Term life insurance plans in India are the most basic, effective and important insurance plans for an individual. They are basically protection plans and designed to protect your family against unforeseen circumstances by providing them financial security.
A term insurance plan is a plan of insurance which is taken for a specified period. During this period, called the plan term, if the person whose life is insured dies, the sum assured is paid. The sum assured is the amount of cover which is chosen at the time of buying the policy.
The benefit under the plan is payable only if the person insured dies. If the plan completes the stipulated term and the person insured is alive, the plan matures. On maturity, no benefit is paid as the insured is alive. This is a pure protection insurance plan which provides coverage against the risk of death. Any other risk, like surviving till maturity, is not undertaken and no benefits are paid in case of such risks which are excluded.
Level Term Plans
This is the simplest form of a term insurance plan where the sum assured does not change during the tenure and benefits are paid out to the nominee on the death of the policy holder.
Return of Premium Plans
Unlike level term plans, here the plans have maturity benefit, wherein the premiums are returned to the policy holder if he or she survives till maturity of the policy.
Increasing Term Plans
In this plan, one can opt to increase the sum assured at annual frequency during the plan period while keeping the premiums same. Of course, the premiums of this plan will be different than that of level term plans.
Decreasing Term Plans
The opposite of increasing term plan is the decreasing term plan. Here the sum assured decreases year after year so as to match the decreasing insurance needs of the policy holders. These plans are mostly taken when someone has taken a large home loan or personal loan and paying an equated monthly installment, or EMI. The sum assured decreases with a chosen frequency as and when the EMIs are paid out and the total loan amount keeps decreasing.
Convertible Term Plans
This is a plan offered by some of the Insurance companies wherein a term insurance plan can be taken with an option to convert it into some other plan of your choice at a future date. For example – You have taken a term plan for 25 years but after 5 years you can covert this into a whole life insurance plan, endowment plan or any other plan of your choice, if you so wish.
Term Plans with Riders
This is a unique plan whereby you can buy riders like, critical illness cover, accidental death cover or disability cover etc. by paying a small additional premium. If you take a rider and opt for premium waiver benefit, then you need not pay the future premiums in case of any eventualities for which you have taken the rider.
For those of you who are still wondering why we are praising the term insurance plans so much, let me tell you that a term insurance plan is the only instrument through which you can entirely protect your family’s financial well being in your absence. And the price for this cause is small as the premium of term plans are cheapest amongst all life insurance plans.
Source: Advisorkhoj.com
