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How does a Term Insurance Plan Work?

dateKnowledge Centre Team dateJune 15, 2021 views122 Views
Benefits of Retirement Planning | Buy the Best Saving Plan | Retirement and Pension Plan

We work hard to guarantee that our families consistently have a happy and secured life today and tomorrow. A term life insurance plan is one of the main financial instruments for ensuring your family's financial safety if the bread-winner of the family passes away.

Before you decide to look for the best term insurance plan online, understand what is a term insurance plan, and how does it work? Knowing everything in and out will help you make an informed decision, which will eventually lead you to live a stress-free life.

What is a Term Insurance Plan?

Term insurance plans are the simplest and purest form of life insurance. A term insurance plan compensates the beneficiary of the insured individual if there should arise an occurrence of unfortunate death of the insured during the policy term.

The sum assured chosen under the policy is payable as a death benefit to the beneficiary or nominee on claiming a death benefit with the insurance company. In case, the policyholder outlives the policy term, no death benefit is paid out. However, some of the best term plans offer return of premium option. If a person opts for return of premium option, and survives the policy term, then all the premiums paid throughout the policy term will be paid back to the policyholder.

Learn how return of premium option work.

How Does a Term Insurance Plan Work?

A term insurance policy can be viewed as quite possibly the most traditional type of insurance. The majority of the term insurance plans have a premium that grows in limited quantities throughout the period. This is to account for a decrease in the worth of money as years pass by.

It additionally covers the increment in mortality risk and the additional levies inflicted for an extended coverage term. To understand how it works, you can consider these three circumstances:

1. Purchasing the policy

To have the option to purchase a term insurance policy, you don't have to set aside a considerable amount of money consistently. A significant number of the insurance policies can offer you a sum assured of up to Rs. 1 crore for a premium that could be pretty much as little as about Rs. 10,000 for each year.

2. Maintaining the policy

Like some other insurance policy, you pay the premium towards these policies at a frequency picked by you. These premiums can be paid each month, each quarter, at regular intervals or once per year. They can likewise be paid as a lump sum amount as opposed to being paid at regular periods.

3. Recovering the benefits

Term insurance plans don't ordinarily accompany any maturity benefits, aside from term insurance. Their fundamental goal is to give life insurance cover, and that is precisely what they do. If the policyholder dies, the individual named the beneficiary of the policy will get the sum assured.

Likewise, the motivation behind why you will see that insurers allude to these plans as pure protection plans a majority of times, is how it works. You pay the premium, and you get a fixed sum if something happens to you.

6 Benefits of Buying the Best Term Insurance Plans

1. Payout options

Payout Options are offered in lump-sum sums toward the finish of the term, staggered payouts alongside the lump sum, average monthly income alongside the halfway lump sum.

2. High coverage and low premium

Term insurance is perhaps the most reasonable approach to cover your life for a fixed duration. Term insurance plans are exceptionally affordable, and the coverage sum can be sufficient to supplant quite a while of your lost income.

3. Disability support

Aside from the death advantage, a portion of the term insurance plans likewise offers disability support. If during the residency of the policy, you experience the ill effects of an accident that brings about aggregate and lasting disability, the insurance supplier will pay the leftover policy premiums.

4. Riders

Riders are accessible as accidental death advantage rider, critical illness rider, and waiver of premium rider for complete protection against death, disability, accident, or sickness.

Understand the importance of adding riders in a term plan.

5. Premium payment mode

Premium Payment Modes are accessible as monthly, quarterly, semi-yearly, or yearly, according to one's financial convenience of premium payment.

6. Tax benefits

Last but not least, premiums paid towards a term insurance plan are qualified for tax benefits under Section 80C of the Income Tax Act. The death advantage got by the nominee under the plan is suitable for tax deductions under Section 10(10D).

What is the Eligibility Criteria for Buying a Term Life Insurance Plan?

It's good to double-check if you fulfill the eligibility criteria for a term insurance plan before purchasing one. While the eligibility criteria for term insurance vary with the plan and insurer, there are a few general requirements:

  • The term insurance policyholder, or buyer, must be a citizen of India.
  • NRIs and PIOs are also eligible to invest in term insurance plans offered by life insurance providers in India.
  • Before purchasing term insurance, most insurers require that the insured undergoes a medical examination. This allows the insurer to keep track of any medical conditions and the risk factors involved with them and assess the premium amounts that the policyholder will be responsible for.
  • The premium of term plans is usually higher for smokers than for non-smokers. This is because smoking has been known to cause serious health problems.

    Know all about Term insurance plan for smokers in India.

  • To complete the term insurance application process, the policyholder must provide all the required documentation.

Who should Buy a Term Insurance Plan?

ULIPs for planning your retirement

A term insurance policy is necessary for anyone who wishes to protect his or her family from financial difficulties in the event of their death. The policy guarantees a high level of coverage at a reasonable premium.

Allowing you to choose the level of coverage that best suits your needs. This comprehensive coverage ensures that your family is financially secure in your absence.

Term insurance is a must-have for everyone since no other investment plan offers the level of financial protection that term insurance does.

Why do you Need a Term Plan?

It would be best to have a term insurance policy to ensure that your family is financially sustainable in your absence. Term insurance plans are the most flexible, cost-effective, and simple-to-purchase life insurance policies that cover your family's financial future at an exceptionally low premium.

Understand these 5 reasons you should buy a term life insurance.

How to Choose the Best Term Insurance Plans?

Consider the following points to choose the ideal term insurance plan:

1. Is the insurance company credible?

2. How much coverage do you require?

3. Verify the claim settlement ratio(CRO)

4. Consider inflationary factors in premium payment and coverage benefits.

5. Try comparing the terms and conditions of multiple insurance companies.

6. You can also purchase two term insurance plans from two different insurance companies simultaneously. This is beneficial in case one of the companies rejects your claim.

7. Please don't choose the cheapest term insurance plan because it may be reasonable, but it can have unreasonable conditions for claiming the money at the end of the term.

8. You have the option of choosing an online or offline term plan.

Buy Canara HSBC Oriental Bank of Commerce Life Insurance iSelect Star Term Plan

Canara HSBC Oriental Bank of Commerce Life Insurance has presented you with the iSelect Star Term Plan, the most advantageous and fulfilling plan to safeguard you and your dear ones!

Some of its benefits are as follows:

  • Life insurance cover at an affordable cost
  • Alternative to get coverage for a limited period or the complete life
  • Variety of other options of coverage, premium payment, and benefits payouts, aligning the arrangement to your necessities
  • Option to add your spouse in the same policy as yours
  • Plenty of premium payment option
  • Provision for tax benefits
  • Possibility of additional covers such as like Accidental Death Benefit, Child Support Benefit, Accidental Total, and Permanent Disability Benefit
  • Opportunity to pick returns in lump-sum amount, monthly pay, part lump-sum amount, part monthly pay, and alternative to pick both levels/high gain
  • Reduction on premiums for more considerable sums assured and for female individuals.
  • Loyalty discount for an existing customer of the company

Before buying a policy, it is fundamental to comprehend what term insurance is, how it works, and its benefits. When you have wholly perceived the policy, you would then be able to peruse the choices to pick the one you accept would have the option to meet your family's financial requirements if there should be an occurrence of your downfall.

And that's where Canara HSBC Oriental Bank of Commerce Life Insurance comes to your aid by providing you with the most suitable term plan which is flexible enough to suit any of your prerequisites.

Choose financial security by opting for iSelect Star Term Plan today!

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Frequently Asked Questions (FAQs) for Term Insurance

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to Ask while Buying a Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
  9. 9. Does the term insurance plan have a cash value if you decide to cancel the policy?
  10. 10. Under what circumstances can a term insurance plan be cancelled?
  11. 11. Can I pay the premiums online or make electronic payments?
  12. 12. What will happen to the term plan if the life assured starts smoking after purchasing the policy?
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