Suppose you are entering your 30s and will get married soon. As marriage comes with a lot of responsibilities, you think of investment options where you want to secure the financial future of your spouse in case of your untimely death. In such scenarios, term insurance emerges as a crucial financial tool that helps build a safety net for your spouse and family in your absence.
You may wonder which term insurance policy to opt for. Well, this blog will explain the different types and importance of term insurance policies so that you can make informed financial decisions.
Breaking Down the Types of Term Insurance Plans
Term insurance has become popular among Indians recently, and if you are also planning to buy one, knowing the types available can be quite helpful. Here is a breakdown of different term insurance policies you can opt for:
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Wednesday01 Jan. 2025
● Level Term Insurance
This is one of the most common types of term insurance policy. Here, you are provided with a fixed sum assured for your entire term policy. Policyholders primarily benefit from a stable and predictable premium amount.
● Decreasing Term Insurance
This type of term insurance is designed for those with certain financial commitments, such as loans. It guarantees that the amount insured will decrease over time in proportion to the diminishing responsibilities. Meanwhile, rates remain unchanged, guaranteeing consistent coverage in the policy.
● Convertible Term Insurance
A convertible insurance policy offers its policyholders adaptability and allows them to convert their term plan into a whole life policy or an endowment plan at a later date. If the policy’s requirements have evolved over time, this flexibility can help them gain the necessary advantages.
● Increasing Term Insurance
In this instance, the sum assured is progressively increased during the policy period to counteract the impacts of inflation. This type of policy provides adequate protection against the growing expense of living, even if the premiums are a little higher than those of standard term insurance.
● Term Insurance with Return of Premium (TROP)
According to TROP, if you, as a policyholder, survive the term (duration), you will receive a refund of the total premium you paid. Even though TROP premiums are generally higher than those of traditional policies, this type of policy offers a certain component of saving, which makes it an appealing option, especially for individuals looking to create a financial corpus for the future.
Importance of Buying the Best Term Insurance Plan
Buying the best term insurance plan is essential not only for securing your family’s future financially but also for various reasons. They are discussed as follows:
- Term insurance has cheaper premium rates than other types of life insurance, so you may be able to afford a higher coverage amount.
- A term insurance policy replaces your income if you are the family’s principal provider, helping to pay for living expenses, schooling, and other financial obligations.
- You may customise a term insurance plan to meet your unique needs by selecting different riders, such as critical illness or accidental death coverage. Term plans often have immense flexibility in adjusting the coverage tenure and sum assured.
- Term insurance can be a safety net for your family if you have outstanding debts or loans, shielding them from financial obligations in case of your unfortunate
Factors to Consider When Exploring Types of Term Insurance
Read the following factors that you must consider before purchasing the term insurance policy of your choice:
● Assess the Need for Insurance
Before you select a suitable term insurance policy, make sure to assess your needs. The sum assured of the policy must be sufficient to cover your family’s lifestyle and expenses in your absence.
● Check the Claim Settlement Ratio of the Insurer
The claim settlement ratio (CSR) of an insurance provider is a crucial aspect to consider before purchasing a plan. CSR mainly signifies the percentage of claims that insurers settle to the total claim they receive. Opt for insurance providers with high CSR to claim your settlement when needed.
● Consider Tenure of Policy
Understanding the insurance policy’s terms is essential to align them with your financial goals. If your objective is to give your family financial stability until retirement, select a policy term that extends until you attain that age.
● Assess Add-ons and Riders
Riders can improve the coverage of your term insurance plan. When looking at your options, assess the riders already available and consider adding those that will offer further protection appropriate for your needs.
Final Words
Overall, purchasing a term insurance policy is a wise choice for people who have dependents. You may choose the best term insurance plan to protect your family’s financial future by carefully weighing criteria like the sum assured, policy duration, and riders. Also, read the terms and conditions well to avoid hassle during the claiming process.
