Types of Term Insurance Plans

What is Term Insurance?

Term insurance plan are one of the most basic and traditional forms of life insurance. These are protection plans that are designed to protect the policyholder’s family against unforeseen circumstances by providing them with financial security in your absence.

A term insurance plan has a specific time period assigned to it, which is also known as the plan term. In case the policyholder/life insured dies during this plan term, his/her nominees are liable to be paid the sum assured by the insurance company.

The sum assured is the coverage amount agreed upon by the policyholder at the time of purchasing the policy, and this benefit is only payable in case of her/his death. In case the term plan completes the fixed term assigned to it and the life insured is still alive, the plan will attain maturity. Once the plan matures, no benefit is paid to the insured. This is the case with pure protection term insurance plans that come with death coverage.

What are the Types of Term Insurance Plans in India?

Here is a list of the different types of term insurance based on their coverage and term insurance benefits:

1. Level Term Insurance Plans

   Level or regular term insurance plans are the most basic and affordable types of term insurance plans, where the sum assured is fixed throughout the policy tenure, and death benefits will be paid to the nominee on the death of the life assured during the policy term. These types of term life insurance plans ensure the financial protection of your loved ones in the event of your unfortunate demise.

2. TROP (Term Return of Premium) Plans

   The term insurance with return of premium plans provides the total premiums paid throughout the policy tenure at the end of the policy term on survival. This acts as a maturity benefit in term insurance, as regular term plans do not provide any maturity benefits. In these types of term insurance plans, the premiums are slightly higher than level term insurance plans.

3. No-Cost Term Insurance Plans

   The no-cost term insurance plans allow you to exit the plan early at an earlier stage selected by the insurer, and upon exiting the policy, the premiums paid until that point will be returned to the policyholder on the termination of the policy. In these types of term insurance plans, the premiums are similar to that of a regular term plan, as this is a free-of-cost feature, but the policy term has to be greater than 65 years or more, depending on the insurance provider.

4. Increasing Term Plans

   In increasing term insurance plans, the sum assured increases by a fixed percentage every year till the sum assured becomes double the initial sum assured or as per the policy documents. Since the sum assured increases every year to fit your evolving needs and the potential inflation, the premiums for these types of term insurance plans are slightly higher than regular term insurance plans.

5. Decreasing Term Plans

   The sum assured decreases every year in these types of term life insurance plans to meet the decreasing insurance requirements of the life assured. These types of term insurance plans are best suited for people who have taken a huge home/personal loan or paying an EMI (Equated Monthly Installment). In these types of term insurance plans, the sum assured keeps on decreasing at a fixed rate every year with the payment of EMIs as the total loan amount keeps decreasing.

6. Convertible Term Plans

   These types of term insurance plans come with an option wherein the policyholder can convert these plans into any other type of plan at a future date. For instance, if you have bought a term insurance plan for 20 years, but after 5 years if you want to convert it into a whole life insurance plan, etc., you can do so without any hassle.

Why is Sum Assured Essential in Choosing the Right Type of Term Insurance?

Now that we have learnt about the different types of term insurance plans let us take a look at the various sum assured options available that may be well suited for your needs:

What are the Key Benefits of Buying Term Insurance Plans?

A term insurance plan offers pure life cover without any investment component, making it a simple yet crucial tool for financial protection. Here are the key benefits:

Financial Protection: In the unfortunate event of death, a term insurance plan provides a lump sum payout to your family. This helps settle outstanding debts, home loans, and ensures financial stability for future goals and everyday expenses.

Affordable Premiums: Term insurance is cost-effective with affordable premiums, ensuring that everyone can access financial protection. You can easily customize the plan based on your budget and needs.

Flexibility: You can choose the sum assured and policy tenure that suits your financial needs. Additionally, term insurance offers optional riders like accidental death, permanent disability, and critical illness riders to enhance your coverage.

Tax Benefits: Premiums paid towards a term insurance plan qualify for tax deductions under Section 80C of the Income Tax Act*. Moreover, the death benefit payout to your nominee is tax-free, providing additional financial relief.

What are the Points To Consider While Buying Term Plans?

Let us take a look at the various points you should consider before buying the best term insurance plan in India:

• You need to ensure that the premiums of the term plan of your choice are suitable and fit within your budget, as a large term premium poses the risk of policy lapse.

• You need to check the Claim Settlement Ratio (CSR) and the solvency ratio, as these represent the insurer's reliability.

• The policy term should be enough to cover your financial dependants in your absence therefore, choose the policy term after careful consideration.

• You should assess your and your family’s needs and use a human life value calculator to make sure that the sum assured is enough to support your dependents financially.

• Make sure to add all the relevant riders, such as terminal and critical illness, to ensure comprehensive coverage within the same plan and at nominal premiums.

Why Buy Term Insurance from Policybazaar?

Buying term insurance from Policybazaar provides you with the following benefits: 

• Get discounts of up to 15% on premiums

• Receive high cover at low premiums

• Get long term cover till 99/100 years of age

• Claim tax benefits up to Rs. 46,800

• Secure family from loans and debts

How to Buy Term Insurance Online from Policybazaar?

Here is how you can buy term life insurance plans online from Policybazaar: 

Step 1: Visit the term insurance page of Policybazaar

Step 2: Fill in the required details like name, contact information, and more required details

Step 3: Select the right smoking habits, occupation type, annual income, and educational qualifications

Step 4: Choose the most suitable term insurance plan and proceed to pay

Final Thoughts

Having a good knowledge of term insurance and the different types of term insurance plans can help you make an informed decision about the most suitable plan. You can take a thorough look at the types of term insurance plans available in India and compare them based on their benefits to buy the best term insurance plan.

Note: Check all the best term insurance plan in India.

FAQs