1) What is term insurance and how does it work?
Term plan is a pure risk coverage life insurance plan generally with no maturity benefit. It is a cheapest way for providing financial security to family or dependents in case of any unforeseen eventuality. It provides a lump sum to the family in case of death of the life assured during the policy tenure. Some term plans also provide regular monthly payout instead of lump sum payment or a combination of lump sum and regular payout as provided by the insurance company.
2) Are the term plans in the market similar in all respects?
No, they may be similar with minor differences in terms of duration, maximum entry age, minimum and maximum sum assured but they differ with regard to the cost and additional features such as riders etc.
3) Who can buy term insurance?
Any one above age of 18 years can buy term plan provided they can support their economic value with help of income documents such as salary slips and/or Income tax return. Consequently, companies do not offer term plan to groups such as children and homemakers.
4) What is the maximum Cover I can buy for myself?
There is no limit to maximum cover you can buy. It depends on the financial net worth and health conditions. Companies have their own grids for financial underwriting. If you can prove your net worth and have premium paying capacity then Rs. 5 crore or so are definitely possible.
5) What is the maximum tenure of a term plan?
The maximum duration of term insurance policies is generally 25 years. Many companies offer term plans for a term up to 30 years or even 35 years. A few offer till age of 75 years.
6) Can I buy Term plan on joint life basis with my spouse.
Normally term plans are bought on single life basis as both the partners would have their own financial standing. Some companies do offer joint life term plan on 1st death basis. In case of death of any of the partners sum assured is paid to surviving partner and policy ceases. Such type of plans is beneficial for Joint borrowers of home loan.
7) Can Women buy Term Insurance?
Yes, working women can buy term insurance as male counterparts. In fact they are offered preferred rates lower than males of same age. Some companies even ignore smoking status of women when offering preferential rates.
8) Can people above 50 years buy Term Insurance
Yes, people upto age of 65 years can buy term plan and cover themselves upto age of 75 years. However, all companies may not offer cover to elderly. In fact, there is now a plan exclusively for people above age of 50 from IDBI Federal. The general response of the customers has been that premium rates are on higher side.