When distributing your finances in different directions, it is important to take care of the financial requirements that may come up in your absence. This is especially important if you are the primary earning member of your family and have dependents. A term insurance plan is an effective and affordable way to ensure that, in the event of your untimely demise, the financial necessities of your loved ones are taken care of. With the ease of digital processes becoming more common nowadays, one can even buy an online term plan with just a few clicks.
There are several types of term insurance plans in India presently and it is important to have an overview of them before buying one.
Regular term plan
A regular term plan, also called a level term plan, is the most common and affordable form of term insurance offered by insurers in India. In this type of plan, you choose a sum assured amount and tenure at the time of buying the plan. Based on the sum assured and the tenure chosen, you are quoted a premium. Throughout the term of the plan, you pay the premium to ensure the continuance of the plan. The sum assured you had chosen remains the same throughout the plan and is provided to the nominee/s if you pass away under the conditions mentioned in the policy.
You can also get an estimate of the premium based on the sum assured and the tenure with the help of a term plan premium calculator.
Return of premium term insurance
In regular term insurance, the policyholder usually does not receive anything if they outlive the maturity of the policy. However, if you do not wish for that to happen and are looking at term insurance as a form of saving as well, then you would want to opt for the return of premium term insurance plan. With this plan, you receive a lump sum amount equivalent to the total premiums if you outlive the maturity of the plan.
Though the premiums for such a plan may be a bit higher than other types of term insurance in India, it is a beneficial plan to opt for, as it will provide funds in both scenarios. If you pass away before the maturity of the plan, your family receives the sum assured. And, if you outlive the plan, you receive all the premiums paid to date.
Increasing term insurance plan
As time passes, the sum assured that you had once opted for may seem to be insufficient due to rising rates of inflation and an increase in your family’s standard of living. You may want to give the sum assured amount another thought and may want to increase it to better suit your family’s needs. With an increasing term insurance plan, you indeed have the option to do this. Here, you can increase the sum assured at certain points during your term plan. Usually, the rate of increase is pre-decided.
A term plan premium calculator can be used to better plan the premiums for such a plan.
Decreasing term insurance plan
As compared to the situation mentioned in the previous point, there might be some people who may want a lower sum assured as they age. As their income increases, the liabilities they have to pay off decrease. There might be other investments that can take care of their family’s needs in their absence. So, they might want to decrease the sum assured amount as the plan continues. This can be achieved with a decreasing term insurance plan. The decrease occurs at certain pre-decided points during the plan and at pre-fixed rates.
Term insurance plan with riders
As compared to the other types of term insurance in India offered by insurers separately, term insurance plan with riders is a type of financial protection that you get to curate with the option of choosing riders or add-ons. Riders such as waiver of premium can help you cut down on premiums in case of an unfortunate situation, while critical illness rider and accidental permanent disability rider can provide lump-sum amounts if the covered situation occurs. Thus, it helps you increase the amount of financial protection you have.
Whether you are planning to buy an online term plan or an offline one, do remember to read the terms and conditions of the plan before signing it.