What is Term insurance? It is one of the oldest and the most basic types of life insurance. These are protection plans meant to protect your family from unplanned events by giving them the money they need to pay their bills if you’re no longer there.
A term insurance plan is suitable for a certain amount of time, called the plan term. If the policyholder or life insured dies during this plan’s term, the insurance company will pay the sum assured to their heirs. The sum assured is the amount agreed by the policyholder to cover when they bought the policy. This benefit is only paid out if the policyholder dies. If the fixed term of the term plan ends and the insured person is still alive, the plan will have reached maturity. When the plan ends, the insured no longer gets any money from it. This is true of pure protection term insurance plans that include coverage for death.
To learn more on ‘what is term insurance‘, here is a guide to the 6 main types of term insurance plans based on their coverage and term insurance benefits:
- Plans with the Same Length of Time
This is the simplest and most basic type of term insurance. The sum assured stays the same for the whole life of the policy, and when the life insured dies, the benefits go to the person who chose to receive them.
- Return of Premium Plans (TROP)
Unlike level-term insurance, these plans have a maturity benefit where the life insured will get back the total premium paid if they live through the policy term.
- Making longer-term plans
In these plans, the policyholder can choose to increase the amount of coverage every year while keeping the same amount of premium payments. Because of this, the premium for these plans is a bit higher than for level-term plans.
- Making plans for less time
In these plans, unlike increasing term plans, the sum assured keeps going down every year to meet the life assured’s decreasing insurance needs. When the policyholder has already taken out a large home or personal loan or is paying an EMI, these plans can help (Equated Monthly Installment). To get more clarity on your expenses, you could use the term insurance calculator!
With this type of plan, the amount of money guaranteed keeps going down as EMIs are paid. It also brings down the total amount of the loan.
- Plans that can be changed
The policyholder can change these plans into any other type of plan at any time. For instance, if you buy a term plan of 20 years, you can easily change it after 5 years into an endowment plan, a whole life insurance plan, or something else.
- Long-term plans with add-ons
This kind of plan has options like accidental death coverage, critical illness coverage, etc., that can be added to the normal term plan for a small premium. For example, if a person chooses a rider and gets a premium waiver benefit, he or she won’t have to pay future premiums for that rider if something terrible happens.
What to think about when buying term plans?
Only some people know financial terms and how to manage their money. Now, think about what would happen if you passed away and your nominee decided to invest all the money they got from your term plan. Let’s say they take a friend’s or family member’s advice and put the money in a chit fund, only to lose it all. That’s something other than what you’d want to happen. That money is meant to pay your family’s bills when you can’t. It needs to be handled well so that it can do that. So, ensure your chosen nominee knows about the term plan you bought and what to do with the assured sum. Also, introduce them to the term insurance calculator so they can make wise financial decisions.
Another vital thing to think about is the temptation to spend too much. When a person gets too much money at once, it’s natural to want to spend more than they should. In a rush to shop, someone might spend too much on things they won’t be able to pay for in the long run. This can cause the claim amount fund to shrink, which can make it hard for people to pay their bills.
To conclude:
Even though no one wants anything uncertain to happen in their lives, everyone has to deal with the uncertainties of life. Life is full of unexpected moments; sometimes, these surprises can be bad. You can also choose online term insurance plans if you have little time.
Insurance companies are always working to make their websites easier to use and more user-friendly. Buying term plans online is completely safe, and they have a lot of benefits, like being easy to use, responding quickly, and being available at lower prices.
