Most people may be well aware of the fact that there are at least a few different types of life insurance plans. However, there are still a few people who may be in the market for a term plan but may not be aware that there are a few different types of term life insurance policies available.
As a consumer, it is ideal for you to know your options and what they have to offer. For example, if you are looking for life insurance, knowing all the types and the sub-types is crucial. You may not want, need, or get all of these plans, but knowing your options can help you sift through the choices on offer, shortlist the ones that suit you right, and pick the one that seems apt for you.
Hence, it is important for consumers to know sub-types of term insurance plans as well. Before we dive into understanding these, let’s take a look at what term insurance is.
Basics of Term Insurance
Term plans are one of the most basic life insurance plans available today. They are known to be simple, hassle-free, accessible, as well as affordable. Let’s understand what this means. Why are these plans termed ‘simple’? It is probably owing to their design. The most fundamental benefit offered by term insurance plans is the death benefit.
This is the benefit that your nominee may be able to claim in the event of an occurrence that is covered by the policy. After they make the claim, they will be paid an amount that may be equivalent to the sum assured you have decided for the policy, and for which you have been paying premiums.
Apart from the death benefit, there is rarely any uniformity as to what term plans should offer. Most insurance providers will offer some additional benefits alongside, depending on the sub-type of plan chosen.
Moreover, there are riders available with term plans. Riders are add-on features available with plans that you can pay for. Some of the common term insurance riders include waiver of premium, accidental death, accidental permanent disability, income benefit, and more.
Another aspect these plans may be well-known for is accessibility and affordability. They are deemed accessible not only because they are available online as well as offline, but also because of their affordability. The affordability aspect is probably because of the simplified design of these plans.
To sum it up, term plans are an apt choice if what you primarily seek is a life cover and are looking to have a customised plan with a few more additions in the form of benefits or riders.
Term Insurance Plan Types
Once you have decided a term life insurance plan is what you seek, it is time to understand the various term plan types. Let’s take a look at the type of term insurance plans available in India.
- Level term insurance
This is one of the most basic types of term plans. It is often considered to be the default term insurance plan. You are required to pay regular premiums for this plan and can expect a death benefit. There are no maturity benefits to be earned from this plan.
- Return of premium term cover
This is the type of term insurance plan that offers a maturity benefit. If the life assured of the policy survives the policy duration, they can expect to earn a survival benefit. This survival or maturity benefit comes in the form of the return of premium, i.e., the premium paid into the plan will be paid back to the policyholder.
- Increasing term insurance
If you are buying a term plan early in your life and would like the option to have a higher sum assured as your plan nears maturity, increasing term insurance policy may be your option. The increase you can bring about in the plan is predetermined. It allows you to plan for your increasing financial capabilities as well as responsibilities you may have to shoulder in the future.
- Decreasing term insurance
As the name suggests, it is a plan that offers the opposite of what increasing term insurance has to offer. At a predetermined rate, your sum assured in this plan decreases as the years pass by. It is ideal for people who may have taken a term plan as a security measure to pay off their loans or any such financial obligation.
- Convertible term insurance
These are the type of term insurance policies that can later be converted into a different type of life insurance. It could be suitable for you if you are currently looking for an affordable life cover but expect financial growth later and would want to switch your plan accordingly.
These were a few types of term insurance plans. Once you know more about what insurance providers have to offer, it would be easier for you to choose what policy suits you best. Make a choice based on your requirements and financial goals.