Term insurance is a form of financial instrument that protects your loved ones in the event of your untimely demise. However, a term insurance plan can also be an excellent form of savings with large returns if you plan your financials carefully.
The process is simple. You purchase a suitable term insurance plan, set tenure for the policy, pay the premiums, and receive the benefits. Based on the types of term insurance, you could reap the benefits during your lifetime secure your family’s future financials, or both.
Types of term insurance plans
Here are the extraordinary types of term insurance that can yield you maximum benefits:
Single premium term insurance plans
If you are not thrilled by the idea of paying premiums often due to financial burdens or lack of a steady income, you can purchase single premium term insurance plans. These types of term insurance require you to pay a lump sum premium upfront and the policy remains valid for your chosen tenure without a need for any further payments.
Increasing term insurance plans
If you consider the value of the Indian Rupee in futuristic terms as a variable that affects the money that your family will receive in the event of your untimely demise, then these are the types of term insurance you need. The Increasing term insurance plans allow you to set a sum assured at the beginning of the policy. This sum is increased every year without any changes required to the other variables in the policy. The longer you survive the tenure of your plan, the more money your family receives if the unspeakable happens.
Decreasing term insurance plans
If you are someone with a lot of loans and debts, then you need decreasing term insurance plans. These policies are uniquely designed to reduce your liabilities slowly and steadily so that you do not face a tremendous financial burden.
As with most types of term insurance, you must select the sum assured and the tenure of your policy. Every time you pay the premium, the insurance provider sets aside a portion of the money to pay back lenders. That way, your term insurance premium is being used to settle your debts, and you need not worry about planning the financials to do so.
The amount that is paid to the lenders is then deducted from the total sum assured for which you purchased the policy. In the event of your death, your beneficiaries will receive the remaining sum assured after all the deductions made to repay lenders. The benefits of this plan are many including helping you plan your financials without the added load of repaying loans. Your family also receives a decent settlement amount that they can use to repay very little debt, if any, and still have enough left over for their future.
Level term insurance plans
These types of term insurance plans neither increase nor decrease the sum assured or impact any other variables in your policy. The term insurance plans is very straightforward. You choose your sum assured, and tenure, and decide on the premium. If you want a term plan that pays regular benefits, you need to specify that as well.
Once the term insurance is in place, you pay the premium regularly. Upon the event of your demise, your beneficiaries must raise a term insurance claim by notifying the insurance provider. The claim will be settled as per the terms agreed upon in the original term insurance contract to the value of the sum assured.
Term insurance with return of premium
If you purchase a term insurance plan and survive the tenure of the policy, it is a matter of celebration. All you need is a little forethought to purchase the types of term insurance that offer a return of premium.
These policies, much like any other, will pay your beneficiaries a hefty sum assured in the event of your demise within the policy tenure. However, if you survive the term, then the policy repays you all the premiums that you paid over the years. It is an excellent form of savings plan for those who take good care of their health and live cautious lives.
Unit Linked Insurance Plans
If you desire to reap the benefits of your term insurance during your lifetime, ULIPs are the best solution for you. These term insurance plans are designed so that the insurance provider invests part of your money in the market. Based on the returns, you can receive neat amounts of profits periodically. In the event of your death, the insurance provider pays the sum assured to your beneficiaries.
Conclusion
The different types of term insurance plans allow you to make an informed decision based on your specific needs. If you have loans, then decreasing term plans can be quite beneficial, and so can ULIPs. You can repay investors, lenders, etc. using the profits. Similarly, every term insurance plan has its pros. Evaluate your finances and make a defined financial plan to make the most of your term insurance policy.
