Primary Coverage of Term Insurance Policies

Primary Coverage of Term Insurance Policies

Term insurance is one of the most popular forms of life insurance. A typical term insurance plan  offers a high cover at a low cost. It offers a pure life cover – if you die within the policy period, your nominee gets the sum assured. If you outlive the policy period, there is nothing in return. This makes term insurance a very no-nonsense kind of life insurance, something which is easy to understand, easy to own and most importantly, easy to afford.

Types of term insurance and key features

While the basic aim of a term life insurance plan is to cover your life, there are some variations to the term plans that help you address some other needs as well. There are mainly four types of term insurance. They are:

  1. Level term insurance: This is the basic and the most common types of term insurance. You buy a plan with a fixed sum assured and a consistent premium. You keep paying the premiums for the duration of the policy. If you die within the term, your beneficiaries receive the death benefit and the policy terminates. If you outlive the term, there is nothing to expect in return. This is a straightforward type of life cover and is available at a very reasonable cost.
  2. Decreasing term insurance: Here, the sum assured keeps decreasing as the plan progresses. A decreasing term plan is ideally purchased to cover a mortgage. So as you pay off the debt and the financial liability reduces, so does the coverage amount on the term plan. In such a policy, the premium usually remains fixed, but the sum assured continues to decrease. The term of the plan is commonly equal to the term of the mortgage or loan.
  3. Increasing term insurance: This is the opposite of the decreasing variant. Here, the sum assured increases as the policy progresses. An increasing term insurance plan is purchased, keeping the inflation rates in mind. A cover of Rs.50 lakh may be sufficient for your nominees today, but would not be in about 30 years’ time. So if you feel the cover should increase along with the inflation rates, you can opt for an increasing term insurance plan. The premium of such a cover remains fixed for the entire duration of the policy.
  4. TROP (term insurance with return of premium): As the name suggests, a TROP plan pays you back the entire amount of premium that you paid, if you outlive the policy period. In other words, you don’t lose any money if a claim is not made on the term insurance policy. A TROP plan is more expensive than a regular level term insurance plan, simply because of the return component.

Time to decide the best term insurance plans

Now that you know all about the various types of term insurance, go ahead and get the most appropriate cover for yourself. However, you first need to assess your needs. Do not buy the same plan that your friend did. Life insurance is specific to an individual and the plan that suits your friend may not be of any use to you! So understand what your life situation is and what kind of cover you want to assure your family members with. Once you do that, you should be able to understand and locate the best term insurance policy.

In conclusion

Term insurance is indeed a blessing. You can get a comprehensive life cover at a very affordable cost. And as we saw, there are different types of term plans that cater to your different needs. It is important for you to find the most suitable type of cover. Once you do that, buy a term insurance plan right away. You can be  rest assured that even if anything uncertain was  to happen to you, your loved ones would remain financially secured for the years to come.

Categories: Fitness

About Author