What Are the Different Types of Term Insurance Plans in India?

To start with, we know that term insurance provides financial security by offering a lump-sum payout in case of the policyholder’s passing during the term. Yet many buyers view it as a uniform product and compare only premiums. 

The reality, though, is that the types of term insurance plans in India differ significantly in how coverage is structured and the needs they address. This article outlines each type and how it aligns with different financial responsibilities. 

You can explore Bandhan Life’s term plans at the iTerm prime product page. 

Key Types of Term Insurance Plans in India 

Different types of term insurance vary in how the sum assured changes, included features, and the financial needs they address overall. 

1. Level Term Insurance 

Level term insurance provides a fixed sum assured throughout the policy tenure. The payout remains constant for any claim during the term, making it a reliable choice for predictable coverage. There are other options available where the sum assured can be increased or decreased as per your life stage.  

Best for: Individuals seeking straightforward income replacement. 

2. Return of Premium (ROP) Term Plans 

Return of Premium (ROP) term plans refund the total base premiums paid (excluding taxes, rider costs, and other charges) if the policyholder survives the policy term. Apart from this feature, they operate like regular term insurance by providing a death benefit during the tenure. 

Because the refund element increases the overall cost, premiums are generally higher than pure term plans. The sum assured may therefore be lower for the same budget in Bandhan Life’s term plan with return of premium. 

Best for: Buyers who want a maturity benefit in addition to life cover. 

3. Group Term Insurance 

Group term insurance offers collective annual coverage, often through employers, at a lower cost. The policy remains active only during employment and is usually non-transferable. However, some insurers have now started offering the option of ‘portability’, wherein the group insurance can be converted into individual insurance. 

Best for: Employers providing workplace life cover. 

4. Joint Life Term Insurance 

Joint life term insurance covers two individuals under a single policy, typically spouses, business partners, etc. Depending on the structure, the payout is claimed at the first policyholder’s passing, or the second. In the first-death structure, the insurance cover continues for the second policyholder, often with a waiver of premium. 

Best for: Couples with shared financial goals and dependents. 

5. Term Insurance with Riders 

Riders are optional add-ons that expand a base term insurance policy’s coverage. Common riders include critical illness, accidental death benefit, Disability benefit and waiver of premium. 

Best for: Buyers seeking targeted protection beyond standard life cover. 

Why Is Sum Assured Important in Term Insurance? 

The sum assured determines the financial support available to dependents in the policyholder’s absence. An inadequate amount can leave families exposed to unpaid liabilities, income gaps, or unmet goals. 

When deciding on sum assured, consider income replacement needs, outstanding loans, and future objectives. This assessment is key when comparing the different types of term insurance plans available. 

How to Choose the Right Type of Term Plan 

Understanding the benefits of term insurance among the different types of life insurance helps identify how different term plan types align with specific financial needs and responsibilities. 

• Income stability: Stable incomes often align well with level term plans, while individuals expecting income growth may benefit from increasing term insurance that adjusts coverage over time. 
• Dependents and financial goals: The number of dependents and long-term goals, such as education or household expenses, influence both the type of term plan and the sum assured required. 
• Loan responsibilities: Ongoing liabilities such as home loans or EMIs may be better addressed through decreasing term insurance, where coverage reduces as obligations decline. 
• Budget and risk tolerance: Premium affordability and comfort with long-term premium commitments help determine whether to opt for riders or return of premium term plans for extended protection. 

Still deciding? 

Choosing the right term insurance plan requires clarity and careful evaluation. Different types of term insurance plans suit specific needs, from income replacement to liability protection. 

You can explore Bandhan Life’s term insurance plans to compare options and identify which structure best supports your long-term financial goals. 

Frequently Asked Questions 

1.  Which type of term insurance is best for families? 

Level term insurance is preferred for families as it offers fixed premiums and a stable sum assured suited to income replacement. 

2. Is a return of premium term plan better than a pure term plan? 

ROP plans refund premiums on survival but have higher costs. Pure term plans generally provide higher cover at the same budget. 

3. Can I change my term plan type later? 

Most plans remain fixed after issue. Only convertible term insurance allows changes within specified timelines. Some new plans also offer a life-stage benefit, where you can  

4. Should I buy riders with term insurance? 

Riders extend cover for risks such as critical illness or accidental death or disability and are relevant for increasing the coverage. Critical illness is good addition for individuals above 40 yrs while accidental death and disability are relevant for young individuals.