The insurance industry in India is vast and comes with plenty of investment options suitable to all kinds of investors. Several insurance providers offer a variety of plans with multiple benefits that are aimed at covering all life stages and requirements of their clients. When it comes to term insurance comparison, there are three main categories of term insurance plans – pure term insurance, term plan with return of premium, and whole life insurance plans.
All these plans come with their own set of coverage benefits. However, to help you understand more about term insurance and its other variants, we will discuss the regular term plan and term insurance with return of premium. Let us discuss their features individually.
- Term Plan
Term insurance is a simple life insurance plan that offers life coverage for a certain time period. However, the policy beneficiary will only receive the death benefit if the insured person dies within the policy term. Such plans are best for people who want to start investing early in their lives and want maximum coverage for the least amount of premium. Here are some of the top features of a term insurance plan.
- It is cost-effective
They are the cheapest life insurance plans in the market today. Since these policies are pure insurance plans, they do not come with an investment component. Therefore, their premium is also relatively low, as compared to other life insurance products.
- Flexibility to choose the payout method
The payout option you choose will help your family sail through the difficult financial times when you may not be there to look after them. Therefore, choose the payout method carefully, keeping your family’s financial strength and ability in mind. Even if your policy nominee is financially sound, the additional income from your life insurance will help them sustain their lifestyle.
There are two types of payout options:
- Fixed monthly income: A fixed monthly income option will pay the policy beneficiary with a predetermined amount on a monthly basis for a particular time period.
- Increasing monthly income: In this plan, the monthly income will grow 10% annually. By choosing this option, you can factor the inflation and make sure your family has enough money to pay for their expenses.
- Add riders to make your policy more comprehensive
Since term plans offer the most basic life cover, you can choose riders or the add-on benefits to increase the policy’s coverage. Nevertheless, they do offer these rider benefits at an additional cost. So, be sure to add the riders that are most suitable to your lifestyle. Some rider options include the following:
- Waiver of premium: With the help of this rider, you will be able to waive off the obligation to make premium payments if you become ill or disabled.
- Critical illness: By adding this rider, you become eligible for a lumpsum amount if you ever get diagnosed with a critical illness listed in the policy document.
- Accidental death benefit: If the policyholder’s death happens due to an accident, the policy nominee not only gets the death benefit applicable to the term plan but also the sum assured that comes with the accidental death rider.
- Expand coverage at various life stages
Your responsibilities change as you progress in life. A single person’s liabilities will vary significantly from someone who is married with kids. Therefore, your policy should allow you to make these adjustments and enhance the cover as you reach these stages.
There are many reliable insurance providers, such as Max Life Insurance, that allow you to expand your existing coverage at certain life events, like marriage or children. Make sure your insurance provider allows you to upgrade your policy at specific times of your life.
2. Term Plan with Return of Premium
Term plan with return of premium is different than term plan as they not only offer you with a life cover, but also give you maturity benefit if you outlive the term. Thus, it is important to do a term insurance comparison, including a Term plan with return of premium for people who are looking for a low-risk way to create wealth.
Here are some of its features:
- Sum assured
When it comes to term insurance with return of premium, the sum assured plan refers to the life insurance cover that is given to the policyholder when they sign up for the plan. However, the sum assured is lower than the term plan because the premium is refunded as the maturity benefit when the policy period ends.
- Maturity benefit
The survival or maturity benefit offered by term plan with return of premium is the one distinct factor that makes it different from a regular term plan. While the latter does not give you any survival benefit if you outlive the policy duration, TROP does. The insured person is entitled to all the premiums they paid over the policy term as the survival/maturity benefit.
- Death Benefits
The death benefit, in this case, is the sum assured amount that the nominee will receive if the policyholder dies due to any eventuality.
- Surrender Value
If you want to surrender the policy for some reason, then you become entitled to the surrender value that the insurer will pay to you.
- Paid-Up Value
This benefit allows the policyholder to retain their term plan with return of premium policy, even if they are unable to make the premium payments anymore. However, the insurance provider may require the insured person to pay the premium for a certain number of years before becoming entitled to this benefit.
Choosing between these two policies is mainly about personal preferences. While you are at it, make sure that you educate yourself about the available options before making an investment decision. You can use the online policy comparison tools to see their benefits objectively.
