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What are the Different Types of Term Insurance Plans in India?

Thinking of buying term insurance? Well, you need to think seriously about what kind of plan you are getting because the financial future of your loved ones is questionable. Term insurance is one of the most economical and flexible form of life insurance policies. However, before getting the policy, it is important for you to understand the different types of term insurance plans available. This is done so that they have all their options available and then make an informed decision about the purchase.

Term insurance is designed to provide financial protection for a specific period of time. If you – the policyholder – dies during the term of the policy, the insurance company will pay the death benefit to the nominees you have listed in the plan. Term insurance has many benefits and, therefore, should be part of everyone’s insurance portfolio. Here are all the types of term insurance you should be aware of:

Level term insurance

Level term insurance is the most bought plan in India. The sum insured and the premiums payable are fixed for the entire term of the policy. Therefore, the premium you and the insurance company agree on while purchasing the plan, it will be fixed for the rest of the policy’s term. Usually the term that most people select for a term plan can be between 10 years and 30 years. Moreover, the younger you are, the cheaper the premium will be cheaper for you when you buy a level term life insurance plan. This type of cover is offered by all life insurance companies.

Increasing cover term insurance

Increasing term insurance is a type of policy that has the provision where the death benefit increases periodically each year during the term of the policy. Meanwhile, the policy premium does not increase. You should note that many such plans have a limit of how much the death benefit can increase over time.  Once, the maximum limit of the death benefit is reached, the increase in the amount of coverage will stop when it. Then, the plan will stay active at the maximum limit of coverage. Such plans are designed to help combat the effects of inflation and / or changing conditions. The cost of a term insurance plan extension is usually higher than standard term plans. However, it is well worth the extra cost.

Decreasing cover term insurance

In this type of term insurance, the sum assured of the policy decreases every year until the claim is settled or the term of the policy expires. The premium payable in this type of term insurance is fixed. Such policies are normally availed to cover the policyholder’s family against a specific debt or other liabilities. In case the policyholder passes away, the debt would pass on to their family. A decreasing cover term insurance policy will help them clear any debt that might cause problems. Usually, the sum assured comes down to zero when the policy period comes to an end. Premiums of decreasing term insurance plans are lower when compared with other types of term insurance.

Return of premium term insurance

If you opt for a return of premium term insurance plan, the insurance company will reimburse you for all premiums paid by the end of the policy term. However, this only applies if you have lived through the policy term. For example – if you buy a ROP term plan with guaranteed sum assured of ₹ 50 lakhs with a term of 20 years. The annual premium to be paid will be ₹ 5,000. In these 20 years, if you pass away, your nominee will receive the sum assured as mentioned in the policy. However, if you survive the term of the policy, the insurance company will refund all the money you paid as premium. If you follow this example, the premium returned to you would be around ₹ 1 lakh.

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