you have taken.
9) Use the rider
The rider gives you extra coverage. With a term insurance policy, you can hire a few riders at a very low additional premium. Such as-
- Critical Illness Rider
- Permanent Disability Rider
- Accidental death benefit rider, etc.
You can find out the details about this from your advisor or online agent.
10) Understand the use of MWP Act
If you want that after your death, only your wife and children should get all the benefits of your policy, not any other relative or creditor, then you can use the Marriage Women’s Property Act. While taking a term insurance policy, you can ask the company about this.
11) Find out the option of taking term insurance online
If you want, you can also buy a policy by visiting an insurance company’s website or an insurance portal. Generally, it is cheaper to take an online policy and now these sites have also started giving good service to the customer.
12) Do not choose a company with a poor claim settlement ratio
If a life insurance company received 100 death claims, out of which it gave the claim to 98, then the claim settlement ratio of that company was 98%. Before choosing your insurer, find out what its claim settlement ratio is. This ratio does not have to be the best, but it would be better if the ratio is above 95%.
3) Don’t let your carelessness lead to policy lapses
If you do not deposit the premium of your policy on time, then it lapses. And in such a situation, no benefit related to that policy is payable.
Recently, I came across an incident where a person had taken insurance but his policy had lapsed some time ago and in such a situation, the family did not get a single rupee of insurance.
So no matter what happens, don’t let your term insurance plan lapse.
Also know that you can revive the policy even after it has lapsed. So if the policy lapses by mistake, contact the insurance company immediately and get your policy revised.
14) Check the physical presence of the company from which the policy is taken
If you take a policy online or from a channel where you do not have to go to the insurance company’s office, then you must know where the nearest office of that company is.
After you leave, family members may have to visit the office to settle the claim, in such a situation, if there is no office, then the family members may have problems.
15) Let the company know about your current location, contact number and work:
If you are going to leave India and live in another country, then inform the company about this. In most countries, your insurance will continue to be like this. But if you are going to Afghanistan, Syria or any war-torn country, then the company can stop cover.
Apart from this, if you change the address or mobile number, then definitely inform the insurance company, so that they can remind you about renewal and other things from time to time.
So friends, these were all the important things related to term life insurance. I hope by reading this article you have learned a lot about this topic and in the end you are requested that if you have not yet taken your term insurance plan, then take it within a week of reading this post and also tell me by commenting which plan you have taken.
Thank you!
