Know what type of term insurance you need to buy
As a sole earning member of your family, you would want your loved ones to be well-protected from the uncertainties of life, especially in your absence. While it is not easy to predict when an unfortunate mishap might take place, you can always be financially prepared. Investing in a term policy ensures that your family gets the financial assistance they deserve in your absence.
When you plan to invest in term insurance, you will notice there are many options at your disposal. Each option is designed to fulfil different needs. Read more to understand more about the different term insurance plans before you select one for yourself.
What is term insurance?
Term insurance is a type of life insurance policy in which the policyholder’s family is compensated by the insurer in the event of the policyholder’s untimely demise. When you are looking to invest in a term policy, there are different types of plans from which you can select one. Each plan has a different benefit and different costing.
What are the different types of term insurance?
Listed below are the different types of term insurance plans that you can select from:
1. Basic term plan
In this plan, the insurer will pay your family the sum assured offered under the plan. You are required to pay premium either on monthly, quarterly, half-yearly or yearly basis. In the event of your sudden demise, your insurer will compensate your family with the sum assured.
2.Term return of premium plan
In the basic plan, the family of the policyholder gets the death benefit when the policyholder passes away during the term of the plan. However, if the policyholder survives the term, he/she does not get any maturity benefits at the end of the plan. In return of premium term plan, they do get maturity benefits. The premium that you have paid will be returned to the policyholder.
3.Increasing and Decreasing term plan
In an increasing term plan, you have the option of increasing the amount of sum assured your family gets from the insurer. This can be done without there being any increase in the premium that you pay towards the plan. The sum assured keeps increasing on an annual basis. While this is a great benefit, you end up spending more on your term insurance, meaning that the premium of this plan is relatively higher when compared to basic term insurance plans.
In a decreasing plan, the sum assured keeps decreasing overtime. This is one of the term insurance benefits that the policyholder can enjoy with this plan, especially when there are immediate expenses to take care of. For example, if you have taken a huge home loan and want to reduce contribution towards your term plan, you can do so with this plan. Based on how much you pay towards your loan repayment, the sum assured will also decrease overtime. This means that the premium that you pay towards the plan also gets reduced overtime. This will help you in properly balancing your repayments without defaulting on your premium payments as well.
4.Customisable term plan
In this plan, you have the option of including add-ons to enhance the coverage of the plan. There are many add-ons/riders that you can include in your plan. Hospital cash benefit, critical illness and personal accident cover are some of the riders that you can include in your plan. These add-ons can be included by paying a small premium amount on the existing premium of the plan.
As the name suggests, you have the option of converting your term plan into another type of plan after a certain period of time. For example, if you own a term insurance plan with the term of the plan being 25 years, but decide to convert the plan into an endowment plan; you can do so with the help of a convertible term plan. This plan comes in handy when your life goals change at a certain life stage.
Which plan should you opt for?
There is no guarantee whether a person’s life goals will remain consistent. Once you invest in a term insurance, chances are your requirements might change down the line. On the other hand, that might not happen, and your life goals might remain the same. So, it is always better to make an assessment before you select a plan. If you want better protection for your loved ones in your absence, you can opt for the basic plan. If you are expecting maturity benefit, you should opt for return of premium term plan.
Connect with your insurance advisor to understand more about the term insurance benefits related to the different kinds of plans mentioned above.