Life is unpredictable, and if you are the sole breadwinner of your house, your untimely death can put them at financial risk. It is highly essential to cover your loved ones’ financial needs to not burden you in your absence. Taking up insurance policies is by far the most potent way to secure financial stability. The best savings plan for your family is taking up a term insurance policy and offering financial coverage to the insured for a specific period.
What is a Term Insurance Plan?
A term plan policy is taken by an individual to cover his/her life. A specific sum and tenure are assured at the beginning of the plan. In case the insured before the maturity of the plan, death benefits are paid out to their nominees. The lump-sum amount of the assured amount will help the insured’s family to meet their financial needs. You can also use the add-ons, which are basically the additional coverage options to the policy. Hence, a term insurance plan is the best option to cover your financial needs.
What are The Different Types of Term Insurance?
Level Term Plans
In this policy, your assured amount will remain consistent through the end of it. At the time of maturity, you will get the exact amount you had guaranteed. If you die before maturity, the sum assured will be paid to your nominee. It is the most common and straightforward type of plan that generally people prefer.
Increasing Term Plans
As the names suggest, the assured amount will keep on increasing at a fixed rate every year in this type of insurance plan. In case of untimely death, the sum that is accumulated by then will be paid to the nominee. For instance, the term amount increases at 5% every year, and you have coverage of INR 10 Lakhs. Next year your coverage will be INR 10.5 Lakhs and so on.
Decreasing Term Plans
The exact opposite of the increasing plan, in this plan, your assured sum will decrease at a certain percentage every year. At the time of your death, the assured sum will be given to your nominee at that given point of time. Decreasing plans are provided as the loan redemption, and the main goal is to pay off the outstanding balances in case the borrower dies early.
Return of Premium Plan
In this plan, if the insured dies between the term of the policy, the sum is paid to the insured’s nominee. However, if the insured is alive throughout the policy, the premium will be refunded at the plan’s maturity. This one is quite different from other plans.
Group Term Plan
A group takes this type of insurance for its members. For instance, the employer takes for his/her employees, or the club owner takes for the club members. Group term plan is only offered for a year; during the year, if any member dies, the sum will be paid to the family. This plan has to be renewed every year if needed.
These were different variants of a term insurance policy that will help you in deciding on choosing the ideal one for you. Make sure to consider the benefit of each variant before choosing any.