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Frequently Asked Questions About Term Insurance

Published On Oct 02, 2021

Have you been looking for the best term insurance plan to safeguard your family with? Do you feel the need to be financially protected and save your dear ones from encountering financial struggles in the case of life uncertainties? If so, term insurance is the right choice for you! 

Frequently Asked Questions About Term Insurance 

Here are a few FAQs on term insurance and their answers you must be aware of:

1. What is term insurance?

Term insurance is a simple, reliable and affordable life insurance policy type. A term insurance policy, upon the unfortunate demise of the policyholder during the policy duration, pays a specific amount to the beneficiary appointed by the policyholder. 

2. How can I choose the right term plan for me?

If you want to choose the right and the best term insurance plan for yourself, make sure you focus on two key questions, i.e., ‘How much life insurance do I need?’ and ‘For how many years I want to be covered?’. 

3. How can I decide the right coverage amount for my term insurance plan?

In order to decide the right coverage amount for your term insurance policy, it would be a must for you to have an estimate of dependent family's monthly expenses for the next 15 years, liabilities, liquid assets, expenses related to life goals and retirement corpus in a detailed manner. 

4. How can I decide the right premium payment term and policy term?

Keep in mind that you must always choose to pay until your peak earning years so that you are not concerned about paying the premium for your term insurance policy after you stop earning. People beyond the age of 45 years years can choose to pay till they turn 60. As far as the policy term is concerned, you must select a longer coverage term. You can choose based on at least until your retirement year or the time you would require to cover your longest financial liability.

5. What is the right time to purchase term insurance?

The early years of life are considered the best for purchasing a term insurance policy as at that time an individual does not have to pay much premium. Also, term insurance purchase in the early years is advised to those who have many dependents in their family and them being the sole earning member. 

6. Can my term insurance premium change during the policy tenure?

In most cases, the term insurance premium does not change during the policy tenure. Generally, the premium is locked for the entire policy term, however, if there is a change in the tax regime, then the term insurance policy premium can increase. 

7. Do term insurance plans come with tax benefits?

Yes! Term insurance plans provide tax benefits under three sections, namely Section 80C, Section 80D and Section 10 (10D) of the Income Tax Act, 1961. 

8. What are some of the key documents to buy term insurance?

Some of the major documents required to buy term insurance are proof of age, proof of identity, proof of address, and proof of income. A term insurance policy buyer must keep their Aadhaar Card, PAN Card, Passport, salary slips, marriage certificate and other such documents handy to ease the process. 

9. What if I stop paying the premium for my term insurance plan?

If you stop paying the premium for your term insurance plan, you will lose out on all the benefits (if discontinued within 2 years). If discontinued after 3 years, your term insurance policy will reach the paid-up mode with coverage amount equal to surrender value.

Also read - Most Common Life Insurance Queries: Answered!

Should You Invest In A Long Term Insurance Product?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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