Types Of Term Insurance And When To Buy Them

A term insurance plan plays a crucial role in securing the financial future of the family in the case of any untoward incident with the policyholder. As a term plan offers a high sum assured at a budget-friendly cost, it has become one of the most popular life insurance products in the market today.

A term plan provides the sum assured in the form of a death benefit to the policyholder’s family if he or she passes away during the policy period. It acts as a foundation stone for a successful financial portfolio. So, you need to find a suitable policy as per your requirements. If you are planning to buy a term insurance policy, you need to understand its various forms. These include:

Pure Term Plans:

As the name suggests, pure term plans are the basic and simple type of term insurance. Such a plan secures the life of the policyholder for a specific duration. The premium and the sum assured of this online term plan remain constant throughout its tenure. Pure term plans do not offer any maturity benefits if you outlive the tenure. If an unfortunate event occurs during the policy duration, your nominees will receive the death benefit. This amount is tax-free as per Section 10(10D) of the Income Tax Act, 1961.

Term Insurance With A Return Of Premium:

Term insurance with a return of premium is similar to a pure term plan, but the only difference here is that you get survival benefits if you outlive the policy tenure. Here, you receive the premium paid throughout the term insurance plan on survival. The premium for this plan is comparatively higher than a pure term policy, as it offers maturity benefits. This plan is ideal for people who are hesitant to invest in a term plan due to the absence of a monetary benefit on survival.

Decreasing Term Plan:

The primary role of this type of term plan is to help your family pay your outstanding debts when you are not there. In this plan, the death benefit declines with the decrease in the mortgage value. The premium in such a policy is constant even when the death benefit reduces. Practically, it is not advisable to invest in this plan, as the decreasing death benefit may put your family’s financial future in trouble during your absence.

Increasing Term Plan:

The increasing term plan is the opposite of a decreasing term insurance policy. In the increasing term plan, the sum assured keeps on rising with age, and the premium remains stagnant throughout the policy duration. As your life’s milestones and financial responsibilities can change with time, the increasing term plan can aid you in aligning the sum assured according to your priorities. If you have an increasing term plan, you do not have to purchase an additional online term insurance plan to fulfill your monetary obligations. Additionally, this form of term policy can cover the cost of inflation, ensuring that your family is financially protected if you are no longer around. This plan has a lower tenure than pure term plans.

Term Plans With Riders:

Term insurance provides you with the opportunity to buy extra riders over and above the basic plan. Although you have to pay an extra premium to invest in such riders, they are worth the cost, as they widen your policy’s offering. You can opt for riders like accidental death rider, critical illness rider, income benefit rider, and accidental disability benefit rider, among others.

Having proper knowledge of different kinds of term plans will help you to make an informed decision. You can select an appropriate term policy as per your needs.

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