How to Understand Your Term Insurance Policy in Easy Steps

Term Insurance Policy

Buying term insurance is an involved process. Therefore, the chances are that once you have signed on the dotted line, you would know what you are getting into. But you cannot be oblivious of the fact that this policy would be your safety net in the time to come and afford to ignore the salient features of the plan itself.

Term Insurance Policy

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You must remember that your online term insurance policy is a legally binding document. Thus, it is bound to have a lot of insurance jargons and difficult-to-comprehend language. But don’t worry! Here’s how you can understand your term insurance plan in a few easy steps. Read on.

Look for The Following Benefits

Typically, term insurance plans offered by reputable insurers such as Max Life Insurance offer the following mix of policy benefits:

  • Ample Tax Savings

As per existing tax laws in the country, term insurance plans provide you tax deductions of up to Rs. 1,50,000 on the premium amount paid under Section 80C of the Income Tax Act 1961. That said, the death benefits from these plans is also tax exempt under Section 10(10D) of the Act.

  • Large Sum Assured

The cover amount or the Sum Assured is the most crucial aspect of any of any term plan. Essentially, term plans provide a significant lump sum amount in case of the policyholder’s death, which becomes a form of financial replacement for your family. Thus, any amount which is 20 to 25 times your current annual income would serve the purpose.

Further, most plans allow you to choose between different sum assured payment modules, such as:

  • A one-time payment of the lump sum
  • Lump sum payment along with a monthly income
  • Lump sum payment with an increasing monthly income


  • Policy Tenure

Terms plans usually have a policy tenure ranging from 10 years to 50 years. For example, if a 25-year old wished to purchase term insurance that has a maturity age of 70 years, the tenure for this policy would be 45 years.

Ideally, you must go for a term plan at an early age, in your 20s and early 30s, so that you can avail the dual benefit of a long-term life cover period and low premium instalment benefit. Also, you would be able to extend the plan’s protection till the retirement age or beyond so in case of your sudden demise, the entire sum assured would be paid out to your nominee.

  • Minimum Age for Entry

The age of the policy buyer plays an important role in deciding the calculation of the premium payable. Therefore, the younger you are, the better it is, as you will be able to get the lowest possible premium rates and the longest-possible policy term. Usually, the entry age for purchasing a term plan is 18 years. Therefore, you can get a term plan onboard as soon as you have a sustainable income.

  • Premium

When you are out there to purchase a term plan, the amount of premium payable under different plan becomes a vital metric for comparison. Since term insurance plans are primarily created to set up a security fund for your family and loved ones, you should go for a plan that offers a lower premium amount to create the maximum possible coverage amount during your lifetime.

Look for The Conditions Under Critical Illness Section

Most term plans offer either as an inbuilt critical illness component or a separate add-on rider protection that you can buy alongside the parent term insurance policy. Since this rider helps you extend your insurance protection to cover a wide variety of life-threatening health conditions, it is important that you carefully review the benefits under the Critical Illness section, which typically include:

  • Critical Illnesses Covered

You must go for the term plan whose rider helps covers the maximum number of critical health concerns. Therefore, most terms plans today offer critical illness riders covering up to 40 illnesses.

  • Survival Period

In case the policyholder is diagnosed with a critical illness, he/she is required to survive for a specific number of days at a minimum, known as the survival period. If the demise of the policyholder occurs before the completion of this period, there may be no payment made against the rider. In other words, you should choose a rider with the lowest survival period. Usually, this period extends between 30 to 90 days.

  • Accelerated Pay-out or Additional Pay-out

This is another vital point that affects the choice of the critical illness rider. Under the accelerated pay-out, you are entitled to receive a part of the base cover. On the other hand, the additional pay-out offers to pay the critical illness rider cover amount, over and above the base amount.

  • Pre-Existing Conditions

While buying critical illness rider, you must carefully understand the regulations for excluded Pre-Existing Conditions. Further, it is also beneficial to know about the waiting period applicable to pre-existing illnesses before they are covered.

Check the Accidental Death Disability

Term plans are designed to provide compensation for accidental injury resulting in demise or disability, typically covering the following events:

  • Accidental Death

In case, the death of the policyholder occurs due to injuries sustained in an accident during the policy tenure, the entire sum assured is paid out to the nominee.

  • Permanent Total Disablement

In case the policyholder is left with permanent total impairment, the applicable benefits as per the term plan purchased are disbursed.

  • Permanent Partial Disablement

If the sustained bodily injuries result in a permanent impairment, a specific percentage (up to 100%) of the cover benefit is paid out to the insured.

  • Temporary Total Disablement

If the insured suffers an accident and experiences confinement to home due to short-term impairments, they are eligible to receive a portion of the policy cover amount to tide over the short-term crisis and associated loss of earnings.

Check the Premium Waiver 

The Waiver of Premium rider is another vital component of term insurance plans that allow you to ensure that the policy benefits continue to sustain, even after the untimely demise or impairment of the insured.

In other words, the rider will help ensure that the continuity of the policy, even when you are no longer available to contribute premium payments towards the plan. In case of your demise, therefore, the insurer would waive off any pending premium payments while the policy continues to accrue the intended life cover benefit.

Term Insurance: Your Family’s Ticket to Financial Security

All of us believe that nothing unfortunate will happen to us. However, there is no semblance to this thought, especially when we know how unpredictable life is. Which is where term life Insurance enters into the equation.

The need to buy a term plan might vary from one person to another. However, this pure life insurance product is ideal for covering the death risk and providing a significant lump sum benefit to your beneficiaries, in case of your untimely demise.

Therefore, while many people unnecessarily ponder over questions such as “what is term insurance?”, in reality, it is better to contact an experienced insurance advisor and clear all your doubts and purchase a term policy, as soon as possible.

About the Author: Zack Walker

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