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7 Types of Term Insurance You Didn’t Know!

Term insurance is gaining ground rapidly in the country and for good reasons. A term plan is a pure protection plan.It is a type of life insurance that offers coverage for a certain duration. Another reason for its growing popularity is its ability to provide substantially large cover at affordable premiums. But before you go ahead and purchase a cover for yourself or your family, here are some types of term plans that you must be aware of.

  1. Level Term Insurance

This is the vanilla version of a term plan.It is the simplest form of a term plan. Should you opt for this plan, you would end up paying a certain amount as premium for a pre-defined duration. The cover or the features of the policy do not change all through its term. If anything worst should happen to you, the nominee would receive the sum assured as payout for the policy.

  1. Convertible Term Insurance

A convertible term plan gives you the ability to get cover and save money at the same time. You can start off with a normal term plan and can then convert the same to an investment plan at a later date.

An example for the same could be, you purchase a term plan for 20 years. After about 5 years, you decide that you want to convert that into an endowment plan or whole life plan, you can do so. However, you do need to keep in mind that not all the insurers provide with this category of term plan. Also, your insurance premium amount will change most probably with the conversion.

  1. Increasing Term Insurance

An increasing term plan allows you to enhance the coverage of your policy on a yearly basis. For every year that passes by, you can increase the sum assured by 5% until you double up the initial sum assured. It is almost self-explanatory that the premium costs for this term plan is a bit higher as compared to other categories. You should opt for this plan if you are sure that the current cover won’t suffice. This plan has been structured keeping inflation in mind.

  1. Decreasing Term Insurance

A decreasing term plan, as the name suggests does the opposite of what an increasing term plan does. The premium as well as the cover keeps on reducing along with the decrease in the tenure of the term plan. Theplan is mostly bought along with a large loan. As loan amount decreases year after year, the term plan matches the same. The value of sum assured will keep reducing at a constant rate as regular payment of EMI would reduce the overall loan amount. Mostly financial institutions like banks opt for this type of a term insurance plan for covering major risks for offering home loans, liabilities etc.

  1. Return of Premium Plan

A return of premium term plan is one of the newest additions to this list. Constant interaction and feedback from customers has resulted in the introduction of this plan. A return of premium plan has a maturity benefit unlike the normal term plan. A term plan usually does not have any payouts if the insured survives the term. But if you opt for a return of premium term plan and survive the term duration, the insurer would return all the premiums that you have paid till date. The insurance premium of this term plan is a bit on the higher side, due to the added benefit.

  1. Lump sum Benefit Term Insurance

In case of a claim, your nominee will receive the full claim amount in lump sum at one shot. The policy terminates once the insurer makes the payout. One of the easiest and simplest form of term plans is more in demand these days.

  1. Income Benefit Term Insurance

Here, the insurer pays out certain amount in lump sum and certain amount in installments for certain number of years to your nominee. In short, a regular flow of income in promised to your nominee, in your absence.

You also have the option of adding up riders to any of your term plans to further enhance their capabilities. Though the riders come at a cost, they are almost negligible if you consider the number of benefits that they add. Depending on your needs, you can pick up any of the above term plans and secure your life.

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