Although life insurance penetration rates in India are meager compared to that of the rest of the world, the sector has been making significant headway in the recent past. In FY 19, the premium from new life insurance business increased YoY by 3.66%, as per recent reports.
This increase can be attributed, in part, to increased flexibility models being adopted by life insurance providers. Insurers are now allowing offering a variety of plans that can be tailored to the needs of the policyholder.
For instance, policyholders can choose from a large variety of term insurance plans available in the market.
Firstly, what is a term plan?
- Term insurance plans are life insurance policies that can be purchased for a specific period of time.
- A term plan is generally thought to be the purest form of life insurance
- It provides the policyholder’s family with a payout in the form of a death benefit in case of their death during the policy term.
- Certain term plans may offer a payout upon maturity, even if the policyholder outlives the policy term.
- With a term plan, policyholders can secure their family’s future against unforeseen circumstances without putting too much stress on their present finances. Term insurance benefits usually offer a large sum assured (as large as Rs.1 crore) at extremely affordable premium rates.
- Because of the large sum assured, term insurance plans can prove to be an effective hedge against rising inflation.
Term insurance plans can be customizable as per the needs and goals of the policyholder. Here are the different types of term insurance one can choose from:
Level Term Plans
- These are the most common of all term insurance plans in India. Level term plans are a default type of cover provided by all term insurance providers.
- In a level term plan, the sum assured a chosen by you while taking the policy remain constant throughout the policy term.
- The lesser your age when you buy a level term plan, the lower your premium will be.
Increasing Term Insurance
- As the name suggests, this type of term insurance has an increasing sum assured.
- The sum assured usually increases every year, but can differ from plan to plan. The rate of increase in sum assured is predetermined.
- Some plans come with a limit in the rate of increase of sum assured. However, even when the limit is reached, the policy continues.
- These plans are meant to keep up with inflation and rising prices and ensuring that the beneficiary is self-sufficient.
- The tenure for this kind of policy can be longer than other types of term life insurance.
- This type of plan is suited primarily to the needs of policyholders who anticipate significant hikes in their liabilities. Policyholders who expect to grow their family or who expect their parents to financially rely on them as they reach retirement age can opt for such types of term plans.
Decreasing term insurance
- This is the opposite of increasing term insurance. In this kind of plan, the sum assured decreases at a regular, predetermined rate.
- The sum assured decreases along with an increase in the policyholder’s age and decrease in their liabilities and their need for a high amount of insurance.
- These plans are very helpful for policyholders who have taken out loans or mortgages and expect their liabilities to decrease as they pay them off.
- The premium for these plans is generally lower than other types of term life insurance.
Return of Premium Term Insurance
- This is a new but popular type of term plan.
- A Return of Premium Term Plan effectively offers policyholders a savings component to their plan.
- In case you outlive the policy term, all the premiums that you have paid will be returned to you upon maturity.
- Premiums are returned to the policyholder only if claims haven’t been made during the term of the policy.
Convertible Term Plans
These are plans which come with an option to be converted into another type of insurance like whole life or endowment at a later date. For policyholders who expect their risk-taking capacity to increase in the future and who may want a market component to their life insurance can opt for such plans.
One plan that gives it all- iSelect+ Term Plan
Canara HSBC Oriental Bank of Commerce’s new iSelect+ Term Plan is a term plan that offers you the option of a level, increasing, or decreasing cover along with the option of return of premium. What’s more, it also gives you more flexibility with options like spouse cover, Accidental Death Benefit, Accidental Total and Permanent Disability, and Child Support Benefit riders. Policyholders also have the freedom to choose between a lump sum, monthly payment, or a lump sum+monthly payment.