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.