Types of Term Insurance Policies
Updated On Jun 25, 2021
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A term insurance plan has a specific time period assigned to it, which is also known as the plan term. In case the policy holder dies during his plan term, the nominees are liable to be paid the sum assured by the insurance company.
The sum assured is the coverage amount agreed by the policyholder at the time of purchasing the policy and this benefit is only payable with cash of his or her 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 is matured no benefit is paid to the insured. This is the case with a pure protection term insurance plan that comes with death coverage.
Let us look at some of the types of term insurance plans that you should know before purchasing one.
Must Check:- Term Insurance Benefits
Types of Term Insurance Plans
Here's a list of the major types of term insurance plans:
Level Term Plans
This is the most basic and simple form of term insurance where the sum assured is fixed throughout the policy tenure and benefits will be paid to the nominee on the death of life assured.
TROP (Return Of Premium) Plans
Unlike level term insurance, these plans come with maturity benefits wherein the total premium paid will be returned to the life insurance if he or she survives the policy tenure.
Increasing Term Plans
In these plans, the policyholder has the option to increase the sum assured on an annual basis during the policy tenure, while maintaining the premium amount at the same value. Due to this reason the premium amount, on these plans are naturally a bit higher as compared to level term plans.
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Decreasing Term Plans
Unlike increasing term plans, the sum assured keeps on decreasing every year in these plans to meet the decreasing insurance requirements of the life assured. These plans come handy in situations wherein the policy holder has already taken a huge home or personal loan or paying an EMI.
Convertible Term Plans
These plans come with an option wherein the policyholder can convert these plans into other types of plan at a future date. For instance, if you have bought a term plan for 20 years but 5 years later you want to change it to an endowment plan or whole life insurance plan you can do so without any hassle.
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Term Plans With Riders
These types of plans come with rider options such as accidental death cover or critical illness cover etc. which can be purchased along with the normal term plan by paying a small premium amount. For instance, if an individual opts for a rider and gets a premium waiver benefit, she or he will not need to pay the future premiums in case of any eventualities for the particular rider she or he has opted for.
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Understanding the basic types of term insurance plans will surely help you to choose the best product based on your budget, requirements and financial objectives. The above mentioned types are the major types of term insurance plans that an insurance company offers and these are the basics about a term plan that you should know before purchasing one.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.