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Types of Term Insurance Policy


Term insurance plans are the most basic kinds of life insurance. They provide a pure life cover at a reasonable rate. These are straightforward, no-frill plans that suit everyone’s needs. But did you know that there are different types of term insurance plans too? Yes, that’s right. You can choose from four types of term insurance. Explore your options and select a term plan that would provide the maximum and most appropriate cover to you.

Level Term Insurance

Let us start with the basic and the most common type of term insurance – the level term plans. This is the traditional form of term life insurance. You pay a fixed premium for a fixed number of years. Your life is covered for those many years. If you die during that period, your nominee receives a death benefit and the policy terminates. If you outlive the policy period, you do not get anything in return. This is a simple, inexpensive and clear-cut form of term insurance.

Increasing Term Insurance

The costs of living, education and healthcare are ever-rising. As a result, many people rightly feel that a cover that’s sufficient today may not be sufficient in a few years’ time. To address the issue, they opt for the increasing term life insurance plans. The sum assured in such a plan increases as the plan progresses. So if you die 10 years after buying the plan, your family will get a compensation that is large enough to cover their financial needs at that time. The premium of an increasing term plan remains the same throughout the policy period in most cases, but some insurers hike the premiums from time to time. Check with your insurance provider before buying the policy.

Decreasing Term Insurance

Decreasing term insurance is the exact opposite of increasing term insurance. Here, the value of sum assured falls as the policy moves towards its maturity. This kind of term insurance is best suited for those who want to cover a mortgage or a large loan with a term plan. If you have a large loan and don't want your family members to repay it after your death, you can buy this plan. The sum assured will keep decreasing as you keep paying off the debt. If at any point you die, your family members can use the death benefit from the plan to clear the mortgage without having to strain their own finances.

Term Insurance with Return of Premium (TROP)

A typical term plan doesn’t offer anything in return if you outlive the policy term. However, with TROP plans, you get back the premium you paid over the years if you survive the policy period. The premiums on these plans are usually higher than the regular term insurance plans. The TROP plans work a lot like the other term insurance plans. So if you die within the policy period, your nominee gets a sum assured and the plan ends. If however you survive the period, your premium amount is paid back to you.

Choosing a term plan carefully

So as you can see, term insurance is available in various forms. While all the plans are good, you will benefit only if you select an appropriate term insurance plan  for yourself. Understand the different plans, analyse them and then weigh them against your own requirements. This will help you in finding the best plan with the maximum benefits. Compare the available options online to find the best plan at the best rate. So what are you waiting for? If you haven’t bought a term insurance plan yet, go right ahead and do so. And now that you know about the different types available, you should be able to find a good plan for yourself without any problem.

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