What is a Term Insurance policy or Term Plan ? 

A term insurance policy provides a lump sum payout to nominees if the policyholder passes away during the term. Unlike other life insurance plans, term insurance is purely for risk protection, offering no investment returns.

Key benefits of a term plan:

• Low premiums: Term insurance comes with affordable premiums since it doesn't offer maturity returns and has a simpler fee structure.
• Fixed premiums: Once locked in, your premium remains the same throughout the policy term.
• Guaranteed claims: After holding a policy for 3 years, claim payouts are nearly guaranteed.
• Tax benefits: Enjoy deductions under Section 80C and tax-free payouts to nominees.

Ideal coverage for a Term plan: 

To calculate your term insurance cover, calculate your current annual expenses, multiplied by years of coverage & add the current outstanding loan amount . This ensures your family maintains their lifestyle in your absence. 

please read more Term Insurance Calculator

Riders for a Term Insurance plan: 

Enhance your policy with riders like Critical Illness, Increasing Cover, Top-Up, Terminal Illness, and Waiver of Premiums for comprehensive protection. 

Please read Term Insurance Riders blog

Premium Payment Options:

• Regular Pay: Pay premiums yearly until the policy expires. 
• Limited Pay: Pay all premiums upfront within a set period (e.g., 5 years) for a discount.
• Monthly Payment: Some insurers allow monthly premium payments, though missing a payment could lapse the policy.

While you can choose as per your own comfort, it is generally suggested to go with Regular Pay, want to know why? please read this "Limited Pay vs Regular Pay" or Contact Us.

How to choose the best term insurance policy: 

Key Factors to consider while choosing a Term Plan (but not limited to).

1. Insurer's Reputation:

• Settlement Ratio (Claims & Amount): A higher ratio is better, as it indicates the insurer's reliability in paying claims
• Complaint Numbers: Fewer complaints typically reflect better customer service and satisfaction.
• Solvency Ratio: It is a measure of an insurer's financial health and ability to meet its long-term obligations to policyholders. It's calculated by dividing the insurer's available solvency margin (ASM) by the required solvency margin (RSM).  IRDAI requires insurance companies to maintain a minimum solvency ratio of 150% or higher. Higher the better it is. 

2. Affordable Premium:

While lower premiums are attractive, be cautious about plans offering heavy discounts in the first year, as premiums may increase significantly after that.

Tip: Compare premiums for the 2nd year onwards to get a clearer picture of long-term affordability.

3. Riders or Add-Ons:

Riders provide additional protection and flexibility beyond the basic coverage. Some insurers offer free riders, while others have limited options.

Common Riders to Consider (though not limited to): Critical Illness Rider, Waiver of Premium Rider, Terminal Illness Rider, Life Stage Benefit/Voluntary Benefit (Instead of this rider, you can always purchase a better term plan later, but this rider can save you time and hassle during your life’s milestones).

4. Brand Longevity:

Term insurance is a crucial part of your long-term financial planning, so it’s wise to choose a brand that has been in the market for over 20 years. If you trust a newer brand, that’s fine, but ensure you consider all other factors carefully.

Tax Exemption on Term Insurance:

1. Section 80C: Premium paid up to ₹1.5 lakhs is exempt from tax.
2. Section 10(10D): Maturity proceeds, including death benefits, are exempt from tax, provided - Policy issued on or after April 1, 2003. If premium paid does not exceed 10% of the sum assured.
3. Section 80D: Additional exemption of ₹25,000 (₹50,000 for senior citizens) for critical illness riders.

Click here to know more about Taxation on Term Insurance

Top Term Insurance Plans for 2025 in India

• Max Life Smart Secure Plus
• Tata AIA Maha Raksha Supreme
• Bajaj Allianz Smart Protect Goal
• ICICI Prudential iProtect Smart

Thanks,

Honvest Team