Many people today understand the importance of term insurance in ensuring financial stability and protection for themselves and their families during unexpected events. However, choosing the right plan can be confusing for many. Term insurance comes in different types simply because needs vary among individuals, and no single plan suits everyone. Read on to understand the different types of term insurance plans and find the one that best suits your requirements. 

Term Insurance is one of the most popular types of Life Insurance plans. In this policy, you sign a contract with an insurance company for a specified period. You pay a defined monthly premium, and in return, the insurance company promises to pay a specific amount (sum assured) to your family or nominee as a death benefit if you pass away during the term. 

Term insurance is a pure life insurance policy with no savings or investment component. It is one of the most affordable ways to secure your family's future. 

With various term insurance plans available in India, it's crucial to understand the different types and their features to choose the best plan that suits your needs. Each type of term insurance plan has its own unique features and benefits. This comprehensive guide will take you through the different types of term insurance plans in India and help you make an informed decision.

Level-term Insurance is a type of Term Insurance Plan where the sum assured remains constant throughout the policy term. The nominee will receive a fixed amount in case of the policyholder's death, irrespective of the year of demise. Level-term Insurance is popular among people who want a fixed amount of coverage throughout the policy term. It is an excellent choice for people with a fixed income and budget.

Features and benefits of Level Term Insurance

The sum assured remains constant throughout the policy term.

Affordable premiums.

Provides a fixed amount of cover throughout the policy term.

Tax benefits under Section 80C of the Income Tax Act, 1961 under the old tax regime

Who should consider Level Term Insurance?

Level-term Insurance is an excellent choice for people who want a fixed amount of coverage throughout the policy term. It is an ideal option for people with a fixed income and budget. It is also suitable for people who want to provide financial security to their families in case of their untimely demise.

This type of Term Insurance is similar to the Level Term Insurance plan but with a critical difference - the sum assured increases yearly by a fixed percentage. This increase is usually linked to the inflation rate and ensures that your coverage keeps up with the rising cost of living. With this plan, you can be assured that your family's needs will be cared for even if you cannot provide for them.

Features and Benefits of Increasing Term Insurance

The sum assured increases yearly, providing inflation-adjusted coverage to your loved ones.

This plan is especially suitable for young families with growing financial responsibilities.

The premium for this plan is usually higher than the level-term plan due to the increasing sum assured feature.

Who should consider increasing Term Insurance?

Individuals who want to ensure that their family's financial needs are met even in an inflationary environment should consider this plan. If you are a young earner with a growing family and expect your financial responsibilities to increase over time, this plan may be suitable for you.

As the name suggests, the sum assured under this plan decreases over time. This plan is usually suitable for individuals with specific financial liability, such as a loan or mortgage, which decreases over time.

Features and Benefits of Decreasing Term Insurance

The premium for this plan is usually lower than other types of Term Insurance.

This plan provides coverage specifically tailored to the needs of individuals with a decreasing financial liability.

This plan ensures that your family is not burdened with liability in case of your untimely demise.

Who should consider Decreasing Term Insurance?

Individuals with a specific financial liability that decreases over time, such as a loan or mortgage, should consider this plan. It is also suitable for individuals who want to ensure that their family is not burdened with their financial liability in case of their demise.

Renewable Term Life Insurance is a type of life insurance that allows you to renew your Term Life Insurance Policy at the end of each term without a medical exam. You can purchase Term Life Insurance for a particular period, such as 20 years, and at the end of each term, you can renew the policy for another term. It is important to note that the premium of this policy typically increases at each renewal. 

Features and Benefits of Renewable Term Insurance

This plan ensures that your coverage is not affected by any changes in your health status.

This policy is a good option for individuals with short-term insurance needs and who want to renew based on their choice.

The policyholder can continue to renew the policy as long as the policy allows.

Who should consider Renewable Term Insurance?

Renewable Term Life Insurance can be an excellent option for older individuals concerned about insurability. With age, it gets challenging to qualify for Life Insurance. Renewable Term Life Insurance allows renewing your policy without any hassle. This policy typically has lower premiums, making it a good choice for people with limited budgets. 

Convertible Term Insurance lets the policyholder convert their coverage to Permanent Life Insurance without undergoing a medical examination. This plan ensures that your coverage is not affected by any changes in your health status.

Features and Benefits of Convertible Term Insurance

This plan allows the policyholder to convert their coverage to Permanent Life Insurance Policy. 

The policy offers guaranteed insurability as long as the policy is converted within the specified time frame. 

The premium for this plan may be higher than other types of term insurance.

Who should consider Convertible Term Insurance?

Convertible Term Insurance is an excellent option for people who want to gain more financial confidence over risks and uncertainties of life. If you are worried about developing health issues or the cost of renewing your term life, then consider getting a convertible feature to your term life before signing up for the policy. 

Return of Premium Term Insurance is a type of term insurance plan that refunds the premium paid by the policyholder at the end of the policy term if the policyholder manages to survive the policy term. This plan ensures that your investment in the policy is not lost if you outlive the policy term.

Features and Benefits of Return of Premium Term Insurance

Option to add riders: You can enhance your policy coverage by adding riders such as critical illness insurance, accidental death benefit rider, etc.

Maturity benefit: Besides the return of premiums, some insurance companies offer a maturity benefit if the policyholder survives the entire policy term.

Premium payment options: You may pay your premiums in a single lump sum or opt for regular payment options such as monthly, quarterly, half-yearly, or yearly.

Premiums returned: The most prominent feature of this plan is that if you outlive the policy term, you get all your premiums back. It is a unique feature not offered by other term insurance plans.

Death benefit: In case of a sudden demise during the policy term, the beneficiary receives a lump sum as the death benefit.

Who should consider the Return of Premium Term Insurance?

The Return of Premium Term Insurance Plan is a good fit for individuals seeking a risk-free investment option. This plan is also recommended for those with a steady income who can afford to pay a higher premium in exchange for a refund of their premiums at the end of the policy term. Additionally, it can be an excellent choice for those who want to ensure that their loved ones receive a significant payout in case of their untimely death.

Term insurance works on a simple concept. It provides financial support to your loved ones if you pass away. It ensures that essential expenses like home loans, education fees, daily living costs, and more will be covered in your absence. 

The Term insurance plan works as follows:

Let's look at an example:

A 29-year-old Rahul protects his family's future with a 20-year insurance plan covering INR 1 Crore. He is a non-smoker, so he pays just Rs 620/month, ensuring financial protection for his loved ones in case of any unfortunate event (untimely death). All this while he enjoys his peace of mind.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.