Term insurance is a type of life insurance policy that provides coverage for a certain period of time or a specified "term" of years. If the insured dies during the time period specified in the policy and the policy are active, or in force, a death benefit will be paid. Term insurance is initially much less expensive when compared to permanent life insurance. Unlike most types of permanent insurance, term insurance has no cash value. In other words, the only value is the guaranteed death benefit from the policy. A term plan helps you prepare for such uncertainties. The term insurance should be able to provide the family with adequate income in case of an unfortunate death. The tenure of the term plan should cover the span that an individual intends to work. If you die during the term, a death benefit is paid out. If you don't die during the term, the policy terminates at the end of the term. A major benefit of this type of policy is that the premium money returned to you is completely tax-free, as it is not considered income but simply a refund of premiums.
TYPE OF TERM PLANS
Broadly speaking, there are some 5–6 variants of term plan insurance that are offered by insurance companies in India.
Level sum Assured Term Plan: This is the simplest plan wherein if the Life Assured dies during the term of the policy, his nominee is paid the Sum Assured and the Sum Assured stays the same throughout the term of the policy. If Life Assured survives the policy term, he gets nothing.
Increasing Sum Assured Term Plan: Under an increasing sum assured term plan, the Sum Assured increases every year without any increase in the premium amount. The premium under an increasing sum assured term plan would typically be higher.
Decreasing Sum Assured Term Plan: Under a decreasing sum assured term plan, the Sum Assured decreases every year while the premium stays constant. The premium under this option is generally lower than the other two Sum Assured options.
ROP (Return of Premium) Term Plan: This plan is built extensively for people who typically think that if the calamity doesn’t occur during the policy term, then the coverage amount that they paid in the form of insurance premium amount would be lost. Hence, this plan is meant for such people. As the name suggests, if the Life Assured survives the policy term, he gets his premiums back. However, if the Life Assured dies during the term of the policy, the nominee gets the Sum Assured.
Regular Payouts Term Plans: These plans do not offer a lump sum amount in case of death but offer the entire sum assured amount payable to the nominee in Monthly, quarterly, half-yearly or annual intervals.
Limited Premium Payment: This Plan has a limited period of premium payment and life cover goes beyond the premium payment for the period one opts for. In the unfortunate event, during the premium paying period or after the premium paying period is over, but before the maturity of the Policy, the nominee gets the Sum Assured opted by the Insured.
- You can also get critical illnesses covered: Besides protecting your family in your absence, new-age term insurance plans can also provide coverage against critical illnesses. By paying an additional premium, you can get a lump sum payout on the first diagnosis of a critical illness like heart attack, cancer, kidney failure, etc.
- You can also get accidental death cover: You can get additional protection by attaching accidental death benefits to your term plan. With this benefit, your family will get a larger payout in case of your unfortunate demise due to an accident.
- Support In Case Of Disability: In term life insurance plans the insurance company waives your future premiums in case of permanent disability due to an accident. This ensures that the life cover continues, even if you are unable to pay the premiums.