Buy a Life Insurance Plan in a few clicks
Protect your family's financial future.
Insurance and Investment in one plan.
Thank you
Our representative will get in touch with you at the earliest.
There are various types of term insurance plans, like Level Term, Increasing Term, Convertible Term, Joint Term, Group Term, and No-Cost Term Insurance. Each of these types of term life insurance plans serves different needs, from individual to joint and employer-provided coverage. Understanding their features helps in choosing the right one. Comparing the benefits of different types of term insurance ensures the best fit for your family's financial security.
What is Term Insurance?
Term insurance is a life insurance plan that provides coverage for a set period, called the ‘term.’ If the policyholder passes away during this time, the insurance company pays a lump sum amount to their family. Unlike some life insurance policies, term insurance does not give any payout if the person survives the term, unless they choose a Return of Premium (TROP) plan. It is an affordable way to ensure financial security for your loved ones.
There are various types of term life insurance policies in the market, each catering to different financial goals and protection needs. Let us take a closer look at the different term life insurance types available:
Level term insurance is the simplest and most common types of term insurance. The coverage amount or “sum assured” remains constant throughout the policy duration, and the premiums are also fixed. This straightforward structure makes it ideal for families seeking stable coverage over a specific period.
Example:
Ramesh, a 40-year-old father of two, buys a Level Term Insurance policy with a ₹1 crore sum assured for 25 years. His coverage remains constant, ensuring financial security for his family if anything happens to him. Unfortunately, he passes away in the 15th year of the policy. The insurer provides his family with ₹1 crore, helping them cover daily expenses, education, and loans.
Increasing term insurance is designed to keep up with inflation. In this plan, the coverage increases every year by a fixed percentage, while the premium remains the same or increases slightly.
Example:
Mansi takes an increasing term insurance of ₹20 lakhs. Every year, the cover increases by 5%, so in the 2nd year, her cover is ₹21 lakhs, then ₹22.05 lakhs in the third year, and so on. This way, her family’s protection keeps growing with rising costs.
Decreasing term insurance works inversely to increasing term plans. Here, the sum assured gradually decreases over time, often aligning with a loan or mortgage balance that reduces over the years.
Example:
Subhash takes a decreasing term plan to cover his ₹40 lakh home loan. As he pays off the loan every year, the sum assured reduces too, ₹36 lakhs in year 2, ₹32 lakhs in year 3, etc. So, he only pays for the protection he actually needs.
Unlike regular term insurance, term insurance with return of premium (TROP) offers a maturity benefit. If the policyholder survives the policy term, all premiums paid are returned, making it a viable choice for those who prefer getting something back from their insurance plan. While TROP plans come with slightly higher premiums than standard term insurance, they provide a form of financial reassurance for those looking to benefit in case of survival.
Example:
Priya buys a 20-year TROP policy with a sum assured of ₹30 lakhs. She pays ₹12,000 per year. If she survives the full term, she gets ₹2.4 lakhs (her total premium) back, like a refund with no interest.
Convertible term insurance offers the flexibility to convert your term insurance plan into a different type of life insurance, such as a whole life or endowment policy, at a later stage. This can be beneficial if your financial goals evolve and you want coverage that goes beyond a certain term. This type of plan is suitable for those who may not yet need permanent coverage but want the option to transition in the future.
Example:
Arun buys a convertible plan with ₹40 lakhs coverage. But after 10 years, he wants lifetime coverage, so he converts it into a whole life policy. No health check-ups, no hassle, just a smooth transition based on his changing needs.
Whole life insurance extends beyond the standard term by providing coverage for the policyholder’s entire life, often up to 99 years or more. It ensures that your family will receive a payout whenever you pass away, regardless of your age.
Example:
Arpita wants to leave a legacy for her children. So, she buys a whole life term plan of ₹1 crore. So even if she lives till 98, her family will receive the full amount after her death from this policy.
No-cost term insurance plans let policyholders exit the policy at a set time and get back the premiums they have paid. With no-cost term insurance, you have the flexibility to leave the plan without losing all your money.
Example:
Sooraj purchases a no-cost term plan for ₹1 crore. After 15 years, he decides to cancel the plan. He gets 70% of the premiums he paid back, making it less of a loss if he does not need the cover anymore.
Joint Term Insurance is a type of term plan designed for couples, where both partners are covered under a single policy. Instead of buying separate term insurance plans, a joint policy provides financial protection for both individuals, ensuring security for the surviving partner in case of the policyholder’s death.
Example:
Sanjay and Mona take a joint policy for ₹75 lakhs. If Sanjay passes away, Sunita will get the full amount. This is a convenient and cost-effective way for couples to safeguard each other’s futures.
Group Term Insurance is a life insurance plan provided by employers, organizations, or associations to cover a group of individuals under a single policy. It offers financial protection to employees or members at minimal or no cost.
Example:
ABC Pvt. Ltd. offers all 100 of its employees a group term insurance of ₹10 lakhs each. The company pays the premium, and every employee gets insured under one group plan. This plan is affordable and boosts employee benefits.
Choosing the right types of term insurance is not a one-size-fits-all decision. It depends on your age, income, responsibilities, and future goals. Let us break down which types of term insurance plans fit best for different kinds of people, so you can make a smart, personalized choice.
If you have just started earning and are looking for budget-friendly financial protection for your family, level term insurance is a great pick. It offers a fixed sum assured at a fixed premium, which means your costs stay the same throughout the term. Young professionals usually have fewer responsibilities, and this plan provides them with long-term coverage at the lowest cost.
Do you have a big home loan? If yes, then decreasing term insurance is designed for people like you. The coverage reduces over time, just like your home loan balance. This way, you are insured against outstanding debt without overpaying for unnecessary coverage.
Education costs are rising every year! This is why parents can go for an increasing term plan where the insurance cover grows annually. This ensures your child’s future remains secure even with inflation or when you are not around.
If you do not want to lose your money in case nothing happens to you (which is a good thing!), go for a TROP plan. It gives you back all the premiums that you have paid if you survive the policy term.
Joint term insurance is perfect for married couples or life partners. This is because such a plan covers both lives under one policy and is usually more affordable than two separate plans. So, if you and your partner are looking for a good plan to invest in, consider a joint term insurance.
If you run a company or organization, group term insurance is a great way to offer protection to your team while building goodwill. The best part is that these plans are cost-effective and also help provide peace of mind to your employees.
If you want lifelong protection for your family or plan to leave behind a legacy, whole life insurance is your best bet. It stays active until you turn 99 or even 100 years old.
If you are someone who lives a healthy lifestyle and wants the flexibility to convert your policy later, maybe into a savings plan, go for a convertible term plan. You can easily upgrade your plan without medical tests in the future.
If you want some flexibility, no-cost plans let you exit mid-way and still get your money back. It is a good choice for those unsure about long-term commitments. You can exit the plan after a few years and get a part of your premiums back. It gives you protection without locking in your money forever.
When buying a term insurance plan, you are not just picking a product; you are choosing a safety net for your family. That is why it is important to know what to look for before deciding. Here are some key things that can help you pick the right types of term insurance plan without any confusion:
This ratio shows how many claims a company has settled out of the total claims received in a year. A higher ratio means better chances that your family will get the insurance money when they need it most.
So, if you are comparing different insurers, look for a company with a claim settlement ratio above 95%. Also, check the total number of claims settled because the more claims handled, the more reliable the ratio becomes. A company that settles thousands of claims with a high ratio is usually a safer bet.
This tells you how financially strong an insurer is. Simply put, will the company have enough money to pay if a lot of people claim at the same time, like in a natural disaster?
The Insurance Regulatory and Development Authority of India (IRDAI) says insurers must have a solvency ratio of at least 1.5. Anything above that is even better. So, always check this number; it gives peace of mind that the insurer can actually pay when needed.
Life insurance is great for protecting your family after you are gone. But what if you fall seriously ill before that?
A critical illness cover pays you a lump sum amount as soon as you are diagnosed with a serious condition like cancer, stroke, or kidney failure. This money can help with treatment costs and other expenses. Moreover, you also get tax benefits under Section 80D when you buy this add-on.
Term plans come with optional riders that give you more benefits. A few to consider:
Choose the types of term insurance plans that covers more, not just what is basic. Extra riders may cost a bit more but offer great value.
Once you have shortlisted good plans, compare their prices. But remember, not all cheap plans are better. So, do not skip important features just to save a little money.
Look at what you are getting for the premium, benefits, riders, and long-term value. If the yearly payment feels heavy, go for monthly payment options and set auto-debit to avoid missing due dates.
Think about your job, hobbies, and health. Do you work in a risky field like construction or mining? Do you have any health conditions? These details matter while choosing the right plan and coverage amount.
If you live a high-risk life, go for a plan with higher coverage and useful riders like accidental or disability cover.
Your coverage should match your earnings. If you are the only earner, your plan should cover all major expenses, future needs, and outstanding loans.
Do not stretch your budget too thin, either. The premium should be something you can pay comfortably every year. Experts suggest that your term insurance cover should be at least 10 to 15 times your annual income.
Selecting the right types of term insurance involves understanding your long-term goals and aligning them with your family’s financial needs. Whether you are considering a simple level-term plan, exploring the flexibility of convertible options, or looking for whole-life coverage, it is essential to make an informed choice that supports your family’s financial future.
Remember, each type of term life insurance plans offers unique benefits, so take time to evaluate your current and future requirements to find the plan that best suits your life and financial journey.
1
Increasing term insurance offers a rising sum assured over time, adjusting for inflation, while decreasing term insurance provides coverage that reduces, often aligning with a decreasing loan balance.
2
Certain policies, like convertible term insurance, allow you to convert your policy into another type, but not all plans offer this flexibility.
3
Return of premium term plans (TROP) return the premiums paid if the insured survives the policy term, combining coverage with an element of savings.
4
Group term insurance provides coverage to a group, typically offered by employers, with lower premiums but usually limited coverage. Individual term insurance is tailored to an individual’s needs and offers greater flexibility.
5
For long-term financial planning, Whole Life Insurance or Level Term Insurance can be suitable choices, ensuring coverage and stability over an extended period.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
Get a Term plan that offers high coverage at low, affordable premiums