Term Insurance


Are you the sole earning member in your family? Or perhaps, one of the main breadwinners? If you answered yes to either of these questions, it’s possible that you worry about your family’s financial security in case something unfortunate were to happen.


A term insurance plan, which is the simplest kind of life insurance available today, can help put that worry to rest. Term insurance is affordable, simple, and extremely easy to buy. The best part is that it gives your loved ones a financial safety net to secure their future.


Term plans from ABSLI offer comprehensive protection and financial stability to your family. They are easy on your wallet, protect your family financially, and give you a wide range of other benefits too.


What is term insurance and how does it work?

Term insurance is a type of life insurance that offers coverage for a predefined ‘term’ or period of time. This period is known as the policy term. Like all life insurance plans, a term plan is a contractual agreement between the policyholder and the life insurance company. The policyholder needs to pay premiums to the life insurance service provider. In return, the insurer gives the policyholder a life cover.

If the policyholder passes away during the policy term, the insurance company pays the policyholder’s nominee a predetermined sum of money. This is the amount that is guaranteed under the life cover offered by the term plan. Generally, term plans offer a high life cover at affordable premiums, making them suitable for people with any kind of budget.

Check out the term plans from ABSLI here


Why do you need a term insurance plan?

Benefits of Term Plans

Security for your family in your absence

The main reason you work so hard and plan your finances so carefully is your family’s happiness, isn’t it? At the end of the day, every earning member simply wants to ensure that their loved ones are financially secure and well-protected.

And as long as you are around, you know that you’ll do everything to take care of your family. But what happens in case something unfortunate occurred, leaving your loved ones without any financial stability?

A term plan is the friend you can count on in such a situation. The life cover offered by a term plan acts as a financial safety net for your family in your absence. So, you can rest assured that they remain financially secure, no matter what.

A large cover for a comparatively lower premium

When you buy a life cover, you need to ensure that the payout will be sufficient to offer your family financial stability. Fortunately, a term plan gives you a significantly high life cover in exchange for an extremely affordable premium.

When you compare the payouts term plans give with the premiums charged, you’ll find that term insurance is the most cost-effective kind of life insurance.

To give you some context, take the ABSLI DigiShield Plan. This comprehensive term insurance policy provides a life cover of Rs. 1 crore at just Rs. 477 per month.* See how nominal the premium is, compared to the large life cover? That’s another reason to buy a term plan.

*Scenario: Female policyholder, aged 21 years, buying a level term insurance, with regular premium paying term, and a policy term of 25 years (excl GST)

The ability to pay off debts

Over the course of your life, you may have to borrow funds to meet some life goals. A housing loan, for example, may be necessary so you can buy your first home. Or, you may have to avail a personal loan to pay for some major unexpected expenses.

It’s easy to repay these financial liabilities as long as you have a steady source of income to rely on. But in your absence, the burden of repaying these debts will fall on your loved ones.

A term insurance policy ensures that your family is not burdened by these financial liabilities. The benefits paid out to the nominee can be used to settle the debts, if any. In this way, a term insurance policy keeps your family’s finances from being strained.

The advantage of maintaining the current lifestyle

In addition to securing the financial future of their family, every earning member dreams of making it possible for their loved ones to enjoy the best lifestyle possible. If you’ve played a part in financially supporting your family, you will undoubtedly agree with this.

But when life’s uncertainties come knocking, the sudden loss of income can sometimes leave a family unable to meet even basic necessities of life.

A term insurance plan prevents this scenario from playing out. In return for a nominal term insurance premium, you get to give your family a large life cover - one that will not only cover their basic needs, but will also allow them to maintain the standard of living they are used to.

Tax Benefits

All the other reasons to buy term insurance were about benefits for your family. This one, however, is for you. Over the course of your career, you’ll find that there are many promotions and pay hikes lying in store for you.

Or, if you’re self-employed, you’ll no doubt enjoy increased revenue as your business expands with time. But with these rising incomes come additional taxes.

Term insurance tax benefits can help reduce the burden of taxation to a great extent. Under section 80C of the Income Tax Act, you can claim the premiums as deductions from your total income, thus reducing your tax liability. Also, section 10(10D) of the Income Tax Act makes insurance payouts tax-free for your family.


Who should buy a term plan?


The short answer? Anyone who has any financial dependents can benefit from term life insurance. This includes married people who may have a dependent spouse, parents with young children, young professionals with dependent parents, and even retired folks with dependent spouses.


To get into the details, here’s why people belonging to different groups should buy a term policy.


1. Newly married couples


If you’ve just gotten married, congratulations! Like all newly married couples, you and your spouse too will undoubtedly have many dreams and hopes for the future. Maybe the two of you want to buy a new house together, or perhaps start your own business. You may want to travel the world, start a family, or even put a down payment on that car you set your eyes on.


Term life insurance can help you secure these dreams. It gives your spouse financial support in case of an unfortunate event, and ensures that they can continue to pursue their goals no matter what.


2. Parents


If you’re already a parent, you will certainly agree that your child (or children) depend entirely on you for financial support. And as a parent, you may have your own ambitions for them, like sending them to a prestigious college, or helping them launch their own business. The unexpected loss of a parent can leave children without any support for their future.


You can ensure that your children never have to go through this by simply purchasing a term policy. The high life cover coupled with affordable premiums takes care of your children’s everyday expenses as well as their life goals.


3. Young working professionals


Young working professionals have their whole life ahead of them. If you count yourself in this category, it’s likely that you have no huge financial responsibilities or dependents at this stage of life. But with time, you may get married and have children. Your parents could retire and start to rely on you for financial support. Or, you may avail some loans to meet your goals.


It’s essential to buy a term plan now, when you’re younger, instead of waiting till later in life. That’s because term insurance premiums increase with age. And buying a term policy earlier in life gives you the opportunity to purchase a significant life cover for lower premiums.


4. Working women


An increasing number of women are joining the workforce today. And with the costs of living constantly on the rise, many families are transforming into tw0-income households. Chances are, you know many working women from your own family. Or better still, you may be a working woman yourself. And your family relies on your income for financial support.


A term life insurance policy ensures that your children, your dependent parents, and your spouse are all financially secured even in your absence. In addition to this, riders on term plans also give you financial protection in case of a critical illness diagnosis.


5. Self-employed people


It’s liberating to be the boss of your own life and run your own business. But the self-employed life comes with its own set of challenges. Your income may not be guaranteed or predictable. You may have availed a big business loan or two to set up or expand your business. And there may be creditors to whom you owe money. In your absence, these debts will fall on your family.


That’s why it’s important for self-employed people to purchase a term plan. The life cover offered by the policy can help your family sail through any financial uncertainties in case something happens to you. It also allows them to settle your debts without any financial strain.


6. Retirees


With the right financial plan, life after retirement can be an extremely enjoyable phase. However, that doesn’t mean that your golden years don’t come with their own financial requirements. You will still need to meet your everyday expenses, and you may even have some liabilities left to settle. Your spouse may also be dependent on your pension.


A term life insurance plan ensures that the burden of any pending debts is not passed on to your spouse or children, in your absence. It also allows your spouse to continue leading a comfortable life. You could also use a term plan to leave your children an inheritance.


7. Taxpayers


You may be a salaried person, a self-employed individual, a working woman, or even a retiree. But the one thing that’s common across these groups is tax liability. As you progress up the career ladder or expand your business, your earnings also increase accordingly. And this brings in the possibility of higher taxes. Fortunately, you can reduce the burden of taxes with a term insurance plan.


Term plans give you tax benefits under section 80C of the Income Tax Act. A health rider added on to your term plan also gives you tax benefits under section 80D of the Income Tax Act. You can claim your premiums as deductions from your total income and reduce your taxes.


Buy a term plan now


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What does a term plan give you?


A term plan gives you more than just a life cover. Sure, that’s the main benefit that you get from your term life insurance policy. But when you take a closer look, you get a lot more from just one single term plan. Take a look at what all a term plan can offer you.


  • Death Benefits


    The first, and perhaps the most important, thing that a term insurance cover gives your family is financial security. The death benefits offered by term plans are typically high enough to make sure that your loved ones have enough financial support to make up for lost income. With the payouts from the term plan, your dependents can continue to lead a life that’s comfortable, without compromising on their basic needs or their dreams and goals.
    Use a premium calculator now


  • Return of premium option


    Did you know that some term plans also reward you for surviving the policy term? When the policy matures, these term insurance plans pay out a lump sum amount to you, which equals the sum total of all the premiums you paid during the policy term. Effectively, this ensures that you get your premium back. The ABSLI DigiShield Plan, for example, gives you the return of premium plan option.


  • Monthly income option


    Death benefits are generally paid to the nominee as a lump sum payment. But some term insurance plans give you the option to customize the payouts. If your family needs regular income to meet their needs, you could choose to have the benefits disbursed as regular payments to replace your monthly income. You can even choose a combination of both options, so your family gets a part of the benefits as a lump sum payout and the rest as a monthly income.


  • The opportunity to pass on an inheritance


    If you contribute to your family’s income, you can ensure that your loved ones are well taken care of by creating an inheritance for them. It could be real estate, gold, stocks, bonds or other investments. But the easiest way to create an inheritance is to buy a term plan. Term life insurance offers a high life cover, to the tune of Rs. 1 crore or higher, that makes for a reliable inheritance for your family.


  • Additional coverage from riders


    Term insurance also gives you the option to enhance the benefits with additional riders. These riders are added on to the basic term plan in exchange for a nominal premium. They offer need-based coverage, like financial support in case of a critical illness diagnosis, additional payouts in case the policyholder passes away due to an accident, or even waiver of premium in some cases. You can choose the rider that you need at the time of purchasing your policy.


Types of term insurance plans


Term insurance is a simple and straightforward product. But that doesn’t mean that it’s not versatile. In fact, there are different types of term insurance plans that you can choose from, based on your own unique needs. Check out the main types of term plans.

Types of Term Plans 

  • Level term plans


    This is the most common type of term insurance. In these plans, you can select the sum assured at the time of purchasing the policy. This sum remains constant, and it is the amount that your nominee will receive in case something happens to you. If you are choosing a level term plan, ensure that the sum assured will be enough to sustain your family, since this amount remains constant and cannot be changed.

  • Increasing term plans


    In increasing term insurance plans, the sum assured keeps increasing on an annual basis. The rate of the increase is predetermined, at the time of policy purchase. The ABSLI DigiShield Plan and the ABSLI Life Shield Plan both offer increasing cover options, where the sum assured increases by 5% or 10% annually. These plans are ideal if you expect your liabilities to increase in the future.


  • Decreasing term plans


    These term plans are the opposite of increasing term insurance policies. Here, the sum assured decreases over the course of the policy term. A decreasing term plan may be good for you if you expect to pay off most of your liabilities in the near future. The percentage of decrease is decided at the time of policy purchase itself. For example, the ABSLI Life Shield Plan offers a decreasing cover option where the sum assured decreases by 50% towards the end of the policy term.


  • Term plans with Return of Premium (TROP)


    Worried that you may not receive any amount in case you survive the policy term? A Term Plan with the Return of Premium (TROP) can ease that worry, because it gives you your premiums back at the time of maturity. The premium will be returned only in case no claim has been made on the policy. Both the ABSLI DigiShield Plan and the ABSLI Life Shield Plan both offer term plans with the return of premium option.


  • Term plans with income benefit


    Term plans typically pay out lump sum benefits to the nominee. But if the surviving family members need to replace their regular income, they will have to reinvest those benefits in an asset or a scheme that offers periodic payouts. Term plans with the income benefit option save your family all of this trouble, since they themselves pay out the benefits on a monthly basis. The ABSLI DigiShield Plan offers the income benefit option over a period of 10, 15 or 20 years.

Term Plans by ABSLI

ABSLI Life Shield Plan (UIN: 109N109V04)

A customizable plan to secure your family’s non-negotiable life goals

  • Choice of 8 different plan options
  • Inbuilt term illness benefits
  • Option to cover your spouse under the policy

ABSLI DigiShield Plan (UIN: 109N108V05)

One comprehensive plan to meet a variety of life’s needs

  • Choice of 10 different plan options
  • Flexible payout options
  • Option to avail coverage till the age of 100

ABSLI Saral Jeevan Bima (UIN: 109N128V01)

A simple term plan that protects your family

  • Add-on riders to enhance protection
  • Limited premium payment option
  • Single premium option

Human Life Value Calculator

Know how much life cover you would need to secure your family’s future


How to decide which term insurance plan to buy?

  • The life cover:

    The amount of life cover is one of the main factors you need to think about. Experts recommend that the cover should at least be 10 times your annual income. But you may need a higher cover if you have many debts or goals to accomplish, or more dependents to support. So, make sure you purchase a term insurance plan that gives you an adequate life cover.

    Not sure how much cover you will need? Our Human Life Value Calculator can help you find out how much you will need to secure your family’s future.

    Calculate now

  • The policy term

    The policy term is also a crucial factor. If you choose a term plan with a very short policy term, you may not be adequately covered. Ideally, your policy should give you coverage for at least as long as you are working. So, most policies offer policy terms up to 60 or 65 years of age. Some term plans also offer coverage till 85 years or 100 years of age.

  • The additional benefits:

    Some plans offer extra benefits like a monthly income benefit or optional cover for your spouse. The ABSLI Life Shield Plan, for instance, gives you an inbuilt terminal illness benefit. Generally, these added benefits may also result in slightly higher premiums. So, do a quick cost-benefit analysis before you make your purchase

  • The premium you need to pay:

    You need to be able to afford the premium for your term insurance plan. Fortunately, term plans have extremely affordable premiums. But this could increase based on the choice of the plan or the additional riders selected. So, it’s important to ensure that the premium is within your budget. If it’s too high, you may miss a payment and this could make your policy lapse.

  • Rider options:

    Riders can help you maximize the protection from a term plan for nominally higher premiums. And you need to select the riders you want at the time of purchase itself. So, take some time to get to know the rider options available and the benefits they offer before you decide on a term plan. You can also customize the level of protection and the term period for some riders.

  • The life insurance provider:

    It’s also very important to choose the right life insurance provider. Check the insurer’s claim settlement ratio (CSR) before you buy your term plan. A higher ratio is a good sign, because it means your nominees’ claim will be easily settled. The liquidity ratio is also very crucial, since it indicates the financial strength of the insurer. Above all, your life insurer should also have a good customer support system in place.

Important terms you should know


1. Sum assured:


This is the amount of money that will be paid out to the nominee in case of the policyholder’s demise. It is determined at the time of policy purchase. And the higher the sum assured, the higher the premium charged.


2. Death benefits:


The death benefits are simply the benefits that the nominee receives in case the policyholder passes away during the policy term. In the case of term insurance, the death benefits are the same as the sum assured.


3. Term insurance premium:


In exchange for providing you with a life cover, the life insurance provider charges a predetermined sum from you. This is the term insurance premium. Some term plans charge a single, one-time premium. Others charge periodic premiums that you can pay monthly, quarterly, semi-annually or annually.


4. Return of Premium:


Term insurance plans generally offer only death benefits. However, some plans offer a Return of Premium (ROP) option. Here, if the policyholder survives the policy term, the insurer returns the premiums paid at the end of the policy term.


5. Premium paying term:


The premium payment term is simply the period over which you will have to pay premiums for your term plan. In most plans, the premium payment term is the same as the policy term. However, some limited premium plans allow you to pay the premium for a period shorter than the policy term.


6. Riders:


Riders are add-on benefits that help you enhance the coverage offered by your term plan. You can choose them when you buy a term insurance plan in return for a nominal additional premium. Some examples include critical illness riders, accidental death and disability riders and waiver of premium riders.


7. Claim Settlement Ratio:


The claim settlement ratio is the ratio of the total number of claims an insurer receives in a year, to the total number of claims they have actually settled. A higher claim settlement ratio indicates that the life insurance provider is more reliable.


At Aditya Birla Life Insurance, we have settled 98.04% of the claims we received in the financial year 2020-2021.


8. Maturity:


Maturity typically refers to the end of the policy term. When a life insurance plan matures, the policyholder may receive maturity benefits if the plan offers them. However, a term plan does not offer any additional benefits on maturity. Since it is the simplest kind of life insurance, it offers only death benefits.


9. Beneficiary:


A beneficiary is the person to whom the death benefits under a term plan are paid out. The policyholder will have to nominate a beneficiary at the time of policy purchase. It is best to add a dependent or a close family member as the beneficiary, like your spouse, children or parents.



How to buy a term insurance plan?

Steps to Buy Term Plans


Things to keep in mind while buying term insurance


If you’re planning to buy a term insurance plan soon, here are some important things to keep in mind.


  • Compare your options


    Term insurance comparison is important because it helps you identify the best plan for your needs and your family’s.Different term plans offer different benefits, and you can find the right plan for you by comparing your options before you make a purchase.


  • Customize your plan


    Term plans also give you a great deal of flexibility. You can customize the premium payment term, the premium payment modes and the manner in which the benefits are paid out, among other things. So, check out your options and customize your plan to suit your needs.


  • Provide complete and correct information


    Once you have identified the right plan and customized it as per your needs, you will have to submit your application to the insurer. Make sure that the details you offer are complete and correct. That speeds up the approval process and also reduces the chances of a claim being rejected in the future.


  • Assign a nominee


    Without a nominee, the very purpose of your term insurance plan will remain unfulfilled. So, ensure that you assign a nominee in a timely manner. Ideally, your nominee should be a close family member, like your spouse, children or parents.

FAQs

  • At what age can I purchase a term insurance plan?

    You can generally buy a term insurance plan at any time between 18 years and 65 years of age. Some term plans have different upper age limits. However, do keep in mind that as your age increases, the premium for the policy increases too. So, it is better to buy your term insurance plan early, when you are in good health.

  • How can I buy term insurance?

    Buying a term insurance plan is very easy. You can buy it online or offline. Generally, online purchases are quicker and more convenient. Here’s how you can buy term insurance online.

    1. Head to the website of the life insurance provider of your choice
    2. Check out the plans they offer, compare your options, and select the plan that meets your requirements.
    3. You will then be asked to fill up personal details such as your name, gender, date of birth, mobile number, email ID, and the like. In addition to that, you will also need to select policy-related details like the policy term, the premium payment mode and the sum assured, among others.
    4. The insurer will then generate a quote based on the details you provide, so you can get a better idea of the premium you will have to pay.
    5. If you are satisfied with the quote, you will have to provide additional details such as the nominee’s name, your health and employment details, and other such information.
    6. Upload the scanned copies of your KYC documents and other paperwork as required.
    7. Then, you can choose from different digital payment modes to make your payment online and purchase the term plan.
    8. The soft copy of the insurance policy will be mailed to your registered email ID.

    In case you have any doubts during your purchase, you can reach out to the insurer’s customer support helpline to obtain the necessary assistance. Also, most insurers have chatbots on their website today, to guide you through the entire process.

    If you’re more comfortable buying your term insurance plan offline, you can purchase your plan from an insurance advisor. Fill up the proposal form and submit the relevant documents to the advisor. Simple as that!

    Whether you buy term insurance online or offline, make sure to provide accurate and complete details, particularly related to your health. Hiding any information could lead to a claim rejection. Also, before policy issuance, you may have to undergo a medical examination. Insurers do this so they can assess the risk better. Make sure not to skip it, not only because it may be necessary for your policy to be issued, but also because it could reveal any health conditions that you aren’t aware of.

  • Why should I buy term insurance online?

    Buying a term insurance plan online gives you many benefits.

    • It can be more cost-effective.
    • It’s quicker and saves you a lot of time.
    • It’s also more convenient, since you can buy your plan from the comfort of your home.
    • Online purchases also allow you to research and understand the plan’s features better.
  • Do term insurance plans offer any tax benefits?

    Yes, they do. Term insurance plans offer the following tax benefits.

    • Benefits under section 80C of the Income Tax Act, 1961:

      The premiums you pay for the term plan can be claimed as deductions from your total taxable income, as per section 80C of the Income Tax Act, 1961. The maximum amount of deductions is Rs. 1,50,000. This effectively reduces the taxable income, and therefore, brings down your tax liability.

    • Benefits under section 10(10D) of the Income Tax Act, 1961:

      The claim amount that your nominee will receive from the life insurance policy is also exempt from tax under section 10(10D) of the Income Tax Act, 1961.1

    1 Tax benefits are subject to changes in tax laws. You are advised to consult your tax advisor regarding the same.

  • Does a term insurance plan expire?

    Term plans only expire at the end of the policy term or if a claim is raised and settled, whichever occurs earlier. However, if you fail to pay your premiums on time, your policy will lapse. So, to keep your term insurance policy active, you must continue to pay premiums regularly.

  • How is the premium for a term policy calculated?

    The premium for a term plan depends on multiple factors such as your age, gender, occupation and lifestyle habits, among other things. Do keep in mind that the premium increases with age, which is why it is advisable to buy a term policy when you are young and healthy. To get a better estimate of the premium you may be charged, you can make use of a free term insurance calculator online.

  • My company offers me a life cover. Is that enough, or do I need a term plan?

    The coverage that you get from your company may not be enough to meet the financial needs of your family in your absence. Also, in case of a job loss, or if you quit the company, you will lose the life cover from your group plan. This is why it is important to have your own term insurance policy too.

    For example, if the cover provided by your employer is Rs. 10 Lakh, that may not be enough to keep your family secure for even one year. So, you may need to buy additional life insurance coverage separately, through a term plan, to ensure that you and your family are well-protected.

    Calculate the ideal cover needed for your family using our Human Value Calculator, and purchase a term plan that gives you the right amount of coverage to financially secure your loved ones.

  • How will my loved ones get the benefits offered by my term insurance plan?

    NA
  • I want to buy a term insurance plan. How long should the policy term be?

    Most of the term insurance plans come with policy terms ranging between 10 and 55 years. Ideally, you need to choose the policy term according to your retirement age. This will ensure that the cover lasts throughout your working life. So, if anything unfortunate happens to you, your family can rely on the term insurance benefits to replace the income and meet their needs. They will be equipped to afford their rent, pay the school or college fees, repay any remaining loans and liabilities, and live a comfortable life in general.

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1Tax benefits are subjected to changes in tax laws. You are advised to consult your tax advisor for the same

Disclaimer

For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding the sales

ADV/9/20-21/1042

Need help with life insurance?

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