Understanding The Variants Of Term Insurance Plan

Term insurance plans are one of the most common and widely heard life insurance policies. It is a pure life insurance policy that gives financial protection to the family of the insured in case of his/her death. The policy does not have any maturity value and pays the sum assured only on the death of the insured during the policy term.

Types of Term Life Insurance

There are different variants of term insurance plans available. Some of them are:

• Level Term Insurance Plan: Under this plan, the sum assured remains constant throughout the policy term. The premium also remains the same throughout the policy tenure. Level Term insurance protects for a set period, usually 10, 20, or 30 years. Premium won’t change across the policy tenure.
• Increasing Term Insurance Plan: Under this plan, the sum assured increases at regular intervals. The premium also increases at regular intervals to keep pace with the increase in sum assured. This type of plan is suitable for those who are looking for inflation-protected life cover.
• Decreasing Term Plans: Decreasing term insurance starts with a higher death benefit that decreases over time, typically mirroring the mortgage balance or another debt. The premium also decreases over time. Most people choose level term life insurance because it is less expensive than decreasing term life insurance in the long run and offers more stable coverage. However, decreasing term life insurance may be a better choice for those who want their premiums to decrease along with their other debts.

Advantages of Level Term Insurance Plan

There are many reasons to consider a Level Term insurance plan. This type of insurance protects for a set period, usually 10-30 years. The premium remains the same for the duration of the policy, making it easier to budget for. In the event of your death, the death benefit is paid out to your beneficiaries tax-free. 

This can help them with final expenses, mortgage payments, or everyday living expenses. Level Term insurance can be a good option for people who are looking for temporary coverage or who want to provide financial security for their loved ones.

Advantages of Increasing Term Insurance Plan

An insurance plan is a crucial part of financial planning, and term insurance is one of the most popular types. It offers several advantages over other types of insurance, such as whole life or universal life.

One advantage of such plans is that it is generally much less expensive than other types of insurance. This makes it a good option for people who are on a budget or who want to keep their premiums low.

Another advantage of these plans is that they can be easier to qualify for than other types of insurance. This means that people with health problems or other risks may still be able to get coverage.

Finally, Increasing Term insurance plans often have shorter terms than other types of plans. This means that they can be more flexible and allow policyholders to change their coverage as their needs change.

Advantages of Decreasing Term Insurance Plan

The main advantage of a decreasing term insurance plan is that it is generally less expensive than a level term policy. This makes it an attractive option for people on a budget who still want to have some life insurance coverage in place.

Another advantage of decreasing term insurance is that it can be used as part of a financial strategy to help pay off a mortgage or other debt. Since the face value of the policy decreases over time, it can be used as collateral for a loan. This can be especially beneficial if you have trouble qualifying for traditional loans.

Conclusion

Now that you know different variants of the term plan you must decide the one that fits your needs and choose wisely. Each type of traditional term plan is unique in its offering and can further be cutomised with the help of life insurance riders.

Also read: Aditya Birla Term Insurance Plan: Here’s Everything You Need to Know

Everything You Need To Know About The Rules For Renewing Your Life Insurance Policy