Term insurance plans are the most basic insurance plans where the nominee gets the insurance amount only when the insured person dies. The plan is for a specific time period commonly known as the ‘policy term’. However, if the insured person survives the policy term, no benefit is paid to any of the parties. This is a pure protection insurance plan which provides protection from unforeseen circumstances. Since there is no other benefit attached to it, premiums under term insurance plans are quite reasonable.
Term insurance plans are valuable assets since they protect a family at a minor cost. In general, 25-lakh coverage would cost around Rs. 3200 for a 30 year old male for a policy term of 30 years. Even if the insured person survives the policy term and gets no benefit, Rs. 3200 a year is a minor sum to pay for the peace of mind it brings. They are the cheapest plans available in the market. A policyholder can get a further discount if the policy is bought online.
Different Term Insurance Plans and their Benefits:
Term Insurance Plans can be of many types, some of which are mentioned below:
- Level Term Plans or Pure Term Plans
This is the simplest of term plans, where the sum assured remains the same during the entire tenure. The benefit is paid out to the nominee upon the death of the insured person. The amount of premium depends on the age of the insured person, the term of the policy and the amount of sum assured.
- Return of Premium Term Plans
These term plans include a maturity benefit. If the insured person survives the policy term, then the premium is returned to the policyholder. This is meant for those who do not want to risk paying the premium and not get anything in return. Obviously, the premiums for these plans are more expensive than Level Term Plans. However, compared to other forms of insurance, the premium is quite reasonable.
- Decreasing Term Plans
These are term plans where the sum assured decreases every year. They are popularly linked to mortgage-related products where the outstanding loan principal reduces at regular intervals. The premiums of these plans are lower than level term plans since the sum assured decreases considerably. A single premium option is also available under this type, which is commonly bundled with loan products by banks. Although single premium might look easier, regular premium is more cost-effective in case one is opting for a mortgage loan.
- Increasing Term Plans
In this type, the sum assured increases at a fixed percentage like 5% or 10% every year for a fixed period till the sum assured doubles during the policy term. This does not, however, affect the premium amount. However, the premiums of these plans are different and are often higher than those of the level term plans.
- Convertible Term Plans
These insurance plans can be converted into another plan of the policyholder’s choice like endowment or whole life at a pre-determined future date.
Significant Features of Term Insurance Plans:
The significant features of leading Term Insurance Plans of India are follows
ICICI Prudential Life Insurance: ICICI Prudential Life Insurance’s iProtect Smart is a very popular plan. Backed by the famous ICICI group, this plan can be bought online completely hassle-free. The plan provides protection for up to 75 years of age and boasts of a claim ratio of 96.68%. A policyholder can pay the premium one time, yearly, half-yearly or monthly. A policyholder has the choice of adding riders like accidental death, enhanced critical illness, terminal illness, and waiver of premium on accidental disability. While some of the riders need a nominal payment, the others are inbuilt. A medical test might be required depending on the amount of coverage.
HDFC Life Insurance: HDFC’s term plan 3D Plus Life Option has a claim ration of 97.62%. A policyholder has several choices of making the payment – single, yearly, half-yearly, quarterly or monthly. HDFC also offers riders like disability due to accident and cancer cover. This insurance plan is offered by the financial honcho HDFC and hence, is trusted by millions of investors all over the country.
Max Life Insurance: Max Life Insurance has made its mark in the insurance sector of India. Their term plan Online Term Plus One Time Lumpsum Plan is feature rich. The premium can be paid at yearly, half-yearly, quarterly and monthly intervals. Apart from the riders included in ICICI Prudential’s plan, this plan also has the rider of disability due to an accident.
Term Plans are definitely the best option to protect one’s family. Buying a term plan is not expensive and hence, can be bought by anyone, irrespective of economic background. We strongly recommend purchasing a term plan. It is definitely worth it.