Different types of term insurance plans that you should know about
In today’s steep competitive era, everyone wants to secure the financial structure of his/her family members so they can lead a wholesome lifestyle even after their unfortunate demise. Term insurance plans could be the utmost way to protect your family against adverse financial scenarios in your absence. Purchasing a term insurance policy offers a sum insured to the beneficiary after the demise of the life insured.
Over the past few years, the insurance sector in India is burgeoning. As a result, many insurance companies have introduced a spectrum of term insurance plans to satisfy the customers’ needs.
What is a term insurance plan?
Term Insurance is the most basic and conventional form of life insurance. This kind of policy is designed specifically to protect one’s family against unanticipated incidents by offering financial security so that they can manage all expenditures in their absence. A term insurance plan encompasses a specific period that is known as the plan term. If the policyholder dies during this plan term, his beneficiaries receive the amount committed by the insurance company.
How does term insurance work?
Suppose you purchase a term insurance policy from an insurance company. In that case, the company will decide the premiums based on certain parameters, including your age, gender, and health. The insurance company may also check your background, health status, occupation, liabilities, records, smoking status, and family history.
If you die during the policy term, the insurer will pay the coverage amount to your policy nominee. This cash amount is not taxable and is helpful for the dependents to settle their daily expenses, or any outstanding debts and liabilities. But if the insurance plan completes its tenure before your death, then there will be no pay-out. Though you can renew the term policy as it is expired, the premiums will be recalculated based on your age at the time of renewal. Term life policies have no value other than the guaranteed death benefit.
In this digital-driven world, insurance companies embrace the customers with the various term insurance plans through offline and online mediums. These days, people can check every tiny detail of the process and purchase the best term insurance plan online. Several studies have claimed that online term plans are cheaper (nearly 40%) as compared to offline term plans. Nowadays, insurance companies continuously improve their websites and mobile interfaces to make their online term insurance plans more intriguing, user-friendly, and intuitive. Now, you can safely choose and compare various term insurance types and handpick the best one for your needs.
Benefits of a term insurance policy?
- Term insurance policy is quite appealing to young people with children. Parents can receive a handsome amount of coverage for reasonably low costs.
- Since your premium is decided on age when you purchase the policy, it will remain the same throughout your life.
- Premiums can increase between 4-8 % after your birthday each year.
- Term insurance provides substantial sum assured at affordable premiums.
Types of term insurance plans
These days, the markets are thronged with different types of term insurance plans. So, let’s take a look at different term insurance types available in the market.
- Level Term Plans
- Term Return of Premium Plans
- Increasing Term Plans
- Decreasing Term Plans
- Convertible Term Plans
- Term Plans with Riders
1. Level Term Plans
This is an essential and simple term insurance plan where the coverage amount is fixed throughout the policy term. The predetermined sum assured amount will be paid to the beneficiaries if the policyholder expires during the tenancy of the insurance plan.
2. Term Return of Premium Plans
The TROP plans come with maturity benefits that the insured can get. The astonishing feature of this plan is that the insured gets his/her premium money back once the tenure of the policy is completed. The total premiums paid are returned to the policyholder if he/she survives the policy tenure.
3. Increasing Term Plans
In this type of policy, the sum assured increases at a certain percentage every year. It helps in tackling the growing inflation. By opting for this plan, you need to pay a higher premium.
4. Decreasing Term Plans
As the name suggests, in this policy, the sum assured amount reduces every year to compensate for the reducing liabilities. This plan is ideal for policyholders who have taken a large loan, such as a home or personal loan. After paying their loans, their liability decreases, and hence, they won’t require a large cover amount for the rest of their policy tenure.
5. Convertible Term Plans
These plans allow policyholders to convert their plans into another type of term insurance plan at a set future date. For example, suppose a policyholder has purchased a term insurance policy for 15 years, and in 5 years, he/she can convert the current term insurance plan into an endowment one without any hassle.
6. Term Plans with Riders
Term plan with riders comes with a plethora of options, including accidental death cover, critical illness cover, accidental total permanent disability cover, etc. By paying a small additional premium, you can purchase this plan along with a normal term plan.
The above article gave you an adequate idea about term insurance and the different types of term insurances available in the market. The markets are crammed with a spectrum of term insurance plans, but each one has its own upsides and downsides. By comparing various term insurance policies, you can choose the best one that can successfully meet the future needs of your closed ones. To know about different term insurance plans, visit iiflinsurance.com and make the right choice.
