Understanding Top 5 Term Insurance Plans: The sooner you start, the better secured your family’s future will be !!!

Overview

Term insurance Plan is one of the simplest and most effective forms of life insurance available. It offers financial security to the policyholder’s family in the event of their untimely demise. Unlike other life insurance policies, a term plan does not have a maturity benefit; its sole purpose is to provide a death benefit to the beneficiaries. This article explores the importance of term insurance, the advantages of starting a policy early in life, and compares the top five companies offering term insurance in India.

 Importance of Term Insurance

Term insurance is a crucial component of financial planning, particularly for those who have dependents or financial obligations. Here are some reasons why term insurance is important:

·        Financial Security for Loved Ones 

In the unfortunate event of the policyholder’s death, the term insurance payout ensures that the family’s financial needs are taken care of. This can include day-to-day expenses, children’s education, marriage, or even repaying loans.

 

·        Affordable Premiums 

Term insurance plans are more affordable compared to other life insurance products like endowment plans or whole life policies. This makes it accessible for a broad segment of the population.

·        High Coverage at Low Cost 

One of the key benefits of a term plan is that it provides substantial coverage at a low premium. For instance, a person in their 30s can secure a sum assured of ₹1 crore for a premium as low as ₹10,000 per annum.

·        Tax Benefits 

Premiums paid towards a term insurance policy are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. Additionally, the death benefit is also tax-free under Section 10(10D).

·        Flexibility 

Most term plans offer various add-ons or riders like critical illness cover, accidental death benefit, and waiver of premium. These can enhance the scope of coverage and provide additional protection.

 Benefits of Starting a Term Plan Early

Purchasing a term insurance plan at an early stage in life can yield several advantages:

·        Lower Premiums 

The premium for term insurance is directly related to the age of the policyholder. The younger you are when you buy the policy, the lower the premium will be. This is because younger individuals are generally healthier and have a lower risk of life-threatening diseases.

·        Higher Coverage 

When you start early, you can opt for higher coverage at an affordable premium, ensuring your family’s financial security without straining your budget.

·        Lock-In Lower Premiums 

Once a term plan is purchased, the premium is locked in for the policy’s duration, regardless of changes in your health or age. This means you can secure lower premiums by buying early.

·        Peace of Mind

 

Starting a term insurance plan early gives you peace of mind knowing that your family is financially protected from a young age. It allows you to focus on other financial goals, knowing that this foundational step is covered.

·        Coverage for a Longer Period 

By purchasing a term plan early, you can ensure that the coverage lasts through your critical working years and beyond, providing a safety net when it is needed the most.

 

Factors to Consider Before Choosing a Term Insurance Plan

When selecting a term insurance plan, it’s important to weigh several key factors to ensure you’re making the best choice for your needs. Here are a few considerations:

·        Risk Coverage

   – The main benefit of a term insurance plan is its ability to provide financial protection. If the policyholder passes away, the insurance company pays a sum to the family, offering financial stability in exchange for the premiums paid.

·        Variety of Plans

   – Insurance providers offer various plans to cater to different needs. Generally, higher premiums result in more comprehensive benefits, so it’s important to choose a plan that matches your requirements and budget.

·        Health Benefits

   – Some term insurance plans also cover hospitalization costs and treatment for critical illnesses, providing additional peace of mind in the face of health challenges.

·        Encourages Saving

   – Certain insurance policies are designed to also function as a savings tool, helping policyholders build wealth over time while promoting a disciplined approach to saving for the future.

·        Additional Income

Some policies offer guaranteed income, paying out regular sums (usually monthly or quarterly) to the policyholder or their nominee if an unexpected event occurs.

·        Loan Facility

Certain insurance plans allow the policyholder to borrow against their policy, offering a convenient credit option. However, this feature is only available with specific policies.

·        Tax Benefits

Purchasing a term insurance plan can also provide tax advantages. Premiums paid are eligible for deductions under Section 80C of the Income Tax Act, 1961, offering potential savings on your tax bill.

Overview of Top Term Insurance Plans available in India:

LIC e-Term Insurance Plan

LIC is one of the best term insurance company in India. Its e-term plan is a non-participating pure life insurance plan which can be purchased only through the online mode without the involvement of any middlemen. Pure life insurance cover implies that only the policy holder’s life is covered.

If the policyholder happens to die during the duration of the plan, then the beneficiaries of the policyholder are given the sum assured. If the policy holder survives the duration of the e-term plan, then no sum is paid to the policyholder and his family members or beneficiaries.

Features of LIC e-Term Insurance Plan

• Plan can be purchased online.
• Different premium rates are charged for smokers and non-smokers.
• In case of the death of the policyholder, the sum assured will be paid.
• The purchaser can return the policy within 30 days of purchasing the policy with reasons if he is not convinced with the terms and conditions of the policy.
• It is less costly than the offline term plan of LIC.
• Non-resident individuals can also purchase the LIC Online e-term plan, which will be covered even if they are abroad, provided they are in the country for medical tests.

Benefits of LIC e-Term Insurance Plan

• Death Benefit: In case of the unfortunate death of the insured during the policy term, the sum assured shall be payable to his or her nominee, who can be a dependent family member.
• Maturity Benefit: If the policyholder survives until the end of the policy term, no amount shall be given to him or his family members. Pure term plans do not pay anything on maturity and hence are able to charge much less premium.
• Income Tax Benefit: A life insurance premium paid up to Rs.1,50,000 every year is allowed as a deduction from the taxable income each year under section 80C of the Income Tax Act.

Death Benefit amount paid to the nominee is also exempted from tax under section 10(10D).

HDFC Click 2 Protect Plus

HDFC Life Click 2 Protect Plus is pure term insurance that gives a large amount of life cover for a really low premium.

The policy also offers added features such as:

• Option to increase cover on milestones such as marriage and childbirth
• Accidental Death Benefit to the rider
• Taking the payout as lumpsum + monthly claim settlement.

Features of HDFC Click 2 Protect Plus

Death Benefit: In the case of death of the person insured while the policy is in force, the nominee will get the following benefits:

• For single premium policies, 125% of single premium, or sum assured, whichever is higher
• For policies other than the single premium type, 10 times the annualized premium, or, 105% of all paid premiums till the date of death, or, sum assured, whichever is higher

Life Stage Protection: Life Stage Protection is an optional cover that is available under the life option of the policy and can be taken after payment of an additional premium.

This cover makes sure that the person insured is financially protected at each stage of life as he/she achieves different milestones. With this add-on feature, one can:

Increase Your Sum Assured: One can increase their insurance coverage

Reduce the Additional Cover at a Later Stage: This term plan offers the ability to reduce the insured person’s Additional Insurance Cover from the point where he attains 45 years of age.

Maturity Benefit: There will be no amount payable when the person insured survives till the end of the policy term.

Income Tax Benefit: Life Insurance premiums paid up to Rs. 1,50,000 are allowed as a deduction from the taxable income every financial year under section 80C.

The maturity amount he receives from this plan is tax-free under section 10(10D)

Options Available for HDFC Click 2 Protect Plus

 Life Option

The Death Benefit as per the above calculations will be paid in lump sum amount on the death of the insured person.

 Extra Life Option

The death benefit as mentioned above will be paid as a lump sum amount. An additional benefit equal to the sum assured will be paid if the death is because of an accident.

ICICI Pru iProtect Smart

ICICI offers some of the best term life insurance in India. This term insurance plan provided by ICICI is the only plan that offers claim payment on the diagnosis of 34 critical illnesses. Under this plan, an insured can get cover up to 75 years of age and he can get three types of tax benefits.

 Features of ICICI Pru iProtect Smart

• It fits into the insured’s budget
• It gives the insured longer cover
• It pays on diagnosis of any of the 34 listed critical illness
• It gives 4 payout options to pick from
• It pays life cover on terminal illness (including AIDS)
• It gives the insured an option to add accidental benefit now, or later

Benefits of ICICI Pru iProtect Smart

• Life– Nominee will receive the gains only in case of demise of a policyholder or terminal illness of policyholders.

Along with that, if the policyholder is diagnosed with permanent disabilities due to an accident, then he will not have to pay future premiums. The policy will continue normally without any premium payment from the person insured.

• Life Plus- Along with “Life” option gives the insured accidental rider benefit.

3. Life & Health- Along with “Life” option gives the insured critical illness rider benefit.

It covers 34 major illnesses. The policyholder will get the full benefit irrespective of the actual cost of treatment. This gain can be exercised only once during the policy period.

Variants of ICICI Pru iProtect Smart

Variant Name	Benefits
Life	Death Terminal Illness Benefit Waiver of Premium on Permanent Disability
Life Plus	Death Terminal Illness Benefit Waiver of Premium on Permanent Disability Accidental Death Benefit
Life & Health	Death Terminal Illness Benefit Waiver of Premium on Permanent Disability Critical Illness Benefit
All-in-One	Death Terminal Illness Benefit Waiver of Premium on Permanent Disability Critical Illness Benefit Accidental Death Benefit

Protection Benefits of ICICI Pru iProtect Smart:

• Death and Terminal Illness

The insured’s nominee receives the life cover amount in case of his or her death. The insured gets 100% cash payout of the total life cover amount if you are diagnosed with a terminal illness.

The policy will close on payment of either the terminal illness or death benefit.

Terminal Illness refers to the high likelihood of death within the next six months as diagnosed by medical practitioners that specialize in the same.

• Permanent Disability

The company pays all the due premium on the insured’s behalf in case of permanent disability caused due to an accident.

Permanent disability will be triggered if the insured is unable to perform 3 out of the 6 listed activities permanently and consistently for 6 consecutive months

• Accidental Death (optional)

In case of death due to an accident, the insured’s nominee receives a lump sum amount called the accident cover.

• Critical Illness (optional)

On the first occurrence of any of the 34 covered critical illnesses, the insured receives a lump sum pay-out.

Max Online Term Plan Plus

Max Life offers an online term plan designed to ensure the financial security of your loved ones in the event of death, disability, or critical illness. Recognized as one of the top term plans in India, it provides comprehensive protection with a range of customizable options.

Key Features of Max Online Term Plan Plus

• Eligibility: The minimum age to purchase the plan is 18 years, with a maximum entry age of 60 years.
• Flexible Payout Options: Offers the choice of regular income payout options to suit different financial needs.
• Premium Payment Options: Includes a limited pay option for premium payments, with the flexibility to pay monthly, quarterly, half-yearly, or annually.
• Additional Coverage: Allows the addition of benefits like accidental death cover, premium waiver, and critical illness cover for an extra premium.
• Freelook and Grace Periods: Online plans come with a 30-day freelook period, and there’s a grace period of 15 days for monthly premium payments (30 days for other payment modes).
• Coverage Duration: The policy covers individuals up to 85 years of age, providing long-term protection.

Coverage Options for Max Online Term Plan Plus

• Pure Term Plan: Provides a lump sum payment to the insured’s family in case of death during the policy term.

• Term Plan with Fixed Monthly Income: In addition to the lump sum, 100% of the sum assured is paid out in a lump sum, followed by 0.4% of the sum assured each month for 120 months, resulting in a total payout of 148% of the sum assured.

• Term Plan with Increasing Monthly Income: This option offers a lump sum payment of 100% of the sum assured, followed by a monthly income that increases by 10% annually for 120 months. The total payout under this option amounts to 169.6% of the sum assured.

SBI Smart Shield Overview

SBI Smart Shield is a straightforward term insurance policy designed to offer financial security to a family in the unfortunate event of the breadwinner’s death. The policy ensures that the sum assured is paid to the nominee upon the insured’s passing. For those with a single premium policy, there’s an option to surrender the policy after two years, with the surrender value determined by a pre-set formula. This plan does not offer any survival benefits.

Key Options Available in SBI Smart Shield

• Basic Term Insurance: This simple option provides the nominee with the sum assured if the insured passes away during the policy term.

• Increasing Sum Assured: Under this option, the sum assured increases annually, making it ideal for those who want their family’s financial support to account for inflation and maintain a higher standard of living.

• Loan Protection: Tailored for individuals with home or car loans, this option gradually decreases the sum assured over time, matching the outstanding loan amount. This option is not available to those without loans.

• Flexible Payout Options: The nominee can choose between receiving the sum assured as a lump sum or as regular monthly payments, depending on the policy’s reduced term assurance.

Eligibility

 

·        Entry Age: 18 to 60 years.

• Maturity Age: 65 years.

Comparison of Top 5 Companies Providing Term Insurance Plans in India

Here is a comparison of the top five companies offering term insurance in India based on factors such as premium rates, claim settlement ratio, and additional features.

Parameter	LIC e-Term Insurance Plan	HDFC Click 2 Protect Plus	ICICI Pru iProtect Smart	Max Online Term Plan Plus	SBI Smart Shield
Sum Assured	Minimum: ₹50 lakh (for non-smokers)	Minimum: ₹25 lakh (varies by plan)	Minimum: ₹25 lakh	Minimum: ₹25 lakh	Minimum: ₹25 lakh
Policy Term	10 to 35 years	10 to 40 years	5 to 40 years	10 to 40 years	5 to 30 years
Premium Payment Options	Annual	Regular, Limited, Single Pay	Regular, Limited, Single Pay	Regular, Limited Pay	Regular, Limited, Single Pay
Entry Age	18 to 60 years	18 to 65 years	18 to 65 years	18 to 60 years	18 to 60 years
Maturity Age	75 years	75 years	85 years	85 years	65 years
Death Benefit Payout	Lump sum only	Lump sum, Lump sum + Monthly Income, Increasing Income	Lump sum, Lump sum + Monthly Income, Increasing Income	Lump sum, Lump sum + Monthly Income, Increasing Income	Lump sum, Lump sum + Monthly Income
Riders/Add-ons	None	Accidental Death, Critical Illness, Income Benefit	Accidental Death, Critical Illness, Waiver of Premium	Accidental Death, Critical Illness, Waiver of Premium	Accidental Death, Accidental Total & Permanent Disability
Claim Settlement Ratio	96.46% (2022-23)	99.34% (2022-23)	98.74% (2022-23)	99.34% (2022-23)	97.05% (2022-23)
Grace Period	30 days	30 days	15 to 30 days	15 to 30 days	15 to 30 days
Freelook Period	30 days	30 days	30 days	30 days	30 days
Surrender Value	Not applicable	Available for Single Pay only	Available for Single Pay only	Available for Single Pay only	Available for Single Pay only
Tax Benefits	80C and 10(10D)	80C and 10(10D)	80C and 10(10D)	80C and 10(10D)	80C and 10(10D)
Exclusions	Suicide within 1 year	Suicide within 1 year	Suicide within 1 year	Suicide within 1 year	Suicide within 1 year
Policy Conversion Option	Not available	Available	Not available	Not available	Not available

Conclusion

A term insurance plan is an indispensable part of financial planning, offering protection and peace of mind at an affordable cost. The benefits of starting a term plan early cannot be overstated; it not only provides financial security at a lower premium but also ensures long-term coverage. When choosing a term plan, it’s important to consider factors like the claim settlement ratio, premium rates, and additional features offered by various insurers.

By comparing the offerings from top companies such as LIC, HDFC Life, Max Life, ICICI Prudential, and SBI Life, you can make an informed decision that aligns with your financial goals and the needs of your family. Remember, the sooner you start, the better secured your family’s future will be!!!