What are the Different Types of Term Insurance?

 

1.

Which is the most common type of term life insurance policy? 

Most people tend to buy level term plans as they are affordable and offer a fixed sum assured amount that is a guaranteed death benefit.

If you are fine with paying a slightly higher premium rate, a term plan with a return of premium benefit is also another popular option.

2.

How many term insurance plans can I purchase? 

You can buy more than one term plan, but you also need to know the terms and conditions of each plan very clearly. Most people prefer term insurance plans because they offer more economical premium rates.

One distinct advantage of buying more than one term plan is that buying multiple smaller term plans adding to a big cover is cheaper than buying a single term insurance plan with a high sum assured.

3.

Which type of term insurance plan provides increasing death benefits? 

An increasing term plan offers a higher death benefit as the sum assured increases on a set percentage each year.

You can also opt for a term plan with a return of premium benefit if you want one that offers a dual payout of maturity benefit and a death benefit. 

4.

How much coverage do I need for my term insurance policy? 

This will depend on your current lifestyle, financial obligations, and your number of dependents. 

For a more detailed look into what factors you must consider, you can read the 'Factors to Consider Before Purchasing a Term Insurance Policy' section given above or our blog on How Much Term Insurance Cover Is Needed.

5.

Can the term insurance cover be increased? 

Your term insurance coverage can be increased in three main ways:
● Through Add-On Riders or Top-Ups: These increase your term policy's base coverage and are not as expensive as opting for a brand-new policy. However, most term plans only allow for the inclusion of add-ons and top-ups during policy purchases. ● Upgrading to a Newer Policy: This process requires you to go through the documentation process again and take new medical tests to buy a new term plan. You will also most likely be older, so your upgrade can be more expensive. ● Buy An Increasing Term Plan: The two methods mentioned above can get tedious, so if you are unsure of the amount of coverage you require, you can buy a term plan online with increasing life insurance coverage.

For a more in-depth explanation of all three processes, click here.

6.

Which type of term insurance plan is cost-effective? 

Basic term insurance plans like level term plans or decreasing term plans are the most affordable types of term plans.

7.

Are riders applicable to the different types of term insurance policies? 

Riders⁶ are optional covers that can be attached to basic term plans on policy purchase or renewal. The type of riders available under each term plan may differ and will depend on your insurance provider.

Always check what riders⁶ are available under your term plan with your insurer before policy purchase to avoid any confusion or future issues.

8.

Can I switch between the level term to decreasing term insurance? 

This is only possible under a convertible term plan. In other cases, you will either have to opt for one or the other or buy both pans separately. 

9.

What are the advantages of purchasing a convertible term insurance policy? 

The benefit of convertible term insurance plans is that you do not have to undergo a pre-medical screening process to convert your policy from a term to a life or endowment plan. This is a valuable feature. 

10.

How is term insurance with a return of premium different from the other types of term insurance policies? 

Term plans with a return of premium benefit offer a dual payment of a death benefit and a maturity benefit in the event of the policyholder's death. This unique feature is not available under other types of term insurance policies.

This maturity benefit is a return payment of all premium payments paid during the policy tenure. This payment is tax5-exempt and is paid to the policyholder if they survive the term plan or to the nominee with the death benefit.