Term plans are inexpensive and simple and can be bought for 5,10,15,20, 25 and 30 years. The premium of the policy depends on the sum assured and as the amount increases the premium also increases. Moreover some policies may also provide additional covers like critical illness cover, premium waiver etc. however the premium amount will be greater in such cases.
With the advancement of technology one can even opt for online policies as well. Online policies are cheaper compared to offline policies.
There are generally five types of Term Insurance policies:
Level Insurance Plan:
The premium amount and sum assured is also fixed during the entire policy period.
Decreasing Term Plan:
In this type of term plan as the outstanding loan amount goes on decreasing the cover provided by the plan also goes on decreasing.
Increasing Term Plan:
This type of plan is opposite
of the above plan. The cover increases every year suitable for those who do not have sufficient assets.
Convertible Term Plan:
This type of policy is suitable for those who are unable to buy a whole life or endowment policy. The policy holders under this plan have an option of converting to other plans like whole life or endowment assurance plan later when they have money later.
Return of premium plan:
This type of plan is quite an exceptional plan as it returns the premium being paid by the individual at the maturity period.
Advantages of term insurance plan:
- A term insurance plan provides high coverage at lower premiums.
- The premium of term insurance plans is eligible for tax deduction under Section 80 C and Section 10 D of the Income Tax Act, 1961.
- May also cover short term loans.