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What Are The Types Of Term Insurance?

What Are The Types Of Term Insurance?

what are the types of term insurance

A life insurance plan forms an integral part of the financial portfolio of working-class Indians. Life insurance comes in various forms and types. One such type is term life insurance.

Contrary to some beliefs, a term plan is not a simple one-layered plan. There are various types of term insurance plans available for various needs. Before delving into the types of term insurance, let us first understand what a term plan really is.

What is a term insurance plan?

  • Term insurance is considered by most to be the purest form of life insurance.
  • As the name suggests, term insurance plans are life insurance plans purchased for a specified time period.
  • If the policyholder passes away before the end of the policy term, it provides their family with a death benefit.
  • Certain insurers offer plans with return of premium benefits, i.e. if the policyholder survives the policy term and no claims are made, the premiums are returned to the policyholder.
  • Term plans generally offer larger sums assured, which can even go up to Rs.1 crore, at affordable premiums.
  • The large sum assured also takes care of inflation and ensures that the payout is adequate to sustain your family members’ lifestyles and to help them meet their various needs and goals.
  • Term insurance plans, too, come in various forms. Namely, level term insurance, increasing term insurance, decreasing term insurance, the return of premiums plans, and convertible term plans.
Types of term insurance

1. Level Term Plans

  • The default life insurance coverage provided by most insurers in India is a level term plan. It is the most common type of term insurance plan.
  • In this type of plan, the sum assured selected at the beginning of the policy remains constant throughout the policy term.
  • The lower your age while buying a level term plan the lower will be your premium.

2. Increasing Term Insurance

  • This type of plan offers the facility to increase your sum assured at specific points in the policy term.
  • The rate of this increase is predetermined.
  • This type of plan is a great choice for keeping up with rising prices and ensuring that your family has enough funds to sustain after inflation.
  • An increasing term policy is best suited for you if you predict a considerable rise in your financial liabilities in the future.
  • The tenure for this kind of term plan is usually more than that of other types of term insurance.

3. Decreasing term insurance

  • As opposed to increasing term insurance, in this case, the sum assured decreases at a predetermined rate as your age increases.
  • It works on the idea that as your age increases, your liabilities might decrease and the need for a higher sum assured too might decrease.
  • It is well suited for you if you have taken a loan or a mortgage and expect to pay it off in the near future.

4. Return of Premium Term Insurance

  • A new and very popular type of term plan, a return of premium plan, provides you with a savings component, which is generally not offered by term plans.
  • In the event that you outlive your policy term, all paid premiums till the maturity date are returned to you.
  • The return of premium is made only if you haven’t made any claim during the policy term.

5. Convertible Term Plans

  • A convertible term insurance plan is a policy that can be converted into another type of insurance plan at a later stage; for example, a whole life plan or an endowment plan.
  • If you expect your financial priorities to change in the coming years, you can opt for this type of term plan.
  • For instance, if you are currently risk-averse, but expect to become more flexible in that regard, you can opt for a term plan that can be converted into a whole life plan.
The one size fits all plan- iSelect Star Term Plan

The iSelect Star Term Insurance Policy by Canara HSBC Oriental Bank of Commerce offers a multitude of benefits packed into one plan. It provides you with options of a level, increasing, or decreasing cover along with the option of return of premium. Moreover, there are other ways you can tailor your plan, by opting for spouse cover, Accidental Death Benefits, Accidental Total and Permanent Disability Riders, and Child Support Benefit riders. You will also have a choice between different premium payment modes, amongst other perks.

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Frequently Asked Questions (FAQs) for Term Insurance Plans

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term insurance plan doesn't offer any payout after maturity or expiration date

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 65 years of age. This is a term plan with return of premium option – that means all the premiums paid throughout the tenure will be paid back to you if you outlive the policy.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly when you buy the best term plan in India.

If your key purpose is to give your Family financial protection, go for the best term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan. iSelect Star is a term plan with return of premium option. All the term insurance premium will be paid back to you, if you outlive the policy term.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, the best term insurance plan pays a part of the sum insured to treat your disease.

Term life insurance plan riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance plan riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term insurance policy remains active until the expiration date.
  • Income Rider: This rider in a term insurance plan ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term insurance plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while Buying the Best Term Insurance Plan?

  1. 1. Are you buying a term plan with return of premium?
  2. 2. Amount of premium you have to pay based on your age, habits, education, and monthly income
  3. 3. The total number of benefits covered in the term insurance plan. Do they include benefits that you care about the most?
  4. 4. How to save money on tax if you pay for the term life insurance plan?
  5. 5. Do they offer regular income options?
  6. 6. Can you change the coverage and premium in the future?
  7. 7. Does the claim consider valid if death occurs outside India?
  8. 8. Which kind of death is not covered by a term insurance plan?
  9. 9. Can NRIs take a term insurance plan? If yes, what are the conditions?
  10. 10. Does the term insurance plan have a cash value if you decide to cancel the term insurance policy?
  11. 11. Under what circumstances can a term insurance plan be cancelled?
  12. 12. Can I pay the premiums online or make electronic payments?
  13. 13. What will happen to the term life insurance plan if the life assured starts smoking after purchasing the policy?
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