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Understanding Level Term Life Insurance

dateKnowledge Centre Team dateApril 22, 2021 views121 Views
Understanding Level Term Life Insurance

Life insurance policies give your loved ones the financial security they need in case of your untimely demise. These policies demand premium payouts and pay a lump sum amount in case of any unfortunate event or the expiry of the term period. While there are many life insurance policies available in the market, a level term life policy is one of the most suitable policies that would present a monetary security net to you and your loved ones at pressing times.

What is a Level Term Insurance?

A level term life insurance policy is a type of life insurance policy that usually lasts for a shorter duration rather than 25 to 30 years. While the duration of level term insurance is short, this does not have any impact on the death benefit and coverage.

Types of Level Term Insurance

These level term life insurance policies usually offer numerous policy term alternatives that are mentioned below:

  • Level Term Insurance for 5-year

    This level of term insurance for a term of 5 years is most beneficial for individuals who are looking for insurance coverage only for a shorter period. For example, this policy can be opted by a person whose retirement is due in the next 5 years or maybe a person who has just graduated from college and started working.

  • Level Term Insurance for 10-year

    This term-level life insurance is best suited for people who like to opt for a decade-long coverage. This policy is usually taken by parents of children who are growing up, and they will need the amount for their child’s future. They may consider this as one of the major investments for their child’s future.

  • Level Term Insurance for 15-year

    A 15-year level term insurance plan might require a higher premium amount. However, it further covers the insured person for an extended time. These policies are best suited for people with long-term financial goals.

Apart from these three types, the policies are also available for a longer duration, like 20 or 30 years, and also for a shorter duration of fewer than 5 years.

Benefits of Level Term Insurance Plan

  • Predictability

    The first and foremost benefit of a level term life insurance plan is its preditability. The person opting for these level term life insurance policies will always be aware of the amount of coverage that will be left for their loved ones. However, the maturity amount of level term insurance can fluctuate if the policyholder outlives the term of the policy.

  • Effortless Budgeting

    The policyholder and the insurance company can additionally set a single maturity amount and then take this level term insurance forward. As its benefits usually intend level premiums, budgeting is also effortless.

  • Stability

    The amount of the premium or the coverage always remains the same every year, and there is no need for you to worry that the premium would increase any time during the policy.

  • Health Benefits

    While choosing a level term insurance plan, you can also receive the benefit from your sound health. As you will be spending the equivalent sum and getting the very coverage during the life of the level term life insurance policy, you can receive 15, 25, or even higher than 30 years of coverage on the basis of your prevailing health situation.

  • Yearly Renewal

    Another biggest advantage of these level term insurance plans is the yearly renewal of these term plans. These plans are replenished every year, with the coverage allowances progressing up as you grow older, and the insured will not even ask for additional health reports with each term life insurance plan renewal.

Drawbacks of Level Term Life Insurance

While a level term life insurance is the most suitable life insurance option in the present times, it holds some of the major drawbacks that need to be worked upon. These plans are more beneficial for a completely healthy person. However, not every person in the present time is completely healthy, and many people are avid smokers and drinkers, and they will not remain healthy in the long run.

Hence, if a person takes the policy for, say, 10 or 20 years, in that case, the person is bound to pay the set sum for the entire duration. Another drawback of level term insurance is that the policyholder cannot make any changes in these policies, and it is not always possible for you to assess the needs and requirements of your family.

Level Term Insurance Vs. Decreasing Term Life Insurance

While the benefit of a level term insurance increases over time, decreasing term life is a kind of life insurance that comes with a reducing death benefit. This implies that your insurance coverage will decrease over time, probably as per a reduction in your requirement for coverage.

A term life insurance that demands collateral can be the perfect example of decreasing life insurance. This type of insurance is more expensive when compared to a level-term life insurance plan. Apart from this, a level-term life insurance plan is also far better when a person is looking for a more automated way to coverage reduction.

ULIPs for planning your retirement

A level term life insurance policy is a must-have insurance policy on your list to safeguard the future of your loved ones. If you are one who is perplexed about which insurance institution and level term insurance plan to choose, the iSelect Star level term plan from Canara HSBC Oriental Bank of Commerce Life Insurance is a great choice.

This is the most preferred level-term life insurance in India that renders the highest coverage amount along with an amazing option to cover your spouse and all this at a very limited premium amount that can be paid either monthly, quarterly, or annually.

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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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