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Term Insurance

term insurance

Life insurance policies are meant to cover the risk of premature death. The most basic and the essential form of life insurance is a term insurance plan. This is a plan which offers the highest coverage with the least premium. 

Let’s have a look at a term plan in details.

What is Term Insurance?

Term insurance is a life insurance policy which covers the risk of premature death. When you buy a policy you choose the sum assured and the coverage duration. Thereafter, in case of death during the policy tenure the sum assured is paid to the nominee. Usually, term insurance plans do not have any maturity benefit. That means, there’s no pay-out, if the insured survives till the end of the policy duration.

For example, if you buy a term plan with a term of 25 years and a sum assured of INR 50 lakhs. 

Scenario

With a Term Plan of 
INR 50 lakhs

Without a Term Plan of 
INR 50 lakhs

When the life insured dies during the policy tenure

Death Benefit of INR 50 lakhs is paid to the nominee

No benefit is paid

When the life insured survives the entire policy tenure

No benefit is paid

No benefit is paid

Thus, a Term Insurance Plan covers the risk on the life of the insured as long as the policy is in force and all due premiums are paid.

Features of Term Insurance Plans

Here are some salient features of term insurance plans which differentiate the plan from other life insurance plans –

  • Term plans offer the highest sum insured at the lowest cost as it is a pure protection plan
  • These plans are offered for the long term. You can avail coverage up to 85 years in some term insurance plans
  • If the insured dies within the policy tenure, the entire sum assured is paid to the nominee as death benefit and the policy terminates
  • Term plans allow you optional riders which you can take to enhance your coverage. Many plans also have inbuilt riders more a more inclusive scope of coverage

What is Covered?

Term insurance plans primarily cover premature death. Whether you die in an accident or due to an illness within the policy tenure, the death would be covered under the policy and your nominee would receive a death benefit. 

What is Not Covered?

Term plans do not cover 

  1. Suicidal death of the life insured within 12 months of buying the policy or reinstating it. Only 80% of the total premium paid for the term plan would be refunded on suicidal death of the life insured within the 1st policy year
  2. However, suicidal deaths after the completion of 12 months from policy inception or revival date would be covered
  3. Death under intoxication or self-inflicted injury
  4. Death due to homicide or any other criminal activity
  5. Death due to illegal activities or as a result of war or terrorism
  6. Death due to pre-existing lifestyle habits like smoking or participation in hazardous or adventure sports, if not declared at the time of policy inception

Some term plans have additional exclusions like death due to childbirth and pregnancy, sexually transmitted diseases like HIV, etc. but it varies from company to company. You must read the exclusions well before purchasing the policy.

Frequently Asked Questions
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