- Date : 21/04/2023
- Read: 4 mins
If you are looking for adequate life coverage for your household and security in the future, term insurance is best for you. Get answers to your queries.
Term insurance plans can help you create a large corpus, providing your family with assured financial security. This tool helps you get life cover for your household, grow funds effectively, and get future fiscal security. But there needs to be more clarity regarding term insurance.
Many people consider both life insurance and term insurance to be the same. Is it? Recently, the government of India has made certain policy changes regarding taxation on term insurance. There is much confusion among people regarding the changes. If you have queries on term insurance, you may scroll down to get an answer to your query.
Top 7 FAQs on Term Insurance Plans
FAQ #1: Are Term Insurance and Life Insurance The Same?
Term and life insurance plans provide life coverage to the policyholder's household. However, there is a significant difference between them.
- A life insurance policy provides the following:
- An assured sum of money to the nominee in case of the policyholder's demise within the policy's tenure.
- Maturity benefits to the holder.
- A term life insurance plan provides a sum assured to the nominee in the case of the policyholder's demise within the plan term.
Also Read: Term Insurance Vs. Life Insurance: A Complete Guide!
FAQ #2: Doesn’t Term Insurance Provide Any Maturity Benefit To The Policy Holder?
Return of premium (RoP) is provided by many term insurance companies nowadays. If you opt for term insurance with a return of premium, you'll get back all the premiums paid after maturity. The premium amount of term insurance with RoP facilities is significantly higher than normal term plans.
FAQ #3: Can an NRI (Non-Resident Indian) Buy Term Insurance in India?
Yes, NRIs can buy term insurance plans in India if:
- They have dual citizenship
- They Qualify as citizens of India
Also Read: Life Insurance Term Policy For NRIs: Detailed Discussion
FAQ #4: What are the New Taxation Rules on Life and Term Insurance Premiums?
The government of India has made some major changes in its policies during Budget 2023 to stop the misuse of life insurance and term insurance. Term-insurance is the most affordable form of life insurance. Its main purpose is to provide Indian households with adequate life cover. However, it is often used to make large investments.
To stop the misuse of term insurance policies for investment purposes, the Union Budget 2023-24 has implemented certain taxation policies (effective from April 1, 2023). According to the new rules, you'll have to pay taxes on maturity proceeds if your total premium paid (on all your term insurance policies) in a year is more than Rs. 5 lakhs.
FAQ #5: How Much Term Insurance Cover Should You Opt For?
Experts suggest that you should get a term insurance coverage that is 15-to-20-times your annual income currently.
Example:
Suppose your current annual income is Rs. 15 lakhs.
In that case, try to get a term insurance cover of around Rs. 2.25 crore (15-times to Rs. 15 lakhs) to Rs. 3 crores (20-times to Rs. 15 lakhs).
FAQ #6: Can Home Makers Buy Term Insurance?
Yes, a homemaker can buy term insurance. You must buy a term insurance policy as a homemaker to secure the financial future of your family. A housewife can buy a term insurance plan in two ways:
- Individually or
- Joint term cover with spouse
If you buy a term plan jointly with your husband, both of you will own the policy equally. Please check for the adaptable features provided by the term insurance company. You may opt for a life coverage that provides your family with any of the following options:
- Onetime payment
- Recurring income
- A combination of both the above options
FAQ #7: Do I Need To Undergo Medical Tests While Buying Term Insurance?
Yes, an applicant for term life insurance should undergo a comprehensive medical test. The test is mandatory for both the insured person and the insurer. It helps the insurer determine your risk profile. Based on the test results of your medical test, your insurer determines the policy's value and substance.
Term insurance plans can help you create a large corpus, providing your family with assured financial security. This tool helps you get life cover for your household, grow funds effectively, and get future fiscal security. But there needs to be more clarity regarding term insurance.
Many people consider both life insurance and term insurance to be the same. Is it? Recently, the government of India has made certain policy changes regarding taxation on term insurance. There is much confusion among people regarding the changes. If you have queries on term insurance, you may scroll down to get an answer to your query.
Top 7 FAQs on Term Insurance Plans
FAQ #1: Are Term Insurance and Life Insurance The Same?
Term and life insurance plans provide life coverage to the policyholder's household. However, there is a significant difference between them.
- A life insurance policy provides the following:
- An assured sum of money to the nominee in case of the policyholder's demise within the policy's tenure.
- Maturity benefits to the holder.
- A term life insurance plan provides a sum assured to the nominee in the case of the policyholder's demise within the plan term.
Also Read: Term Insurance Vs. Life Insurance: A Complete Guide!
FAQ #2: Doesn’t Term Insurance Provide Any Maturity Benefit To The Policy Holder?
Return of premium (RoP) is provided by many term insurance companies nowadays. If you opt for term insurance with a return of premium, you'll get back all the premiums paid after maturity. The premium amount of term insurance with RoP facilities is significantly higher than normal term plans.
FAQ #3: Can an NRI (Non-Resident Indian) Buy Term Insurance in India?
Yes, NRIs can buy term insurance plans in India if:
- They have dual citizenship
- They Qualify as citizens of India
Also Read: Life Insurance Term Policy For NRIs: Detailed Discussion
FAQ #4: What are the New Taxation Rules on Life and Term Insurance Premiums?
The government of India has made some major changes in its policies during Budget 2023 to stop the misuse of life insurance and term insurance. Term-insurance is the most affordable form of life insurance. Its main purpose is to provide Indian households with adequate life cover. However, it is often used to make large investments.
To stop the misuse of term insurance policies for investment purposes, the Union Budget 2023-24 has implemented certain taxation policies (effective from April 1, 2023). According to the new rules, you'll have to pay taxes on maturity proceeds if your total premium paid (on all your term insurance policies) in a year is more than Rs. 5 lakhs.
FAQ #5: How Much Term Insurance Cover Should You Opt For?
Experts suggest that you should get a term insurance coverage that is 15-to-20-times your annual income currently.
Example:
Suppose your current annual income is Rs. 15 lakhs.
In that case, try to get a term insurance cover of around Rs. 2.25 crore (15-times to Rs. 15 lakhs) to Rs. 3 crores (20-times to Rs. 15 lakhs).
FAQ #6: Can Home Makers Buy Term Insurance?
Yes, a homemaker can buy term insurance. You must buy a term insurance policy as a homemaker to secure the financial future of your family. A housewife can buy a term insurance plan in two ways:
- Individually or
- Joint term cover with spouse
If you buy a term plan jointly with your husband, both of you will own the policy equally. Please check for the adaptable features provided by the term insurance company. You may opt for a life coverage that provides your family with any of the following options:
- Onetime payment
- Recurring income
- A combination of both the above options
FAQ #7: Do I Need To Undergo Medical Tests While Buying Term Insurance?
Yes, an applicant for term life insurance should undergo a comprehensive medical test. The test is mandatory for both the insured person and the insurer. It helps the insurer determine your risk profile. Based on the test results of your medical test, your insurer determines the policy's value and substance.
