Term insurance plans are the most plain and the oldest form of life insurance. A term life insurance policy ensures a death benefit equal to the sum assured in event of policyholder’s demise during the tenure of the policy. However, if the policyholder survives the entire term of the policy, then the term insurance cover gets ceased and no benefit shall be payable.
A term insurance policy is an investment for the protection of your family. A term life insurance policy basically gives you peace of mind as a return. Also, it covers you and your family against the uncertainties of life. Under a term life insurance policy, the premiums you pay are eligible for a deduction from your annual taxable income and also the death benefit received by beneficiary is a tax-free income.
Term insurance is pure life insurance and thus, almost 100 per cent of your premiums contribute towards the cost of life insurance. However, there are also a few variations of term insurance plans available in the market. Let us know them closely:
Level Premium Term Insurance
This is the kind of a term plan in which the amount of the premiums that are payable remains constant through the entire term of the policy and for the predetermined amount of sum assured. This feature saves the policyholder from paying growing amount of premiums year after year. Such kinds of policies are usually available for term varying from 5 to 30 years.
Convertible Term Insurance
This kind of life insurance plans allows the insured person to convert his term insurance plan into a policy of his preference, for example, a whole life insurance plan or an endowment policy. If a person, after completion of 5 policy years, converts his term plan into an endowment plan of 20 years, then the premium of his plan would change and he would have to pay level premiums estimated according to the type of plan he selects and its term.
Term Insurance with Return of Premiums or TROP
TROP Plan offers dual benefits of a risk cover and saving opportunities. The premiums for this kind of life insurance plans are a little higher than the basic plans. However, if the insured person survives the term of the policy, then the entire amount of paid premiums is returned to him. Also, some part of premiums paid under this kind of plans goes towards the risk cover, while, the balance is invested in the money market. The returns from this investment plus the amount invested are returned to policyholder as the full amount of paid premiums by the end of the policy tenure.
Term Insurance with Guaranteed Renewal
In this kind of plans, the policyholder can renew his term policy for some specific term, like 5 or 10 more years. The best factor about the plan is that the renewal would not require a proof of insurability, such as a medical examination.
Term insurance with Riders
Riders, such as disability rider, accidental death rider, critical illness rider, etc. are also available with term insurance policies. By opting for these additional benefits for a little extra amount of premiums, the policyholder can add value to his basic term policy.
Term Insurance as a Rider
The benefits of a term insurance policy can also be availed in the form of a value addition, i.e. a rider along with the basic insurance policies like endowment plans. For instance, if an individual has a 20-year endowment policy, and after the 5th year of his plan he realizes the need of having a higher cover for death and for another 10 years, then he can opt for a 10-year term policy with the desired amount of additional cover as a value addition to the existing endowment plan.
E-Term Insurance
Most of the life insurance providers have lately started providing term life insurance policies online. These policies are known as ‘e-Term Insurance’. E-Term Insurance Policies are cheaper as the online purchase eliminates agent commissions. Read more about best term insurance plans in 2016.