What are the different types of term policies?

We are happy you are asking this question because, despite popular belief, there is no one-size-fits-all approach to buying term insurance. It needs to be tailored to your unique requirements.
 

There are four types of term insurance plans available -

 

• Pure protection plan
  
  
• Protection plans with changing cover
  
  
• Protection plans with value at the end of the term
  
  
• Protection plans covering more than one person

It’s nothing but your regular term insurance plan. They are also called pure protection plans because their objective is to provide financial protection in the form of insurance money when you pass away during the policy duration.

 

There are two types of pure protection plans -

 

●     Term plan

●     Whole life plan 

●     Term plan  - This is the simplest form of term insurance. Here's how it works:    

   

○ You are covered by your policy for a fixed duration of 10-40 years

 

○ Your family gets the policy money only if you pass away during this period

 

○ You will get nothing in return if you survive this policy duration

 

Find out more about term insurance plans.

 

● Whole life plan - In this option, you are covered by your insurance plan till 99 years of age. You also get the full life cover if you survive the policy tenure.

 

Sounds like a great option? Find out if you should opt for term insurance till 99 years.

What if you get a term insurance policy but the life cover feels inadequate over time? Solution - Protection plans with changing cover!
 

Let’s examine the available options closely -
 

• Flexible term plan - In this option, you can increase or decrease your life cover every year as per your requirement. But interestingly, your premiums may or may not change. 
  
  
  
• Term plan with life stage benefit - With every life milestone like a wedding, childbirth, or home ownership, your financial responsibilities increase. Won’t it be great if your term insurance life cover keeps up too? Term plans with life stage benefits offer the option of increasing your life cover at every life stage. But here, your insurance premium will also increase with an increase in the life cover. 
  

Regular term insurance plans do not offer any maturity value at the end of the policy tenure. Your nominee only gets the insurance money if you pass away during the tenure. If you outlive it, you get nothing.

 

But that is not the case in these types of term insurance plans. Let’s look at the available options in detail

 

●     Term with Return of Premium (TROP) Plan - If you opt for this, you will get back only the premiums you have paid during the policy tenure without any investment return. Know more about TROP Plans.

●     Convertible term plan - With this plan, you have the option to convert your regular term insurance plan into an investment plan. This means at the end of the policy tenure, you get the life cover along with some investment returns.

As the name suggests, this type of term insurance plan covers multiple people. You can choose from the following:

●     Joint life term plan - It covers you and your spouse. You may not need to buy an individual term plan if you opt for this, but we recommend you buy one anyway

●     Group term plan - It is offered by your employer and it covers every member in your organisation. But you must not rely entirely on this plan and get an individual term plan as well