Key features to look for in a term insurance policy
Today, having term insurance is no longer considered optional but a necessity. We understand the importance of term insurance, but what about the features that may come along with it?
If you are planning to buy term insurance, choosing the right set of features that may or may not be optional can make a very large and crucial difference in both the scope and nature of the protection that comes with it. The right policy should offer adequate coverage, critical add-ons, option to get back your premiums, flexible payment and payout terms, terms related to exclusions and grace period- all at an affordable premium to secure your family.
Read on to learn more about these key features:
Key features to consider in a term insurance policy
Choosing the right term insurance policy is more than just picking a plan with the lowest premium. It’s about putting long-term security for your family first in your unfortunate absence. Here’s what to look for.
Sum assured for adequate family protection: A term insurance policy that doesn't cover all major expenses like loans, living costs, children's education, and medical emergencies may not be able to secure your family adequately. It could leave them vulnerable. Experts suggest that your term insurance cover should be at least 15-25 times your annual income. For example, if your annual income is ₹10 lakh, your coverage should be at least ₹2 crore to ensure your family has adequate protection. If you have existing home or car loans, factor in the outstanding amounts when selecting the sum assured. Consider inflation, too. A ₹1 crore policy would have been big a few years ago but wouldn’t be sufficient 20 years later. Therefore, you should look for the term plan that is offering you the requisite sum assured.
Term Insurance Add-ons: While a basic term plan offers life cover, you should not miss out on enhancing your protection with additional add-ons. Though these add-ons increase premiums slightly, they provide an extra layer of security. Common add-ons include the following.
Accidental death benefit: It is an additional payout if death occurs due to an accident and useful for those who travel frequently or work in high-risk professions.
Critical illness cover: Covers illnesses like cancer, heart disease, kidney failure and many depending on the insurer. Usually, this add-on covers most common illnesses with expensive treatment so adding this to your term plan can immensely benefit you as the critical illness cover is usually paid to you after diagnosis of the illness with term plan continuing to secure your family.
premium waiver: Some insurance companies offer a feature to waive of all future premiums If you become critically ill or disabled.
There are many more add-on features depending on the insurer. So, based on your requirement, you can add these to your plan to provide comprehensive coverage to you and your family.
Return of term insurance premiums: Do you know you get back all the premiums you paid if you survive the policy term? Some term insurance plans return all the premiums after the completion of the policy term. This is a feature you should look out for in case you wish to get back all your premiums.
Flexible premium payment terms: The coverage terms should also depend on your life stage and goals. Not all policies require lifelong premium payments. You can choose from either Regular Pay (pay throughout the policy term, Limited Pay (few years of your policy term), and Single Pay (a lump sum upfront) while keeping the policy active. This flexibility in premium payments would give you the power to plan your term plan according to your needs. There is always a possibility that someone may not need coverage until retirement. They would prefer shorter terms that align with specific financial obligations. These could be those who seek cover until children become financially independent (typically around 25-30 years) or until major loans are repaid, such as a home loan or business debt. Hence, look out for the flexibility in premium payment terms while choosing a plan.
Multiple payout options for different family needs: A lump-sum payout may not be ideal for every family. Instead, some insurers offer structured payout options. In the monthly income option, the term cover payout is distributed in fixed monthly amounts and, thus, gives stable income for dependents. The lump-sum and monthly income mode covers both immediate and ongoing financial needs. For example, if the sum assured is ₹1 crore, your family could get ₹50 lakh upfront and ₹50,000 per month for 10 years. This provides both liquidity and long-term stability. There are also features where the payout to the nominee increases year on year. This feature will cover inflation also.
Understanding exclusions to avoid surprises: Every policy has exclusions, which are circumstances under which the insurer won’t pay a claim. The most common include death due to suicide (within the first year of policy purchase), death caused by intoxication, drug abuse, or criminal activities, and participation in hazardous sports or professions (unless explicitly covered). Reading the fine print ensures that there are no unexpected claim rejections.
Grace period and policy lapse terms: Missing a premium payment doesn’t always mean losing coverage immediately. Most insurers offer a grace period of 15-30 days, during which you can pay without policy lapse. However, if the policy lapses some insurers allow revival within 2-5 years, subject to medical tests. Others may require higher premiums upon reinstatement. Checking these details before buying prevents unnecessary financial risks later.
Making the right choice
Investing in a well-structured term plan today means your family won’t struggle tomorrow. True peace of mind comes from knowing they’ll be financially secure, always.
Start securing your family today by exploring the various plans and the premiums using online term insurance calculator.
Disclaimer: This article is published in association with ICICIPruLife and not created by TNM Editorial.