Term Insurance What’s On Offer?

Term life insurance provides coverage for a limited period of time. If the insured dies during the term, the death benefit will be paid to the beneficiary. After that period, the insured can either renew or drop the policy. Term insurance has gained popularity as it is the most inexpensive way to purchase a substantial death benefit. Here’s a look at the term insurance policies that exist in the market:

Term Plans With Rising Premiums: Such plans are targeted at affluent customers whose incomes rise yearly, accompanied by corresponding increases in expenses. Accordingly, the increasing term plan makes it possible to increase one’s sum assured by a pre-designated sum (say 10 per cent) every year, ensuring that the customer is always adequately insured. It must be clarified here that the calculations for the 10 per cent increase every year are made with respect to the initial or base sum assured. In this way, it helps you expand the total sum assured over a period of time, without increasing the premium to be paid or having to undergo the tests and complications associated with taking a second policy at an older age. Aegon Religare and SBI Life Insurance are two of the companies which offer such plans. 

Decreasing Term Plans: Such a plan is ideal for customers who may have liabilities, including mortgages and loans at a particular point in time and which stand to decrease as the years go by. Keeping this in mind, companies like LIC and Aegon Religare have decreasing term plans where the sum assured tends to decrease by 5 per cent of the basic sum assured every year and hence, the premium to be paid in this case remains extremely low. This is generally recommended for middle-aged people and particularly in cases where repaying loans could prove to be difficult for other family members in case of unforeseen occurrences. 

Partial Refund Plans: These allow for partial refunds of the premiums paid. For instance, ING Term Life Plus offers return of premiums, paid half-way through the policy term and at the end of the policy term, on maturity. Similarly, in the Swadhan policy offered by SBI Life Insurance, if an individual survives the term, he gets a refund of his premium. However, this refund varies according to the term of the policy and could be anywhere between 50 per cent and 90 per cent of the premium paid. 

Vanilla Term Plan: Such a policy is made available by most insurers across the country. It is strictly a protection plan against unforeseen circumstances. In such policies, if the individual is alive on maturity of the policy, the family does not stand to receive any money from the insurance company. The greatest advantage associated with this policy is that while it allows an individual to be insured for a sufficiently high sum, the premium that needs to be paid in such a policy is quite low, thus making it an extremely affordable option.

Modified Term Plans: Another innovation in the term insurance space is that it is available for a limited period. For instance, LIC offers a policy whereby a person can insure himself/herself for two years. Some companies also offer individuals a limited amount to start with a term plan which can be converted into an endowment or limited payment whole-life policy at a later stage when they have more money to spare. 

Tip: Remember to keep your requirements, the sum insured and the duration of the policy in mind while deciding which term policy to take. Keeping these constant, you can compare the premiums offered by different companies and decide on which plan to purchase. The lowest premium plan qualifies as the best assuming that all companies are equally sound. Term plans also prove inappropriate if you lack the willpower to invest regularly, want to skip the trouble of researching investment vehicles, or intend to invest in an insurance option for a specific aim such as your child’s marriage. In such cases ULIPs are a better option.