A robust life insurance policy is an integral part of the financial portfolio for most working-class Indians. And the majority of the people prefer buying a term plan. Over the years, term insurance has evolved significantly, and insurance companies nowadays offer different types of term plans.
But before we discuss the types of term insurance policies in India, let us understand what term insurance is?
Term insurance is one of the purest forms of life insurance. And as the name suggests, term insurance offers coverage for a limited period. In the event of your demise during the policy period, the insurer will pay the death benefit to the family member. However, if you survive the policy term, you don’t get any survival benefits, and the policy will cease to exist.
Types of term policies
Level Term Plan
It is one of the purest forms of term insurance. In this plan, you can choose the sum assured at the time of buying the policy, and the amount remains constant throughout the policy term. The earlier you buy the policy, the lower the premium will be.
Increasing Term Insurance
As the name suggests, this type of term insurance gives you flexibility to increase the sum assured at specific points during the policy term. The rate of the increase in sum assured is predetermined. It is an excellent choice of term plan that allows you to keep up with the rising prices and ensures that your family has sufficient funds to meet their regular expenses. Generally, the tenure of an increasing term plan is higher than other types of term insurance.
Decreasing Term Insurance
Unlike the increasing term insurance policy, in decreasing term insurance, the sum assured decreases at a predetermined rate as you grow older. This type of term plan works on the idea that as you grow older, your liabilities may also decrease, and you need not have a policy with a higher sum assured. As the sum assured decreases, your premium will also decrease proportionately.
Return of Premium Term Insurance
This is one of the most popular types of term plan. As the name suggests, in this plan, the insurance company pays back the premium at the end of the insurance tenure. Thus, it offers a survival benefit that other term insurance plans do not provide.
If you outlive the policy term, you will get back all the premiums you paid earlier. However, the only condition to get the premium back is that you must not have made claims during the policy period.
Convertible Term Insurance
Convertible term insurance gives you the flexibility to convert your plan into another type of insurance plan later as per your changing insurance needs. For example, if you want to get coverage for a higher term, you can convert your term plan into a whole life insurance plan.
Now that you know the different types of term insurance plans, assess your needs, and choose the right plan accordingly.