What is Term Insurance & How much Term Insurance coverage do I need?

Term insurance is a simple way to protect your family's financial future. You pick a coverage period, pay your premiums, and if you pass away during that time, your loved ones get a payout.

But how do you find out how much term insurance you need?" Everyone’s situation is different, so coverage is different for each one. Assess your family's needs, kids' education, liabilities, etc., and this is the coverage amount you need. The idea is to leave them with enough to maintain their lifestyle without you. Let’s find out in detail.

Term Insurance Meaning & Importance

Term insurance is a simple life insurance plan. You buy it for a set number of years, and if you die within that time, your family gets a lump sum payout. It's all about giving them financial support when you're not there.

Why is it important? Well, think about what your loved ones would face without you. You will not be there, but they'd still have expenses. Term insurance is designed to alleviate that burden. It’s like leaving them with a financial cushion so they can carry on, even without your income.

What is Term Insurance?

Term insurance, also known as a term plan, is a type of life insurance that provides coverage for a specific term or period. It is a pure life insurance product that offers death benefits to the beneficiaries if the policyholder passes away during the policy's term. Term insurance is generally affordable. You can choose the length of the term and the amount of coverage to suit your needs. It’s flexible, too, with different payout options, so you can find a plan that works for you. It’s insurance with no strings attached. Just simple protection for your family when they need it most.

Why Choose Term Insurance plans?

Financial Security

Losing a loved one is devastating, and it's even harder when you suddenly lose the income they provided. Mortgage payments, school fees, and everyday bills don’t stop just because you do. Without you, your family could face a severe financial struggle when they’re grappling with loss. With term insurance, your family won't face financial ruin; our beneficiaries get a cash payout and cover the essentials. It’s like an airbag for your family's future, providing protection when everything else falls apart.

Affordable Premiums

Life insurance can be a tough sell, especially when you look at the price tags. High premiums on some policies make you feel like you need to choose between protecting your family and keeping the lights on. It shouldn't be that way. Term insurance turns traditional insurance on its head by providing affordable premiums. It can secure a higher sum assured at a lower cost. This means you get the protection without causing a strain on your finances, even if you're on a tight budget.

Great Flexibility

Term insurance plans allow you to shape your policy to fit your life. You can choose how your beneficiaries receive the death benefit—whether as a lump sum or in monthly instalments—and the term length matching your financial goals, whether it's covering your family until your kids are grown or until the mortgage is paid off. This flexibility means you get the coverage you need without overcommitting. With term insurance, you're not stuck with a one-size-fits-all approach.

Choice of Payout

While some insurance limits how your beneficiaries can use the death benefit, term insurance breaks the mould by offering different payout options. If you want a lump sum, it's there. If you prefer a steady income stream, you can opt for monthly instalments, providing a regular cash flow for your loved ones. And if you outlive your policy term, some plans even offer a maturity benefit.

What are the types of term insurance plans?

Level Term plans

Level-term plans are simple. The premium is steady, and the payout is consistent throughout the policy's term. There are no hidden costs or sudden hikes. It’s the kind of insurance where what you see is truly what you get. You pay the same amount each year and get reliable financial protection without breaking the bank. If you pass away during the term, your beneficiaries will be assured of the fixed sum.

TROP Plans (Return of Premium)

TROP, or Return of Premium plan, is like term insurance but with a money-back guarantee- the best of both worlds. If you pass away during the term, your beneficiaries get the payout. If you outlive the policy, you get your premiums back. There is nothing to lose. It costs a bit more, but you can rest easy knowing you're not wasting your investment if you live longer than expected.

Increasing Term Plans

Life's expenses only seem to increase; Mortgage payments, education costs, and even everyday bills get pricier over time. If you have term insurance with a fixed payout, it's not enough to cover those rising costs down the road. That's why increasing term plans exist. With these plans, the death benefit grows over time, either at a set rate or to keep pace with inflation. As your financial responsibilities grow, so does your coverage.

Decreasing Term Plans

Decreasing term plans works oppositely to increasing term plans. They are ideal for people who need substantial coverage right now, but expect their financial obligations to decrease over time. This setup is a good fit for those who have specific debts to pay off. If you were to pass away, your loved ones wouldn't be left struggling with your outstanding financial commitments. Decreasing term plans ensures your beneficiaries receive enough to cover your debts, but not more than they need, keeping costs in check.

Convertible Term Plans

Convertible term plans allow you to turn your term insurance into a permanent policy without all the bureaucratic headaches. Usually, reapplying for a whole-life policy involves a lot of paperwork, fresh underwriting, medical exams, and potentially higher premiums. But with convertible term plans, you can switch to a whole-life policy without the usual hassles. Think of it as a smooth transition that saves you from the stress of reapplying.

For instance, you might start with a 10-year term because you must determine your long-term plans. If your circumstances change—like starting a family or buying a house—you can convert to a whole life policy without hassle.

Term Plan with Riders

Term insurance with riders is an add-on that extends your coverage to specific scenarios. It allows you to tailor your term insurance to fit your particular needs. Whether you're worried about critical illnesses or want extra support for your family in case of an accident, these add-ons offer a customisable approach to term insurance. A critical illness rider pays if you’re diagnosed with a severe condition, such as cancer or a heart attack. An accidental death rider gives your beneficiaries extra cash if you die in an accident. The waiver premium rider waives premiums if you become disabled or critically ill, keeping your coverage intact when you can't work.

What are the benefits of term insurance plans?

Assess your monthly expenses.

If you manage the household bills, groceries, and rent or mortgage, and suddenly you're not there, your family's financial stability is at risk. Without your income, these costs don't just go away. The question is, how will your family handle the financial burden without you?

Term insurance assesses your monthly expenses, gives you a clear picture of what your family would need to maintain their lifestyle, and allows you to choose a plan with the right amount of coverage—enough to keep the lights on and the bills paid, even if you're not there to handle it.

Consider your financial liabilities.

If you're no longer around, your financial liabilities will still remain, and the burden falls on your family. A term insurance plan can help your family manage these debts in your absence. When choosing a term insurance plan, consider your financial liabilities and select a sum that covers your outstanding debts, such as a mortgage, car loan, or credit card debt. Doing this ensures enough coverage that your family can use to pay off these liabilities when you aren't there.

Take your future goals into account

Whether it's college tuition, a retirement nest egg, or even just the money to keep the household running, these future goals can quickly turn into stressors if the primary breadwinner is gone. But when you choose a term insurance aligning with these goals, you ensure your loved ones have the resources they need to keep moving forward. It's not just about paying bills or covering debts; it's about allowing your loved ones to achieve the future you've envisioned together. If you have children, your term insurance could help fund their education. If you're planning for retirement, it could ensure your partner has a secure financial cushion.

Age

As you age, the risk of health issues increases, which means higher costs. That's the problem with waiting to get term insurance. When you choose term insurance at a younger age, you are locked in affordable premiums and longer policy tenure, as younger policyholders are seen as less risky. If you wait too long, you might not get the policy duration you need due to age limits.

Term Plan Tenure

If you select a term that is too short, you risk losing coverage, and if it is too long, you might be overpaying for the protection you don't need. The right term plan tenure depends on your financial obligations and goals. Some people need coverage until their mortgage is paid off, while others require it until their kids are grown. It’s all about aligning your term with your significant financial planning. For example, if you have a 15-year mortgage, choose a plan that covers at least that long, and if it’s about your child's education, consider how many years until they head to college.

By matching your term plan tenure to your needs, you ensure you're covered when it matters most without overpaying for extra years.

Term Insurance Premium

If your insurance costs too much, you could struggle to keep up with payments, risking a lapse in coverage. Find a term insurance plan that aligns with your financial situation and goals to avoid high costs. Term insurance is generally more affordable and flexible than other types of life insurance, making it a cost-effective option if you choose wisely. You can choose how you pay: monthly, quarterly, half-yearly, or annually.

Tips on choosing the best term insurance policy in India

Sum Assured

When choosing term insurance, your first focus should be the sum assured—the total amount your beneficiaries would receive if you pass away during the policy term. To find the right sum assured, consider your family's needs, including mortgage payments, education costs, and daily living expenses. It is advisable to choose a sum that is at least 10-15 times your annual income to ensure that your family is adequately protected and can maintain their standard of living in your absence. A proper sum protects your loved ones from financial strain in your absence.

Policy Term

The policy term determines how long you'll be covered. To choose the right term, consider your financial obligations and goals. If you have a mortgage, ensure your coverage extends until it's paid off. If you have kids, think about when they'll be financially independent. Picking the right policy term ensures your coverage aligns with your needs.

Affordable Premiums

Premiums are the regular payments you make for term insurance. It's essential to strike a balance between premium affordability and the desired sum assured. Consider your monthly income and expenses to determine how much you can comfortably allocate towards premium payments. So, compare quotes from different insurance providers and choose the best term insurance policy that offers affordable premiums with adequate coverage at a reasonable cost.

Claim Settlement Ratio

The claim settlement ratio shows how often an insurer pays out claims. It represents the percentage of claims settled by an insurance company in a given period. A high ratio indicates a reliable insurance company. Choose a high claim settlement ratio to ensure your loved ones receive the death benefit without any hassles or delays.

Rider Options

Riders are additional benefits you can add to your term insurance. It allows policyholders to tailor their coverage according to their unique requirements and ensure their loved ones are adequately protected. Consider riders for terminal illness benefits, accidental death, or waiver of premiums due to disability.

Online Process

An efficient online process makes buying term insurance in India a breeze. Many insurers, like PNB MetLife, offer online quotes, policy management, and claims processing. This means you can apply for and purchase term insurance from the comfort of your home without the hassle of physical paperwork. The online process is fast and straightforward, letting you complete your application in minutes. It also gives you easy access to policy information, premium payment options, and policy documents. Plus, you can manage your policy online and reach customer support when needed.

How to use PNB MetLife Term Insurance Premium Calculator

Visit the PNB MetLife website.

Go to the ‘Buy Insurance’ tab and select ‘Tools and Calculators’.

Click on ‘Term Plan Calculator’.

Enter details like your name, gender, age, income, health history, occupation, etc., followed by the sum assured as requested by the calculator.

If you want to buy any riders like a critical illness rider, you can add them here.

Once you have entered all fields, click on ‘Calculate Premium’.

The premium will be calculated based on the inputs submitted by you and reflected on the screen.

You can then change the entries and compute the premium again to compare the cost of term insurance for different sum assured amounts or policies.

For more information, click here to explore term insurance and its benefits from PNB MetLife.