Different Options of the term insurance policies

Term insurance is the most basic life insurance plan that covers a person upto 65 years of age and provides nominees of the policyholder with the coverage amount on the insured person’s untimely death. It is not just a necessity but a duty to buy a term insurance plan to make sure that the financial needs of your family are well taken care of in your absence. A term insurance plan is designed in a way that it provides protection to your family against unforeseen events by offering financial security.

Even if the definition and purpose of a term insurance plan might sound simple, the task of choosing term insurance is not easy. In case you have already started to search for a suitable term insurance plan, you must have realised that there are numerous insurers offering several plans that can baffle even a seasoned investor. Insurance companies have realised that a single plan cannot suffice every customer’s needs. Thus, it is necessary to offer different plans to meet the needs of different customers.

Term insurance plans come for a specific tenure, which is why it is called term plan. It has two important components- one is the sum assured that is the amount which is decided at the beginning of the buying process of the term insurance. This amount is paid-off to the nominees on the untimely death of the policyholder. The second component is premium, which is the fixed amount paid at regular intervals by the policyholder to keep the policy active.

Here are some basic types of term insurance plans offered by the insurance companies that you can consider and select as per your requirement. 

  1. Level term plans – This is the most basic type of term insurance plan. It offers a fixed sum assured amount throughout the policy tenure, which is paid to the nominees on the death of the policyholder.
  2. Return of premium plan – This type of term insurance plan pays off the amount of paid premiums back to the policyholder if he/she survives during the policy tenure.
  3. Increasing term plan – The increasing term insurance plan offers the benefit of increasing the amount of sum assured annually throughout the policy tenure while keeping the premium amount constant. Thus, the premiums of these plans are generally in a higher range as compared to others.
  4. Decreasing term plan – Contrary to the increasing term insurance plans, these plans decrease the sum assured amount to help the policyholder meet decreasing insurance requirements and prove beneficial for people who have a burden of other loans on them. In this plan, the total loan amount is also decreased.
  5. Convertible term plan – As the name suggests, these term insurance plans offer the benefit of converting the term plan from one option to another if the policyholder isn’t satisfied.

For example, if you have bought an endowment term insurance plan, but after five years you want to invest in a whole life insurance plan, then you can convert your plan into the latter option.

  1. Term plan with riders – This type of term insurance plan offers various riders to provide additional security to the policyholder. These riders are usually available by paying a certain extra amount on the regular premiums. Some of the most commonly chosen riders are accidental cover, critical illness cover, and waiver of premiums.

Study all the riders offered carefully and assess your needs to select the best suitable option.