Term Plan Compare

Additional Useful Information

• Term Plans are available in different configurations. Here are some examples -
• Level Term Plan – Assured amount is fixed throughout the tenure.
• Return of Premium Plan – Total premiums paid are returned at maturity.
• Increasing/Decreasing Term Plan – Policyholder has the option to adjust sum assured annually for changing needs.
• Convertible Term Plan – Can be converted to any other type of plan at a future date.

• Specific terms of Term Plans will differ from company to company.

• Term Plans are suitable for individuals who have dependents in their family and want to make sure that they are financially secured in case of an untimely death.

Returns *

• Term Insurance Plans only have a death benefit. However, their premiums are lower as compared to Whole Life Plans.

• Term Insurance Plans have no cash value.

• Term Insurance Plans may have a surrender value if the plan is surrendered before maturity. Inclusion of surrender value depends on policy to policy. It is not fixed.

• Return of Premium Term Plans may give returns on maturity, but these returns are very nominal.

Risk Level

• Term Insurance Plans are used to mitigate risk by guaranteeing a death benefit.

• Failure to pay premiums would terminate the insurance coverage and put the policyholder at risk.

• All insurance providers are regulated by the government. Therefore, any default risk is negligible.

Liquidity

• Term Plans are liquid. The policy can be surrendered at any time and if there is a surrender value embedded in the policy, it will be received by the policyholder.

Interesting Facts

• Premiums of Term Plans may increase if the policyholder develops a health condition later in their life after purchasing the plan.

• Term Plans bought at a younger age result in lower premiums as compared to plans purchased at a later age.

• Premiums are higher if the policyholder is in a profession that poses a health hazard.

• Poor lifestyle habits may also increase the level of premiums to be paid.

• Some Term Plans may have riders. This is an option that allows policyholders to have enhanced benefits above just life insurance such as accidental death benefit or critical illness benefit. This may increase premiums marginally, but they provide additional value.

• Shorter the tenure of the plan, cheaper the plan is.

• It may be prudent to purchase a plan that covers the policyholder and their family at least until retirement.

Tax Implications

• The maturity benefit is tax free if the annual premium is less than 10% of the sum assured in the policy. Otherwise, the maturity benefit amount is to be added to the taxable income of the policyholder and income tax is to be paid according to the tax slabs.

• The death benefit which is the amount that the nominee of the policy receives in the event of the demise of the policyholder, is tax free.

• The premiums of the term plan can be used towards claiming the ₹1,50,000 tax deduction available under Section 80C of the income tax act. However, the premium paid should be less than 10% of the sum assured.

• Under Section 80D of the income tax act, up to ₹25,000 tax deduction can be claimed if there are additional health riders purchased along with the term plan. If the person is above 60 years of age, up to ₹50,000 tax deduction can be claimed.

Where To Invest

• https://termlife.policybazaar.com

• https://www.hdfclife.com/term-insurance-plans