Types of Term Insurance Policies
Standard Term Insurance Plan
Your premium amount during the entire term of the plan remains constant. The sum insured also remains unchanged. If the policy holder dies during the term of the plan, the nominee gets the amount equivalent to the sum insured.
Return of Premium Term Insurance
If the policy holder survives the entire term of the plan, he will not get any benefit under the standard term insurance plan. However, when you select the “Return of Premium” term insurance plan, you will get the amount refunded at the end of the term. In case of unfortunate demise during the term, the nominee will get the amount as specified in the term insurance policy. The premium of this plan is slightly higher than a regular term insurance plan.
Increasing Term Insurance
With every passing year, inflation reduces the value of money. If you have insured yourself for Rs. 5 lacs today, the value of the same will be negligible after 20 or 30 years. To ensure that your nominees get a meaningful amount in case of your unfortunate death, it is advisable to revise the term insurance with time. Under increasing term insurance, you will pay a little higher premium every year and your sum assured will also increase proportionately.
Decreasing Term Insurance
The insurance companies assume more and more risks with each passing year of the insured. On the other hand, the insured’s budget is limited.. In such a case, the insurance company agrees to provide term insurance at a constant premium, however with a reduced sum assured every year. You should opt for such a plan only if you are constrained with the budget. In fact, over time, the inflationary effect reduces the value of sum insured.
Convertible Term Insurance Plan
It is just like a standard insurance plan, however with an option to convert it into an endowment plan. The insured has to pay a little more amount of premium for the same. If the insured does not wish to pay additional premium, the plan remains valid as a standard term insurance plan.
Term Insurance with Riders and Options
As per your individual needs and risk perception, you can avail additional riders and options with your standard term insurance plan. Consider exploring the right riders and options for you when you sign up for your term insurance plan.