Types of Term Insurance Plans
What is Term Insurance?
Term insurance is a type of life insurance that is known for its cost-effective premiums and lifetime and death benefits. A term insurance offers financial protection for the policyholder throughout the life and to their nominees in case the policyholder dies. This financial cover is granted when the policyholder goes through a critical illness or disability or if the policyholder dies.
Term Insurance is considered to be effective for people from every walk of life. Let us understand this in detail.
| For | Importance |
| Parents | Term insurance cover can satisfy their children’s upbringing in their absence. |
| Young Professionals | Young professionals can enjoy lower premium payments and can secure their future. |
| Newly Married Couples | Term insurance will ensure financial support for spouses and their family planning if unfortunately, the insured person dies. |
| Taxpayers | Premium payments are allowed as deductions from taxable income. |
| Self-Employed Professionals | Financial protection of your family against business liabilities or unstable income. |
What are the Different Types of Term Insurance Plans?
- Level Term Plans or Vanilla Term Plan
The level term plans for term Insurance is the most basic termlife insurance plan. The sum assured under level term plans does not change during the policy tenure. The benefits of the cover are paid-out only on the death of the insured person to the listed nominees.
- TROP (Return of Premium) Plans
In this type of term insurance plan, the premiums(paid towards a plan) are returned if the insured person survives till the maturity period of the plan. These term insurance plans offer maturity benefits unidentical to the level term plans.
- Increasing Term Plans
Under these term insurance plans, the sum insured can be increased at a certain percentage (%) every year till the policy term during the plan period while the premium payments can be kept the same. Though the premiums under these plans might be different than the other term insurance plans.
- Decreasing Term Plans
By its name, decreasing term plans are the opposite of the increasing term plans where the sum insured decreases by a certain percentage (%) year after year. These plans can match perfectly to the policyholders when they understand the decreasing needs of their insurance plan.
For Eg: A policyholder takes a home loan and to equate the monthly installments of this home loan, he takes a cover of term insurance. Now as the sum of the installments for home loans decreases, the insured amount would also be needed in a less number.
Convertible Term Plans
These term insurance plans are made flexible to be swapped with other kinds of insurance plans during the tenure of the insurance plan. The convertible term insurance plans can be converted into a whole life some other kind of insurance plan or an endowment plan or any other kinds of insurance plans as per the need of the policyholder. Convertible term plans offer dual benefits to the policyholder, i.e. death as well as maturity benefits can be availed.
- Joint Term Plan
These term insurance plans are made specifically for couples and their children. The sum assured here is paid on the first-claim basis i.e. when anyone’s spouse dies, the other spouse gets the financial cover. If in case both the insured spouses die, the cover is allotted to the legal heirs/children.
To Explain the different term insurance plans more elaborate, let’s take an example of a situation — A 30 years old non-smoker male opts for an INR 1 crore term plan cover with a policy tenure of 35 years, i.e. up to the age of 65 years. The effect of this situation with different term insurance plans would be like:
| Type of term insurance plan | Cost of premium | Death Benefits | Maturity Benefits | Unique features | Who should opt? |
|---|---|---|---|---|---|
| INR 4000- INR 7000 annually | To the Beneficiary/Nominee listed when the non-smoker male dies. | No Maturity Benefits until the non-smoker male dies. | The sum asinsured of INR 1 Crore cannot be changed. | People buying their first life insurance policy. |
| INR 5000- INR 8500 annually | To the Beneficiary/Nominee listed when the non-smoker male dies. | No Maturity Benefits until the non-smoker male dies. | The sum asinsured of INR 1 Crore can be increased. | People looking for increased income protection in the future |
| INR 5000- INR 8000 annually | To the Beneficiary/Nominee listed when the non-smoker male dies. | No Maturity Benefits until the non-smoker male dies. | The sum inassured of INR 1 Crore can be decreased. | People who expect lower needs of their insured money in future. |
| INR 4500- INR 10,000 annually | To the Beneficiary/Nominee listed when the non-smoker male dies. | Maturity Benefits available after the age of 65 yrs when the tenure ends. | The sum inassured of INR 1 Crore can be received back after 65 years even if the non-smoker male survives. | People aiming for maturity benefits after completion of tenure. |
| INR 4500- INR 6500 annually | To the Beneficiary/Nominee listed when the non-smoker male dies. | Maturity Benefits are available when the plan is converted to a whole life/endowment another plan. | The sum inassured of INR 1 Crore can be shifted to another plan | People looking to change their plans in the course of their tenure. |
| INR 5000- INR 7000 annually | To the Beneficiary/Nominee/Spouse listed when the non-smoker male dies. | No Maturity Benefits until the non-smoker male or her spouse dies. | The sum asinsured of INR 1 crore can be given as a death benefit allotted to anyone’s spouse or legal heirs/children if any of the insured spouses dies. | Married Couples who want to secure their family’s future. |
All these term insurance plans come with rider plan benefits that offer you additional coverage for added benefits. You can also have the option of adding riders like critical illness benefits, accidental death benefits, disability benefits, etc along with any of the above-mentioned term insurance plans.
How to Find the Right Insurance Plan?
To find a term insurance plan that fits perfectly to your financial protection needs, you should first understand the need you are opting for. As per your need and the required sum assured, you can choose among the above term insurance plans.
What do you need to understand?
- Your premium paying ability
- The sum required to be insured
- Death and maturity benefits
- Unique features of different term insurance plans
Considering the above-mentioned points, you should choose the best plan that can be probable to your financial cover.