A term insurance plan is a simple type of life insurance available in India. It is meant to protect the insured’s family financially in case of their unfortunate demise. While it is quite easy to buy a term plan, you must know about various types of term insurance plans before making any final decision.
Several types of term insurance plans are available in the Indian market, each having unique features and benefits for the policyholder. Let’s look at each of these types of term insurance plans in detail.
1. Level Term Insurance
A level term insurance policy is most commonly bought in India as it is quite easy to understand. In this type of term insurance, the sum assured chosen by the insured remains unchanged during the policy period. Accordingly, there is no change in the premiums payable to keep this type of term insurance policy in force.
It also implies that the death benefit and premiums defined in the term insurance contract stay the same for the chosen policy tenure, say the next twenty or thirty years. This type of term insurance plan is easily available in India, and most of the life insurance companies sell them.
While buying level term insurance, you need to keep in mind this crucial aspect – the younger you are when you buy this type of term insurance, the lower will be the premiums payable to the insurer. If you want a budget-friendly life cover, search for level term insurance plans online.
2. Increasing Term Insurance
Typically, the benefits of a term plan stay the same throughout the policy period. However, in this type of term insurance, both life coverage and term insurance premium increase periodically over the chosen period. The increment in life cover occurs at a pre-defined rate, and it keeps on increasing until it reaches a maximum limit defined in the policy contract.
While the life cover increment will stop at a certain limit in this type of term insurance, the plan will continue to be effective. Ultimately, the total value of the death benefit received by the policy nominee increases to a considerable amount.
What makes increasing term insurance one of the unique types of term insurance is that it helps cover the risk of inflation. You should know that the premium of increasing term insurance is comparatively higher than level term insurance.
Also Read: Life Insurance FAQs Answered
3. Decreasing Term Insurance
This type of term insurance has a unique feature with which the sum assured of the policy decreases every year during the policy tenure, hence the name. The decrement in the life cover occurs until the policy pays out or when the chosen policy period comes to an end. The sum assured comes to zero at the end of the policy period.
Decreasing term insurance is mostly purchased to cover against a specific debt or loan, like a mortgage, which reduces over time. In case of the life insured’s unexpected demise, the received term insurance benefit is used to repay the debt. This is one reason why it is also known as debt clearing term insurance.
The premium of this type of term insurance is less than the normal term insurance plan. These policies provide financial security to the insured’s family and help them avoid financial burdens because of existing debts.
4. Term Insurance with Return of Premium
Popularly known as TROP, a term plan with return of premium refunds the total premiums paid for the life cover in case the insured survives the selected policy period. It is different from the basic types of term insurance in which there is no survival benefit.
TROP is specifically meant for individuals who look for survival benefits while buying one of the best types of term insurance plan. These days, most life insurance companies in India offer term insurance with a return of premium option. However, it is crucial to check the terms of this type of term insurance plans, which can differ from the basic term plans.
While some insurers offer standalone TROP plans, others have optional TROP riders to be included in the basic term plans along with many other riders. The premium payable for TROP plans is generally higher than pure term plans.
5. Group Term Insurance
This type of term insurance provides life cover to several members in a group altogether. It is meant for organizations, societies, associations, and even large families. All the group members covered in this term insurance plan receive the same benefits. In most cases, employers buy this type of term insurance to provide life coverage as an employment benefit to their employees.
A group term insurance policy is customized to fulfill the specific needs of the group buying it. Renowned insurance companies and insurance aggregators offer this type of term insurance policies, both offline and online.
You May Also Like to Know About: Frequently Asked Questions About Term Insurance
Why Is It Important to Know About Different Types of Term Insurance?
Term insurance purchase is a significant decision in life. With this purchase, you will provide financial security to your loved ones when you are not around. Gaining proper knowledge of different types of term insurance will help you make an informed decision. You will be in a better position to decide which term insurance policy is more suitable to your specific needs. You can compare the benefits of various types of term insurance, check pricing, and their financial impact on your life before buying one. Also, you can avoid shelling out money for term insurance plans that you do not need.