Insurers are offering innovative and better range of Term Insurance plans to face intense competition. Term insurance can be classified into the following types:
1.Regular Term Insurance Plans: A Regular Term Insurance plan is a Term Insurance plan that provides basic coverage, that is, the sum assured is given to the nominees in case of demise of the insured. It doesn’t offer any benefits upon maturity. The insured may opt for regular or a single payment of premium. Usually, the sum assured can go up to 10 times of your annual income. When the policy matures, the insurance cover ceases, as does the need to pay premiums for such a cover.
On maturity, if the insured is still alive, no amount will be paid to the nominees or the insured. Regular Term Insurance has low premiums and high sum assured. This is the most cost-effective Term Insurance plan.
2. Group Term Insurance Plans: Group Term Insurance Plans are availed by an employer, organization, association, trusts, companies or societies. Companies take these plans to insure their employees. A Group Term Insurance Plans covers each and every member insured under the plan. It is cheaper than an Individual Term Insurance plan. The only problem is that the Term Insurance cover ceases to exist, once the employment or membership ends.
Group Term Insurance Plans can be taken by a group that fulfills the minimum membership requirements. Usually, the members to be insured in a Group Term Insurance policy need not undergo medical tests. As the coverage of a Group Term Insurance plan is not very extensive and adequate, the insured can buy riders to enhance their coverage.
3.Convertible Term Insurance Plans: A Convertible Term Insurance Plan allows an insured to convert a Term Insurance policy into an Endowment Plan. The in-built conversion option is available as an add-on feature. Convertible Term Insurance plans have higher premiums to accommodate the conversion facility.
4.Term Return of Premium Plans (TROP):Term Return of Premium (TROP) Plan comes with survival benefits. TROP refunds the amount of premium paid by the insured upon the policy’s maturity, provided the insured survives till that date. TROP plans have a higher premium.
In such a plan, the insured may opt to discontinue paying the premium and return the plan. All the premiums paid till date will be reversed minus deductions like medical examination costs and stamp duty charges.
5.Decreasing Term Insurance Plans: The sum assured and premiums on Decreasing Term Insurance plans decrease at a certain rate throughout the policy tenure. Such plans are designed to insure a property held as collateral against a loan like a home loan. Such plans ensure that the bank will be able to recover the dues in case of an unexpected demise.
The main idea behind a Decreasing Term Insurance Plan is that an insured’s requirement for high insurance coverage decreases with age; when certain liabilities like Home Loan repayment and so on decrease with time, on regular repayment of EMIs. A Decreasing Term Insurance plan should be taken in addition to other forms of Life Insurance.
6.Increasing Term Insurance Plans:Increasing Term Insurance plans have a coverage increasing at specific durations. This is to accommodate and compensate rising costs in the future. These policies get more expensive with time.
7.Joint Term Insurance Plans:Joint Term Insurance Plans allow the insured to cover their spouse under the same policy. It is basically designed for couples. Depending on the policy, the sum assured is paid out either on the demise of the main insured or at the death of each insured member.
