What are the Different Types of Term Insurance Plans?
Updated On Jul 15, 2021
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Considered as the most basic and traditional type of life insurance, term insurance plans are primarily protection plans that look after a person's loved ones after their demise. The plan term is a predetermined period that is decided at policy inception. If the policyholder/life insured dies during the policy period, the insurance company pays the predetermined sum assured to his/her nominees. Moreover, additional advantages like tax benefits, loan and debt repayment services, retirement planning facilities are also provided to the life assured. These plans can be purchased online as well as in offline mode. Now, let's see different types of term insurance plans provided by various insurers.
Types of Term Insurance Plans
In the market, there are different types of term plans to choose from. They can be classified as follows.
1. Level Term Insurance Plans
This is one of the most basic types of insurance, with a predetermined coverage amount. If the life assured dies during the plan's term, the predetermined sum assured would be distributed to the beneficiary. The payout can be made in the form of a lump sum or monthly income.
2. Increasing Term Insurance Plans
As the names suggest, increasing term plans allow the life assured to raise their sum assured annually during the policy tenure. However, you may have to pay a greater premium if you choose this sort of coverage.
3. Decreasing Term Insurance Plans
Under this plan, each year, the amount of money supplied lowers to match the changing needs of the life assured. These plans are especially beneficial to policyholders who have taken out a significant loan, such as a home or personal loan. Once the person has paid off their loan, their responsibility is reduced, and they will not require a substantial sum assured for the remainder of their policy term. As a result, the sum assured constantly lowers according to this plan.
4. Term Return of Premium Plans (TROP)
The life assured can take advantage of maturity benefits under TROP plans. The fact that the policyholder receives his/her invested money back at the end of the policy term is one of their most appealing features. That is, if the life assured survives the completion of the policy's term and makes no claims, the total premiums paid are refunded to him/her.
5. Convertible Term Insurance Plans
These plans, as the name implies, allow the policyholder to convert a term insurance plan into any other type of life insurance plan at a later point. For instance, if a policyholder buys a term insurance policy for 20 years and then needs a savings component after 8 years, they can switch their current term insurance plan to an endowment policy.
6. Term Insurance Plans With Riders
This series of policies include critical illness coverage, accidental death coverage, accidental total permanent disability coverage, etc. For an additional nominal price, such coverage can usually be acquired in combination with a standard term insurance plan.
7. Group Term Insurance Plan
Term insurance policies for corporations, firms, societies, and other similar groups are known as group term insurance. Under this, coverage is offered to all the members of the organization. They usually offer identical benefits as individual plans, with the exception that the total coverage may not include additional personalized features that are not available in individual policies.
Each available term insurance policy in the market has its own set of advantages and disadvantages. You may conveniently evaluate the various plans offered and select the one that best suits your loved ones' present financial needs and future life goals.
You may also like to read:-
- Should I Buy Term Insurance Plans in Online Mode or Offline Mode?
- How is Term Insurance A Good Choice For Investment?
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.