Types of Term Insurance
Over the course of time, we have been given ‘n’ number of options to choose from, be it what we want to eat to what insurance we want to opt for. We are sure that you also might have come across a number of term insurance plans giving out various features and perks. It can be overwhelming to choose the right term insurance policy that fits your needs and budget. We can help.
Term Insurance Plans
Term insurance is a popular form of life insurance that provides coverage for a specific period. It is an essential tool for financial planning and securing the future of your loved ones in case of your untimely demise. It is a straightforward type of term plan that offers a death benefit to the beneficiaries of the policyholder if the policyholder passes away during the policy term. In this article, we will explore the different types of term insurance plans that are available and help you understand which plan may be suitable for you.
Types of Term Life Insurance Policy
There are several types of term insurance plans available in the market, each designed to cater to specific needs and requirements of the individuals. Here are the most common types of term insurance plans:
- Level Term Insurance
Level term insurance is the most common type of term insurance plan. It provides coverage for a fixed period, typically ranging from 10 to 30 years, and offers a level death benefit throughout the policy term. The premiums remain the same throughout the policy term, making it easy to budget for the premiums. Level term insurance is an ideal option for those who want predictable coverage and fixed premiums. It is a simple and straightforward policy that is easy to understand and offers affordable coverage to the policyholder's beneficiaries. - Decreasing Term Insurance
Decreasing Term Insurance is a type of term insurance plan that provides a decreasing death benefit over time, while the premium remains constant throughout the policy term. It is an excellent option for individuals who want to ensure that their outstanding loans or mortgages are covered in case of their death. However, it is essential to understand that Decreasing Term Insurance policies do not offer any cash value or investment features, and the death benefit is paid only if the policyholder dies during the policy term. - Increasing Term Insurance
A term life insurance contract with an increasing death benefit is called increasing term insurance. The policyholder can select the policy term according to their particular requirements, and the premium stays set throughout the entire policy term. This plan provides an increasing death benefit over time to keep up with the inflation rate. The policy does not offer any cash value or investment features, but some policies may offer convertibility options and riders that provide additional coverage. - Renewable Term Insurance
Renewable Term Insurance is a type of term life insurance policy that provides the policyholder with the option to renew their policy at the end of the term without having to undergo another medical exam. The policy is a term policy with a fixed premium that remains the same throughout the policy term. The policyholder can renew their policy at the end of the term with a higher premium, and some policies may offer the option to convert the policy to a permanent policy or offer riders that provide additional coverage beyond the standard death benefit. This type of policy provides flexibility and allows the policyholder to continue their coverage as they get older. - Convertible Term Insurance
A term life insurance policy that offers the option to change to permanent life insurance without requiring a new medical examination is known as convertible term insurance. The insurance is a term policy with a set premium that won't change over the course of the policy.The converted permanent policy will have features such as a level death benefit and cash value. This type of policy provides flexibility and allows the policyholder to adjust their coverage as their needs change. - Return of Premium Term Insurance
Return of Premium Term Insurance is a type of term life insurance policy that returns the premiums paid by the policyholder at the end of the policy term if the policyholder outlives the term. The policy is a term policy with a fixed premium that remains the same throughout the policy term, and the premium is typically higher than traditional term life insurance. The policy is typically limited to 15, 20, or 30-year terms, and the policyholder should choose the term length based on their needs and financial goals. This type of policy provides a savings component and allows the policyholder to recoup their premiums if they do not pass away during the policy term.
Term Insurance Companies
Check and compare plans from 21 IRDAI-approved term insurance providers before purchasing a term plan.
How to Choose the Perfect Plan for Yourself
Choosing the perfect term plan can be a daunting task, but it is essential to guarantee your loved ones' financial stability in the event of your untimely death. When selecting a contract plan, keep the following things in mind:
- Amount of coverage
In the event of your untimely death, the coverage amount should be adequate to meet the financial requirements of your family. Choosing coverage that is at least ten times your yearly income is advised. - Policy term
The policy term ought to be determined by your requirements and financial objectives. If you have young children, you might want a longer insurance term; if you don't have any dependents, or if you have older children, you might want a shorter policy term. - Amount of Premium
The premium payment should be reasonable and within your financial range. To get the best deal, it is advised to compare the premium rates offered by various insurance providers. - Riders
The term plan has extra benefits that can be added as riders. Examples of riders include accidental death benefit, critical illness cover, and waiver of premium. Consider which riders are important to you and your family and choose a policy that offers those riders. - Claim settlement ratio
The claim settlement ratio is the percentage of claims settled by the insurance company. It is important to choose an insurance company with a high claim settlement ratio to ensure that your family will receive the death benefit in case of your demise. - Reputation of the insurance company
The reputation of the insurance company should also be considered. Research the insurance company's history and customer reviews to ensure that they have a good reputation and are reliable.
Conclusion
Each type of term plan has its own set of benefits and drawbacks, and it is essential to understand them before selecting a plan. It is recommended to consult with a financial advisor or insurance agent to determine which type of term insurance plan may be suitable for you. You can easily contact the PolicyX advisors if you have any doubt or need assistance in choosing the right plan for you.
