Types of Term Insurance Plans and How to Choose the Right One for You

With the COVID-19 pandemic spread across the entire world, many individuals have understood how important it is to be cautious and take extra measures to ensure the safety of their loved ones. One ways to stay ahead of the virus is by taking the required steps provided by health organisations. Along with these precautionary measures, it is also important that individuals take measures to ensure their family's safety if something unfortunate happens to them. One of the insurance policies that fit perfectly here is the term life insurance plan.  
 

What is a term insurance plan?
 

Term plans are life insurance plans that provide coverage to the policyholder for a pre-determined tenure. In a term insurance policy, the policyholder has to pay a specific premium amount decided at the time of policy purchase. Making the premium payments will uphold the policy and will ensure the beneficiaries get the death benefit from the plan.

If the policyholder passes away during the policy's tenure, the lump sum amount is provided to the beneficiary as the death benefit. However, if they survive the policy's term, no benefits are paid to the policyholder or their beneficiaries. Among the different insurance plans available in the market, term plans provide an extensive sum assured for reasonable premiums.
 

Term plans also allow the policyholder to decide the policy's payout method in the event of a death benefit. Beneficiaries can opt for either a lump sum or getting the sum assured in portions at regular intervals. In recent times, many term plans have come with a renewal feature that will allow a policyholder to extend its term. 
 

With all the companies moving to the internet, purchasing a term plan has never been easier. Individuals can directly visit the insurer's official website and purchase the plan. Buying the plan online can be beneficial as individuals get access to different features like the insurance calculator. These calculators will help the customer make an informed decision. 
 

Types of term insurance plans and who should opt for each:

The following are the term plan types:

1. Standard term plans: These are simple and basic term insurance plans where the sum assured provided by the insurance company is fixed for the entire policy tenure, and the benefits are paid to the beneficiary when the policyholder passes away. It is optimal for individuals who are looking for pure insurance plans. 
    

2. TROP plans: The Term with Return of Premium^# plans are just like standard term plans with one distinctive feature. If the policyholder survives the policy's term in TROP plans, they get the entire premium amount paid towards the policy as a maturity benefit. These plans are suitable for individuals who wish to get term insurance coverage along with assured returns. 
   
   

3. Increasing term plans: In an increasing term plan, the insurance coverage provided to the policyholder increases during the plan's tenure. The insurance policy will calculate the risk based on the cost rise during the policy tenure and provide appropriate compensation. The coverage will keep increasing until the policy is 1.5 times greater than the initial policy coverage. They are suitable for individuals who wish to upgrade their insurance policy as they go through different life stages.
   
   

4. Decreasing term plans: In decreasing term plans, the premium rate and coverage will decrease at a specific rate during the policy's tenure. Decreasing term plans are suitable for people looking for low life insurance coverage since their financial responsibilities may decrease with time.
    

5. Convertible term plans: Convertible term insurance plans are similar to traditional term plans, where a shorter policy term can be converted into a whole life life insurance policy. A big advantage of these plans is the policyholder can convert these plans into whole life plans without providing any medical proof to the insurer. They are beneficial for individuals who wish to get affordable term coverage, to begin with and enhance the coverage once their liabilities start to grow. 
   
   

6. Term plans with riders: These term plans provide the policyholder the ability to extend the insurance coverage they get from the plans with the help of riders^@. A rider is an add-on that can be included in the policy, which provides coverage for specific situations like critical illness diagnosis, accidental death, etc. For instance, if an individual gets the premium waiver rider, then if they are ever in a situation where they cannot keep up with the premium payments, their rider would become active and uphold the plan. These plans are suitable for individuals who wish to get coverage on specific instances with their policies.
    

Here’s the quick comparison of term plan types:
 

Why choosing the right sum assured matters?

Here are the key reasons why selecting the right sum assured is important:
 

• Choosing the right sum assured ensures your family can replace your income and manage essential expenses comfortably during difficult times.
• An adequate sum assured helps your dependants clear outstanding loans and financial commitments without facing additional stress after your absence.
• Selecting enough coverage protects your family from inflation and rising living costs, ensuring stable support throughout their future financial needs.
• Choosing an adequate sum assured keeps long-term goals secure, allowing your children to pursue education and dreams even without your guidance.
• A well-calculated sum assured offers your family financial independence and prevents them from relying on loans or selling valuable assets.

Benefits of a term insurance plan

Term insurance plan provides the following benefits to the policyholders:

• Financial Protection

  A term insurance plan provides a lump-sum amount to your family in case you pass away. It helps clear outstanding debts, pay off home loans, and ensures long-term financial stability for future goals and daily expenses

• Affordable Premiums

  Term insurance is usually a cost-effective scheme with affordable premiums. You can customise this plan according to your budget requirements and the coverage you need.

• Flexibility

  You are allowed to choose the policy tenure and sum assured as per your financial needs. You can also avail of Accidental Death Benefit, permanent disability, and critical illness as optional riders under the term insurance policy for extra protection.

• Tax benefits

  The premiums paid towards term insurance are also allowed as a deduction* under Section 80C of the Income Tax Act. Another advantage is that the death benefit received by the nominee is tax-free.
   

Maha Raksha Supreme from Tata AIA Life Insurance
 

The Tata AIA Life Insurance Maha Raksha Supreme Plan – A Non-Linked Non-Participating, Individual Life Insurance Pure Risk Premium Product (UIN: 110N102V04), is a comprehensive and customisable term plan cover that offers a range of benefits, including:
 

1. An extensive Whole Life Coverage (till 100 years).

2. An ‘Inbuilt Payout Accelerator’ benefit that provides 50% of the basic sum assured if the policyholder is diagnosed with a critical ailment.

3. The Life Stage Plus option can also increase the cover at different stages of your life.

4. With this Tata AIA term plan, choose from multiple premium payment modes - Single Pay, Limited Pay or pay premiums throughout the entire policy.

Further, the Tata AIA Life Insurance Maha Raksha Supreme - Non-Linked Non-Participating, Individual Life Insurance Pure Risk Premium Product (UIN: 110N102V04), offers very affordable premium rates for women policyholders and non-smokers.

 

Conclusion
 

Term insurance plans are extraordinary plans that provide individuals with pure insurance coverage at affordable premiums. Nowadays, insurers provide various types of term plans that offer unique features, giving the policyholder the benefit of choice. However, individuals must analyse their requirements to select the apt term insurance. It is essential to choose a suitable plan that meets your needs.