What is Level Term Insurance?

With the emergence of the Coronavirus pandemic in India and across the world, term life insurance is experiencing an increased acceptance among the people. Term insurance is available in various forms to suit the needs of the customers. Understanding the different types of term Insurance is required before you start browsing for suitable term plans. In this article, we look at one such variant specifically called Level Term insurance, the simplest and cheapest of all the available term insurance options.

Benefits of Renewing Level Term Insurance Policy Online

Rеnеwing your Lеvеl Tеrm Insurancе Policy onlinе offеrs sеvеral advantagеs:

What is Level Term Insurance?

A Level Term Insurance Plan guarantees fixed premiums for the coverage amount decided at policy inception. This essentially means that the Sum Assured under the policy and the premium payable against it remains constant throughout the tenure of the policy. It is a pure risk cover and upon the death of the policyholder, the beneficiaries are entitled to receive the death benefit, without any deductions (such as in the case of Decreasing Term Insurance) or increments (as in the case of Increasing Term Insurance).

Features of Level Term Insurance

• Premium amount is fixed throughout the policy term.
• Sum Assured remains constant.
• Death benefit is payable if it occurs within the policy term.
• There is no maturity benefit.
• Policy period can range up to 10, 20, or 30 years.
• Tax benefits under Sections 80C and 10(10D).

How Does Level Term Insurance Work?

Level Term Plans are standard term covers that charge a fixed premium to insure you for a specific period of time. The premium amount is decided by Insurance Providers on the basis of factors such as age, annual income, medical health, among other needs and liabilities.

The working of a Level Term Insurance Plan is like any other. The following pointers should guide you through the process.

• Decide the coverage amount (Sum Assured), policy term, and death benefit payout option.
• Pay premiums on a monthly, quarterly, half-yearly, or annual basis.
• On your unfortunate demise, death benefit is paid out to the beneficiaries as a lump sum amount or in installments.
• In the event that you survive maturity, the insurer is not liable to pay any benefits, unless you chose the ‘Return on Premium’ option at policy inception.

As an example, let’s consider Aryan who bought a level term insurance policy for a Sum Assured of Rs. 20 Lakhs. He chooses a policy tenure of 30 years and pays the corresponding premium amount on a monthly basis. Now, in the event that Aryan dies under unfortunate circumstances, Aryan’s mother who is the primary beneficiary is required to intimate the Insurance Provider about it and raise a claim. Upon successful verification of the claim, the Insurance Company is liable to send the death benefit of Rs. 20 Lakhs to Aryan’s mother.

Why should you choose Level Term Insurance?

The benefits offered by Level Term Insurance are manifold. In addition to being affordable for the general public, it is simple to understand and there are no hidden costs or surcharges involved. The following pointers highlight the various benefits of such insurance plans.

1. Assured Financial Protection

   Your dependents can use the money from level term life insurance to pay for any financial commitments. A level term life insurance payout can assist your loved ones and family members in covering any ongoing bills, existing college fees, loans/mortgage payments, or any other financial obligations you may have.

2. Constant Premium Amount

   The policy’s premium does not alter. The life insurance company is prohibited by law from increasing your premium during the term of your policy. Even if you suffer a substantial change in health, the insurance company is required to protect you for the amount agreed upon until the policy matures. People prefer such policies because it helps them in adhering to a budget. With fixed premiums, the Life Assured knows what (s)he has to pay every month, quarter, or year.

3. Tax benefits For the Insured

   Policyholders of Level Term Insurance can enjoy tax benefits under sections 80C and 10(10D) of the Income Tax Act, 1961. Further, the death benefit received by the beneficiaries is tax-free.

4. Affordable and Easy-to-Understand

   Buying a term insurance is extremely cost-effective and does not create a hole in the pocket of the individual. Buying a best term plan is no more a tedious task rather one can easily buy an online term plan on the premise of their requirements.

5. Enhanced Protection Through Riders

   Additional optional benefits such as critical illness and accidental death/ disability or Accelerated Sum Assured are also available under the term insurance policy. The benefits can be added to the term plan by paying an additional premium amount. Examples of additional riders are Critical Illness Rider, Waiver of Premium Rider, Accidental Death, and Permanent/partial disability and dismemberment rider.

Benefits of Renewing the Term Insurance Policy Online

Disadvantages of Buying Level Term Insurance

Yes, just like advantages, Level term insurance has its own disadvantages as well. The following are the cons of level term plan:

Conclusion

Level-term insurance is a simple and affordable form of life insurance that provides security to the family of the insured. It comes in a policy tenure of 5,10, 20, 30 years. Depending upon the financial goals the insured can choose the tenure of the policy. As premiums and coverage stay the same, this makes it convenient budgeting-wise as well. Plus, there’s tax exemption available on top of it and you could further enhance its coverage through some optional riders.

However, before you decide, there are several disadvantages that must be reviewed including that premiums will increase on you as you get older, and also this policy doesn’t have any cash value nor an investment component, you need to look into the positives and negatives of the plan before you decide to opt for it or not according to your requirements and financial goals.