Exploring the Different Types of Term Insurance

Term insurance is a pure protection plan designed to provide financial security to the surviving family in the unfortunate case of the policyholder's demise. While it is a basic product, term insurance comes in various types tailored to meet different needs. Understanding these types is crucial for selecting a policy that aligns with your financial goals.

This article can help you familiarise yourself with the options available to ensure you choose the most suitable coverage to protect your financial future.

What are the different types of term insurance plans available in India?

Below are some types of term insurance plans available in India:

o Pure protection term insurance plan: A pure protection term insurance plan is one of the most common types of term insurance. It offers financial cover in the unfortunate event of the policyholder's demise and helps the family cover their financial needs. There are no survival benefits provided with this type of plan.

o Return of premium term insurance plan: A return of premium term insurance plan offers the same benefits as a pure protection plan but also includes a survival benefit. If you survive the term of the policy, you get back all your premium payments upon maturity. This can be an attractive option for those who want a lump sum refund at the end of the policy term.

o Increasing term insurance plan: An increasing term insurance plan provides a gradually increasing sum assured over the policy term. This type of term insurance plan is particularly beneficial to combat inflation and meet your changing life stage needs over time as it ensures that your coverage keeps pace with your growing financial responsibilities.

o Whole life insurance plan: Whole life insurance is a type of term insurance that provides life protection until the age of 99 years. With lifelong financial protection, the plan offers peace of mind to you and your family for life.

How do you select the correct term insurance plan?

Below are the steps you can take when selecting a suitable term insurance plan:

o Assess your needs: You can start by evaluating your financial needs and responsibilities. It is essential to consider factors like your family’s lifestyle expenses, healthcare expenses, future educational expenses for your children and any other long-term financial goals. This will help you determine the amount of coverage you need.

o Factor in the premium: Different term insurance plans come with varying premium rates. You can use a term insurance calculator to compare the premiums of different plans. You must ensure that the premium fits within your budget while still providing adequate coverage. This approach can offer affordability along with optimum protection.

o Calculate your financial liabilities: Analysing your current and future financial liabilities is another critical step. For example, having a term insurance plan that allows you to increase your life cover might make sense if your financial responsibilities are likely to increase.

o Consider inflation: Inflation has the potential to diminish the real value of your term insurance coverage over time and leave your family members financially vulnerable. Take into account the impact of inflation on your future financial needs.

o Reach out to an insurance agent or financial advisor: In case of doubt, it can help to speak to a professional. An insurance agent or financial advisor can help you understand the pros and cons of each plan and how well they align with your requirements.

To sum it up

Selecting the right term insurance plan should be a well-thought-out and researched decision. It is essential to ascertain your financial needs, compare the different types of term plans in the market, and consider factors such as inflation and your future financial liabilities. Consulting a financial advisor and insurance agent can also help you make the right choice. Moreover, you can select multiple term plans to tailor coverage to your diverse needs. Sometimes, purchasing more than one term insurance plan can ensure that you choose a plan that gets the right level of protection for you and your family’s financial future.

(No Hans India Journalist was involved in creation of this content)