Types of Term Insurance
Term Insurance is a very easy type of life insurance to understand. You simply buy a plan, pay the premium and your life is insured. There are no frills associated with term insurance. However, this does not mean that you blindly buy the first term plan you come across. There are certain concepts and forms of term insurance that distinguish them. Understand what they are before you make a purchase. Read on to know more.
Some of the Providers of Term Insurance
Term insurance is widely available in India. From the public sector insurance providers to the private insurers, everyone has term insurance product on offer. Some of the top life insurance providers of India who offer term insurance include:
- The Life Insurance Corporation of India (LIC)
- HDFC Life
- ICICI Prudential
- SBI Life
- Bajaj Allianz
- Bharti AXA
- Tata AIA
- Kotak Life
There are many other, bankable term insurance providers in India. It is therefore always an excellent idea to run a comparison of the available options and then select the term insurance plan you wish to buy.
Various Plans in Term Insurance
Now let us understand what the different types of term insurance refer to. Term insurance is available in four major types. They are:
- Level term insurance: This is the basic and the most popular form of term life insurance. Here, you buy a term cover for a set number of years. The value of the sum assured and the duration of the policy, both remain constant at all times. Your premium amount is also fixed and you pay the same premium over the years. If you die before the policy expires, your beneficiaries get the death benefit and the policy terminates. If you outlive the policy, there is nothing in return for you.
- Increasing term insurance: Here, the sum assured increases as the policy progresses. The premium usually stays fixed. So if you have a cover of say INR 5 lakhs for the first five years, the cover may go up to INR 7 lakhs for the next five years and so on. The percentage at which the cover increases is decided when you buy the plan. Such a term cover is useful for those who have increasing responsibilities (young children who need to complete their education, get married, etc).
- Decreasing term insurance: This is the opposite of increasing term insurance. Here, the sum assured decreases as the policy progresses. It eventually becomes zero and the policy ends. A decreasing term plan is very useful for covering a large financial liability. As you pay the EMIs and your loan or debt reduces, so does the cover of your term plan. Gradually, as your pay off the loan, your term cover also gets over. If in the interim you die, the death benefit from the term plan can be used by your family members to clear off the liability.
- TROP: TROP, or term insurance with return of premium, is a type of term insurance where you stand to get the premium you paid, back. You pay the premium throughout the duration of the plan. If you outlive the policy, the insurance provider deducts the taxes and returns the accumulated amount to you. A TROP is usually more expensive than a regular term plan simply because it has a return component attached to it.
These are the different types of term insurance. As we can clearly see, one needs to understand what each type of term insurance cover offers. You buy term insurance for some specific reasons. So analyse your own requirements and see which kind of term plan appeals to you the most. Then shortlist the insurance providers who offer those types of plans. Run a comparison and find your ideal term cover.
The final word
Term insurance is one of the biggest blessings of the present day and age. You get a large cover at a low cost. Make use of this and keep your life and your loved ones protected. However, do your research and find the ideal cover first. If you do not choose the right kind of term plan, your family may not benefit from the cover after your death. So spend some time when buying term insurance and see what options are available to you. This will make it easier for you to find and get the best possible term insurance plan for yourself.