Types of Term Life Insurance Plans in India in 2024

Term life insurance policies are the most affordable form of life insurance, offering financial security to your family within a fixed duration of time. Due to its affordable premiums, it is a popular choice of life insurance plan today.

However, you can find numerous types of term insurance, each offering different benefits and terms. Thus, before coming to a decision, it would be wise to understand what these types include. Keep reading to learn more about term insurance and its different forms.

A term insurance policy refers to a financial protection plan that offers coverage within a fixed coverage term. As the name suggests, a term insurance company will offer a death benefit to your beneficiaries in light of your unfortunate demise within the specified period.

However, if the policyholder lives past the coverage period, then their nominees will not be entitled to the death benefit or maturity benefit.

Term insurance plans are a great bargain as they offer a highly assured amount at reasonable premium rates. The large amount ensures financial security for your family, even against the effects of inflation, to meet their future goals along with daily lifestyle expenses.

Moreover, many insurers offer to return the paid premiums if the insured survives past the coverage tenure. Apart from this, the different types of term insurance plans offer benefits under different conditions. Therefore, you must know each type before choosing the most suitable one.

A term insurance plan involves a legal contract between a policyholder and an insurance provider. The policyholder is required to pay a premium every month, which is decided when purchasing the term insurance. However, the policyholder may also pay the premium in a single instalment. The insurance provider considers several important factors, such as the policyholder's age, profession, health status, and gender, when deciding the sum of money and the premium amount.

While purchasing term insurance, the policyholder must select a trustworthy nominee. In the untimely event of the policyholder's death, the nominee submits a form claiming the assured amount. Thereafter, the insurance provider minutely evaluates the documents and pays the assured amount to the nominee.

An Example of Term Insurance

1. Level Term Plans

Level Term plans are a standard type of term insurance, commonly offered by most insurance companies by default. For this plan, your premium amount and the sum assured are determined at the beginning of the term and remain constant throughout.

Note that premiums for life insurance plans depend prominently on your age. Therefore, if you opt for the policy at a younger age, your premium will also be lower. In addition, factors like your income, health conditions, etc., will also influence the premium rate.

The benefit received on the level term insurance policy is a death benefit. This means that the assured sum will go to your nominees if an unfortunate occurrence leads to your demise. However, if you survive the term period, no benefit will go towards your family.

Features of Level Term Plan:

Here are the features of a level term plan:

• The monthly premium and the assured sum remain unchanged throughout the insurance duration.
• The assured amount can be independently discussed between the insurance provider and the policyholder.
• This insurance allows the nominee to receive the lump sum amount at once after the death of the policyholder.
• As per Section 10D of the Income Tax Act, no additional tax is charged against the assured sum.
• This type of insurance plan offers several term plans to choose from.

Who Should Consider Level Term Plan?

The Level Term Insurance Plan is suitable for couples who have young children or are planning to have children soon. This type of insurance plan enables parents to secure the expenses of their children in their formative years.

2. Term Insurance with Return of Premium (TROP)

Unlike most term insurance plans, TROP is a type of term plan that offers maturity benefits. Therefore, if you outlive the term of your plan’s coverage, you will still be entitled to the premiums paid until the maturity period. There will be a 100% refund of the paid premiums, also called survival benefits, in case you live past the policy term.

However, this does not mean death benefits are not applied here. So, your beneficiaries will be entitled to receive a death benefit in light of your unfortunate demise within the policy period.

Features of Return of Premium Term Plan:

• TROP involves disbursing the premium policyholders pay if they survive the policy duration.
• It offers certain tax benefits under Section 80C of ITA.
• TROP offers riders the option to enhance the policy.
• TROP offers several payout options.

Who Should Consider Return of Premium Term Plan?

The following people may opt for this type of insurance plan

• Single people who wish to secure the well-being of their parents.
• Married people who wish to support their partners financially in the unlikely circumstances of a mishap
• Married individuals who wish to secure the financial status of their children.

3. Increasing Term Plans

As suggested in the name, an increasing term plan refers to that policy where the assured sum amount increases with the passing time at a fixed rate. However, the rate of premium remains relatively constant. 

Therefore, the premium of these plans is also relatively steeper. It also depends on the rate at which the assured sum increases. The insurer sets the maximum limit of increase.

Nonetheless, this plan could be helpful during times of inflation to cope with the increasing cost of living. You can also choose this if you expect to increase your financial responsibilities.

Features of Increasing Term Plan:

Here are the features of an increasing term plan:

• The sum assured in increasing term plan insurance increases by a certain percentage depending on the policies and terms of the insurance provider.
• Increasing term plan insurance offers better coverage, providing better financial security.
• This type of insurance plan offers several riders to choose from.

Who Should Consider Increasing Term Plan?

An increasing term plan insurance is ideal for people with increased financial responsibilities.

4. Decreasing Term Plans

A decreasing term plan works opposite to an increasing term plan. This means the assured amount will be reduced at a fixed rate over time. The benefit of this plan is that its premium is significantly low and fixed. 

Furthermore, this plan can be beneficial if you have financial debt, such as loans, mortgages, etc. As time passes, the debt amount reduces, and so does the assured amount.

Features of Decreasing Term Plan:

A decreasing term insurance plan has the following features:

• The amount assured by the insurance provider decreases over the years.
• The premium amount remains the same throughout the tenure.
• A policyholder may decide the tenure of the policy.
• It is a pocket-friendly option that enables individuals to secure their financial stability without any holes in their pockets.

Who Should Consider Decreasing Term Plan?

A decreasing term insurance plan is suitable for those who plan to cover their liabilities, such as home loans and other debts.

5. Convertible Term Plans

Convertible Term Insurance policies refer to those specialised term plans that you can convert into a different type of live coverage plan later on. This means you can turn the term life insurance plan into an endowment plan or whole life insurance plan if required.

This plan is particularly useful if your financial goals change or you find a better option than your present one. Therefore, if you opt for this type of term insurance and get a whole life insurance or endowment plan after 15 years, you can do it hassle-free.

Features of Convertible Term Plan:

A convertible term insurance plan has the following features.

• Policyholders may convert their insurance plans to an endowment plan depending on the terms and conditions of the insurance provider.
• The premium is usually higher than other types of term insurance plans.
• It offers a death benefit and a maturity benefit.
• No additional underwriting is required to assess the risks of the insured.

Who Should Consider Convertible Term Plan?

A convertible term insurance plan is ideal for those individuals whose financial needs and commitments change over time.

The eventualities of life spare no one. Thus, the best you can do is ensure that your loved ones are protected and secured long after you are gone. Term plans are such options that offer coverage to your family in your absence without having to devote a high premium.

The Covered Amount

Policy Tenure

Select a Good Insurer

Claim Settlement Ratio

Solvency Ratio

Critical Illness Cover

Additional Benefits

Section 80C

Section 80D

Section 10(10D)

This provides an exemption of tax on the amount received by heirs of policyholders after their death.

This article discusses the different types of term insurance plans to cater to your financial needs. However, you must understand the terms and conditions of the policy you opt for to secure the maximum benefit for you and your family.