A term plan is a life insurance cover specifically for the family of the individual in the unfortunate event of a demise. The policyholder doesn’t enjoy the benefit of receiving the assured amount from the policy when matured (and no loss of life), but this nevertheless doesn’t exclude people from choosing different kinds of term insurance plans available with varying characteristic features based on specific individual needs and demands.
Given below are the 6 term plan types that you must know about before buying term insurance plans online, and describe in detail, what are the types of term plans available.
Types of Term Plan
Here are the types of term plans:
- Level term insurance plan
This is the most generic plan to choose from the various available term insurance plans in India. For example, Tata AIA Insurance and others offer these types of term insurance plans. Popular as a pure term insurance policy, this plan doesn’t pay off any amount in case the plan matures, and there is no casualty of life of the policyholder. The beneficiary/nominee receives a pre-decided, fixed sum assured only in the event of the unfortunate death of the policyholder.
- TROP (Return of premium plans)
This plan is for those who desire the return of the premium paid during the policy tenure. This means that the person receives the entire premium paid (excluding the interest calculated), even in the case of survival of life once the policy matures.
- Increasing term insurance policy
This particular plan operates in a way that increases the amount of the sum insured annually with a specified percentage. Since the premium paid doesn’t increase simultaneously, this plan is subjected to the highest amount of premium incurred by the policyholder.
- Decreasing term insurance policy
Contrary to the increasing term insurance plan, this plan reduces the amount of the sum insured annually and is the exact opposite of the previous plan. This unique feature of the plan is helpful for the family to pay back any outstanding debt in the name of the policyholder in the event of an unfortunate death. In case of demise during the policy tenure, the nominee can use the amount to clear debts using the amount from the term insurance claim.
- Convertible term insurance plans
These term plans are flexible to be converted into any other specific term plan in case of a change of mind due to certain accompanying factors. The initial term plan can be converted into an endowment or any whole life insurance plan as per the policyholder’s choice
- Rider term insurance policy plans
A rider term insurance plan has the property of enrolling special unforeseen circumstances other than death, given an additional premium is paid over the base amount. Special unforeseen circumstances may include critical illness, accidental death, partial or permanent disability and other riders.
Given the variety of choices a term insurance policy plan offers to the buyers, a calculative and well-informed decision by the interested party may help in economising the purchase. A brief cost-benefit analysis would supplement the issue of answering what are the best-term insurance plans in India and enhance the prosperity and well-being of both the policyholder and the nominees. Families own their respective backgrounds, culture and history, which plays a crucial part in framing such money-sensitive decisions. A thorough check and knowledge of the above term policy features would precisely result in favour of the term policyholder.