A term policy is an effective guard against the unforeseen

A term policy is an effective guard against the unforeseen. But you need to carefully check out the specifics and weigh them against your needs. Lisa Mary Thomson
reads the fineprint

    ARE you part of a growing tribe of people who splurge big time, without factoring in their needs and priorities — even when it comes to something as critical as choosing an insurance plan. As much as it is important to protect and provide for your family while you are alive, it's equally important to provide for them even after you die. However, to choose an insurance policy intelligently, you need to clued in to the specifics of the insurance policy and weigh them against your needs. SundayET gives you an insight into the types of term insurance policies that exist in the market and how to buy them.
LEVEL TERM PLANS
Fundamentally, a term insurance policy is one which makes it possible for you to provide for your family in the event of your death during the period of your policy. It is strictly seen as a protection plan against unforeseen circumstances and it is important to note that if the individual is alive on maturity of the policy, then the family does not stand to receive any money from the insurance company. The greatest advantage associated with this policy is that it while it allows an individual to be insured for a sufficiently high sum, the premium that needs to be paid in such a policy is quite low, thus making it an affordable option for many with limited cash to spare. This is a vanilla policy that is made available by most insurers across the country.
INCREASING TERM PLANS
As times have changed, the term plans offered by different companies have evolved and one such product that caters to the ever-increasing needs of people are increasing term plans. "It is targeted at customers whose incomes and lifestyles change yearly which brings with it corresponding increases in expenses. Accordingly, the AEGON Religare Increasing Term Plan makes it possible to increase one's sum assured by 5% every year, ensuring that the customer is always adequately insured," says Rajiv Jamkhedkar, CEO, Aegon Religare Life Insurance. It must be clarified here that the calculations for the 5% increase every year are made with respect to the initial (also called base) sum assured. In this way, it helps you expand the total corpus of the sum assured over a period of time, without increasing the premium to be paid or having to undergo the tests and complications associated with taking a second policy at a later age. "SBI Life Insurance gives individuals another option whereby the basic sum assured increases by 50% every 5 years into the policy while the premium to be paid remains unchanged," says a senior SBI Life Insurance official.
DECREASING TERM PLANS
Insurers have also realised that they have a clientele who may have liabilities, including mortgages and loans at a particular point in time and which stand to decrease as the years go by. Keeping this in mind, companies like LIC and Aegon Religare have decreasing term plans where the sum assured tends to decrease by 5% of the basic sum assured every year and hence, the premium to be paid in this case remains extremely low. In certain cases, there may be a limit to the age at which one can opt for a decreasing term plan. This is generally recommended for middle-aged people and particularly in cases where clearing off liabilities could prove to be difficult for other family members.
PARTIAL REFUND PLANS
There is another type of term insurance policy in the market, which allows for partial refund of the premium that is paid. "ING Term Life Plus offers return of premiums, paid half-way through the policy term and at the end of the policy term, on maturity," says Amit Gupta, director, marketing, ING Vysya Life Insurance. Similarly, in the Swadhan policy offered by SBI Life Insurance, if an individual survives the term, he gets a refund of his premium. However, this refund varies according to the term of the policy and could be anywhere between 50% and 90% of the premium paid.
INNOVATIVE PLANS
Another innovation in the term insurance space is that it is available for a limited period. For instance, LIC offers a policy whereby a person can insure himself/ herself for two years. Some companies also offer individuals with limited amount to spare the chance to start with a term plan which can be converted into a more sophisticated product such as an endowment or limited payment whole-life policy at a later stage when they have more money to spare.
DON'T FORGET
Remember to keep your needs in mind while deciding on the type policy to take, the sum assured and the length of the policy. Keeping these constant, you can compare the premiums offered by different companies and decide on the basis of how much you can spare. Starting your policy at an early age also gives you the chance to get very reasonable premiums. According to Jamkhedkar, "Everybody in the age-group between 25-45 years with a constant income should take these plans." Individuals also need to be aware that in addition to single and multiple-premium policies, there also certain companies, which give you the option of making, limited premium payments.
TERM-INOLOGY
Level Term plan
Allows you to insure yourself for a large sum while paying reasonably
low-premiums
Increasing term plan
Allows you to hike your sum insured by a fixed amount every year or every 5 years to deal with increasing needs
Decreasing Term plans Here the sum assured decreases over the term as loans and
mortgages also reduce with time
Partial refund plans
Gives you the chance to get a refund of the premium either in between or at maturity of the policy
Limited Term plans
This is available for individuals who
want to be insured only for a specific time period
Convertible term plans
This allows you to start off with a low premium term plan and move on to other policies at a later point of time