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Term Insurance

About Term Insurance

Term insurance is a type of life insurance policy which provides coverage for a certain period of time or specific term of years. It is one of the oldest and most basic form of life insurance plans.They provide a high life insurance cover amount for a comparatively low premium payment, which facilitates the insured to financially secure their family.In case of death of insured during the time period specified in the policy, their family gets a pre-decided amount, known as ‘death benefit’ or ‘sum assured’. No settlement is given if the insured survives the policy tenure. It has a pure life cover, which means there is no savings or profit component. It has no cash value. Basically, the insured purchases peace of mind and risk cover by investing through this insurance.

Advantages of Term Insurance
Competitive pricingSimplicity and flexibilityInnovative features
The term markets are more price competitive than other cash value policies. Different policies of term insurance are easy to understand and can be compared to each other because of the similarity in their structure.
This can be better explained by “pay the premium and get protected for the term chosen.” It is flexible to increase the life cover during critical stages of the insured’s life. Discontinuing is also easier as compared to other policies. Insured stops paying the premium, risk cover stops and policy ends.
Companies are active in reducing premium rates and giving additional discounts to certain categories like non-smokers, for instance, making it easier for a healthy individual to buy a term plan. Almost all term policies have a build in privilege to convert their policies to a permanent policy regardless of any changes in the insured’s health.
Types of Term Policies

There are many different types of term insurance policies available, which are as follows:

Level TermAnnual RenewableReturn of PremiumDecreasing TermIncreasing Term
Most common type of term insurance policies which offer premium for a period of 10 years, 20 years or 30 years, these are known as “Level term” policies. After initial term period of the policy, it can be renewed to a higher premium policy when the insured meets the renewal guidelines. Sum assured remains unchanged throughout the term of the policy.
In this type of insurance the company automatically allows the insured to renew their coverage after the policy term is over. Premium is paid for one year of coverage which is renewed each year for a certain number of years. Premiums increase in each renewal thereby exceeding the cost of a permanent policy.
As name suggests, the insurance company will return the premium paid, by the insured, over the life of policy at the end of term, if he outlives the term durations. Amount of premium that is returned is received income-tax free.
In this type of policy, sum assured decreases at a predetermined rate over the policy tenure, while the premium remains constant. It is also referred to as “mortgage insurance” as policy can be decreased as that of the assured amount.
The insurance cover under this goes on increasing over the time at a predetermined rate. This conception is based on rising inflation.