What is Term Insurance: Detailed Guide on Term Insurance Plan Types, Key Features and Benefits

6 min read

Do you have any knowledge about Term Life Insurance? Do you know Term life insurance meaning? Why do you think you should consider buying a Term Policy?  If you are seeking answers to these questions, and are unaware of the benefits of a Term Insurance Plan, you must read on to know all about it in this blog.

Let us first start with the meaning of term life insurance?

What is Term Insurance – Definition and Meaning of Term Life Insurance

Term insurance is a complete coverage life insurance policy that cover you for a specific period of time. In term insurance, the nominee of the policy holder receives specific payout in case of sudden demise of the insured during the tenure of the policy.

Thus, term insurance can be stated as a contract between an insurance provider and a policy holder where the nominees of policy holder receive a definite amount of money in case of the sudden death of insured person.

There are many term life insurance plans available in the market that you can choose from. However, the variety makes your choice difficult as you get confused with the numerous policy benefits and features. Thus, it impacts your final purchase decision concerning the most suitable plan for your family.

Let us see the various types of term plans available.

Types of Term Insurance Plans

Now that you know what a term insurance plan is, let us talk about the various term plans available that you can choose from. A person can compare different plans as per his/her preference and can choose the best term insurance policy.

Here are some of the different kinds of term insurance plans that you can opt for:

1. Standard/Basic term policy –  These are the most common types of term plans. Here, the nominee of the policy owner gets coverage for life in the event of the sudden death of the policyholder during the term of the plan.

2. Group term policy – This plan caters to organizations, businesses or associations etc., by providing coverage to all the members of the society/company. Though the benefits accrued are same as individual term insurance, but the coverage offered is high as compared to personal plans.

3. TROP or Term Return of Premium – This policy offers return of premium advantages in the form of survival benefits. So, if the policy holder survives throughout the duration of the term, they will receive the entire amount of the policy (except taxes).

4. Increasing and decreasing term plans – In case of increasing term plan, the coverage offered is augmented during the term duration at a particular period of the term. This rise is calculated as per the inflation rate and growing cost during the policy period and the insured accordingly gets the compensation. Here, the coverage keeps on increasing until the policy reaches the value that is 1.5 times higher than the original price.

In case of decreasing term plans, the premium rate as well as the coverage on life reduces at a particular rate within the tenure of the policy. These plans are generally used by banks and other financial companies while covering high risk consumer mortgages.

5. Convertible term plan – These are conventional plans that comes with limited term policy, which can be converted later into insurance policy for entire life. The key benefit here is that while converting the policy the insured person doesn’t require to give any medical proof.

Also Read: Benefits Of Choosing A Term Insurance At Younger Stage Of Life

What are the Key Features of Term Insurance Plans?

Here are some of the important features of Term Insurance plans:

  • Age of Entry – The minimum age of entry is 18 years, while the maximum age is 65 years. However, the rate of premium increases with the increase in the age of entry. So, it is better to buy a plan early on in life.
  • Age of Maturity – In most cases, maturity age in term insurance reaches at the age of 65 to 70 years. For term policies that offer higher maturity age, they charge a higher rate of premium.
  • Cover Enhanced – Some policies allow the policy holder the flexibility to increase the coverage with their requirements or increasing responsibilities. So, even if you start with a low coverage, you can enhance it later by paying a greater premium.
  • Greater cover of life – These plans are affordable and offer high life cover.
  • Policy duration – Term plan can have a minimum tenure of 5 years, while the maximum term can be from 25 years to lifetime.
  • Benefit in the event of demise – Term plans offer death benefits in the form of complete sum assured to the nominee of the policy holder in case of his/her sudden death.

Other features of term insurance plans include, benefits of maturity, benefits of survival, add-on or rider benefits, tax benefits and annual renewal benefits.

What are the Key Benefits of Term Insurance Plans?

Some of the primary advantages of term insurance are:

  • The term plan present benefits in case of death of the insured person by providing a lump sum amount to the policy owner’s nominee.
  • The plan takes care of all the financial liabilities of the nominees of the insured person
  • The plan offer financial security to the family of the insured person and ensures a comfortable life even after the death of the insured
  • It offers the facility of supplementary income to the policy owner in case the insured person suffers a loss of income due to any critical illness or disability caused by any accident.
  • The term insurance presents extra amount of sum assured to the nominee of the policyholder in case of sudden demise of the insured. However, this is possible only if the insured person opts for an accidental rider benefit.
  • The term plan offer discounts to females and non-smoker policy owners.
  • The policy offers low rate of premium to young, healthy policy buyers.
  • The term can be purchased online by applying for a medical examination.

Why should you buy Term Insurance Plan?

Here are some key reasons for choosing buying term insurance plans:

  • Presents Financial Protection
  • Presents Ample Coverage
  • Offers Affordable premium plan
  • Presents competitive costs
  • Offers flexibility of plan
  • Presents low claim of rejection
  • Presents Add-on Riders

Can I buy term life insurance Online? How?

Yes, getting a term insurance plan online is very easy and they are available at easy premium payment option. If you buy term insurance online, it makes easy to compare different plans and to choose the most beneficial one. Online plans are also better in terms of reliability.

Here’s the things to remember while buying online term insurance:

  • Note the coverage amount
  • Review your needs and budget
  • Prefer the right company
  • Check the policy period
  • Check the payout option

Exclusions under a term insurance plan

Some of the exclusions of term insurance include:

  • Suicidal death not covered
  • Death owing to HIV/AIDS not covered
  • Death due to self caused injury not covered
  • Death due to drug overdose not covered

Conclusion

Now, you know what is term plan, and also know how it serves as a good financial tool to support your dependents.

Term insurances are budget friendly as they protect your family financially during your absence. Knowing the term life insurance meaning makes it clear that it is high time for you to buy a term plan and support your family with a term insurance cover against any sudden mishap.

With a term plan, you can also ensures a bright future for your kids and save them against any financial crisis during your absence.

Also Read: Best 1 Crore Term Insurance Plans In India

FAQs on Term Insurance Plan Types, Key Features and Benefits

What does the term insurance policy mean?

Term policy is a life insurance policy that cover you and your family with financial protection against any mishap. Term policies are easily affordable and must be kept active to be able to avail the benefits of the policy.

How does term insurance work?

Term insurance provides coverage for a defined period in exchange for a specified premium amount. In case of an unfortunate event during this time-frame, the insurer provides a guaranteed# payout to the nominee of the insured to compensate for the loss of income.

What is the difference between life insurance and term insurance?

The common difference between term insurance and life insurance plan is that a term insurance plan only provides a death benefit in case of demise of the insured within the term period, whereas a life insurance policy offers both death and maturity benefit to the insured.

Is it worth having term insurance at a young age?

Yes, it is worthy to have term insurance at young age as it protects your family and ensure they continue to live comfortably without compromising their lifestyle when you are not around. Also, buying a policy at a young age will allow you to pay a low premium for the plan and vice-versa. Young people with low health issues pays less premium.

Do you get money back from term life insurance?

You do not get money back when your term life insurance policy expires unless you purchased a return of premium life insurance policy.

What is 1 crore term insurance?

Term insurance is a life insurance policy offering complete protection for a definite tenure in return of a particular amount of premium paid by the policy holder. A 1 Crore term insurance policy assures that your nominee receives enough in the form of the sum assured after you are gone so that the family can sustain well and your children's future is secured.

Who is eligible for term plan?

Anyone who is above the age of 18 is eligible to buy a term plan. Buying a term plan at a young age helps you get sizeable coverage at very reasonable premiums.

Which term policy is best?

Below are some good term policies:
HDFC Life Click 2 Protect Life
ICICI Pru iProtect Smart
Max Life Smart Secure Plus Plan
Tata AIA Life Insurance Sampoorna Raksha Supreme
ICICI prudential - iProtect Smart Plan
PNB Metlife - Mera Term Plan
Bajaj Allianz iSecure
Kotak Preferred e Term Plan

Which one is better: whole life or term life?

Term life coverage is often regarded as more affordable plan as compared to whole life because it's temporary and has no cash value. Whole life insurance premiums are much higher because the coverage lasts your lifetime, and the policy grows cash value.

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Gayatri Prabhu, Head-Digital Business at Mahindra Insurance Brokers Limited (MIBL) is one those few digital leaders who has the width and depth that is required to execute an ROI driven holistic digital strategy. She cuts through the noise, identifies the critical levers and leads her team to successful execution of the defined strategy. Her core mantra to win new and retain existing customers is: understand the consumer behavior and craft experiences around it.

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