For the most part, keeping things simple is the best policy in life. The same principle can be applied to life insurance policies. Term insurance policies are the most simple and straightforward form of life insurance. It is a plain life insurance plan that provides a pure life cover without any survival benefits. In other words, it will act as a financial support to the nominees of the insured person, when he is not around anymore. Besides, it is also the most cost-effective plan to secure the future of your loved ones. A term insurance policy provides a huge death benefit for a fraction of the cost. While many of you might be familiar with the concept of term insurance policies as a whole, there are several types and features of term insurance policies which are not known by people at large. This article decodes the various types and features of term insurance policies to help you make well-informed decisions while buying life insurance policies.
Level Term Insurance
A level term insurance plan is the most popular term insurance policy in India. Under this plan, the beneficiaries of the insured person are paid a fixed sum on the death of the insured person . The premium payable under this plan is based on the age and health of the insured person, the policy duration and the cover amount and remains fixed during the entire tenure of the policy.
Decreasing Term Insurance
In a Decreasing Term Insurance plan, the amount of death benefit payable decreases with each passing year. Although the death benefit amount decreases, the premium payable remains constant throughout the policy tenure. A Decreasing Term Insurance policy is beneficial for individuals with mortgages and loans as the liabilities decrease or cease to exist with the passage of time.
Increasing Term Insurance
Under an Increasing Term Insurance plan, the amount of coverage increases with each passing year. This types of term insurance plan is based on the concept of inflation. Since inflation increases with time, there is always the risk of the insurance death benefit not being sufficient to cover the needs of your family members. Hence, an increasing term insurance policy provides added protection against inflation.
Return of Premium Term Insurance
The Return of Premium Term Insurance is for those policy holders who do not like the idea of their premiums going waste once the policy term expires. Under the Return of Premium Term Insurance plan, the policy holder receives the premium amount paid at end of the policy term. However, if the insured person dies during the policy term, the full death benefit will be provided to the beneficiaries.