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Types of Term Insurance Plans

Life may be great for the most part, but at some point, uncertainties and unexpected events may happen. They may be sudden job losses, pay cuts, or even accidents. And almost always, such incidents come with financial difficulties. This is particularly true when there is sudden demise of the primary breadwinner in a family. Loss of the primary source of income can prevent the surviving members of a family from achieving their life goals as planned. In situations like these, a term insurance plan can be the saving grace that is needed.

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 03rd June 2025
Modified on: 05th June 2025
Reading Time: 20 Mins
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What is term insurance?


Term insurance is a type of life insurance where the insurance company offers the insured person a pure life cover. In exchange for this life cover, the insured person pays term insurance premium to the insurer. As is evident from the name, the cover provided by a term insurance plan is valid for a specified period of time. This is known as the term of the policy.


If the insured person passes away during the term of the policy, the insurer pays a death benefit to the nominees or the legal heirs of the insured person. Term insurance plans are purely protective life covers, meaning that if the insured person survives the term of the policy, the insurer is not liable to pay any amount to the insured person.


Since term insurance plans offer a pure life cover, they are typically much less expensive than traditional life insurance policies like endowment plans and whole life insurance.


What is Single premium term insurance?


As the name itself makes it clear, a single premium term insurance plan is a type of term insurance where the policyholder is required to make a one-time premium only once, up front, in exchange for a life cover from the insurance company. The primary feature of this type of term insurance is that it eliminates the need to pay regular and periodic premium payments, while still allowing the insured person to enjoy a life cover.


Benefits of a single premium term plan


  • No chances of policy lapses


    With a single premium term plan, policyholders do not need to keep track of regular due dates for paying the premium periodically. This eliminates the chances of policy lapses, since there are no chances of any term insurance premium payments being missed.


  • Suitable for people with irregular incomes


    Single premium term insurance plans are preferred by people with irregular incomes, like self-employed people or entrepreneurs, since they can simply purchase the policy and relax without worrying about the policy lapsing.


  • Good for people with a lump sum amount


    In case someone looking to buy term insurance possesses a lump sum amount owing to a bonus or an inheritance, a single premium term plan can be the a preferred kind of life cover to purchase. It helps put that money to good use.



Types of term insurance plans in India


Depending on the term insurance premium charged and the coverage offered, there are many different types of term insurance plans in India. Each of them has its own defining features and offers its own distinct benefits. Broadly speaking, term insurance plans can be any one of the following four types.


  1. Level term insurance


    Level term insurance, being the most commonly availed types of term plans in India, are characterized by fixed premiums throughout the term of the policy. The sum assured by the insurer also remains fixed in level term insurance. Typically, when people purchase a level term policy at a younger age, there are higher chances that the premium charged will be lower.


    Benefits of a level term plan

    • Lower premiums

      Level term insurance plans generally come with lower premiums that are more affordable. This is particularly true if policyholders purchase the term plans when they are younger and healthier.


    • High coverage

      Level term plans also offer high life covers for affordable term insurance premiums. A high life cover can prove to be very useful in case of the policyholder’s demise, because the surviving members of the family can remain on track and achieve their life goals.


    • Fixed premiums that make financial planning easier

      Since the premium amounts remain fixed throughout the term of the policy, it is easier for policyholders to plan their finances accurately. It can also help potential buyers choose a term policy that fits into their budget.



  2. Increasing term insurance


    An increasing term insurance plan is a type of term plan where the sum assured increases every year by a predefined amount. This increase can be re-defined or chosen as per the product terms and conditions


    Benefits of an increasing term insurance plan

    • Keeps life goals in place

      An increasing term insurance plan helps the beneficiaries meet their life goals on time, since it accounts for rising costs and changing financial goals. It allows the beneficiaries to live the life they planned no matter what the circumstances may be.


    • Hedges against inflation

      Inflation is a very real phenomenon, and increasing term plans help the beneficiaries of policyholders meet the rising costs in the future because the sum assured increases on a year-on-year basis.


    • Helps achieve life goals based on life stages

      As one progresses along the timeline of life, the life goals keep changing. From being single, to married, to becoming a parent – each stage brings along a new goal. Increasing amounts of the sum assured helps in making it possible to achieve the goals no matter what stage the policyholder’s nominees are in.



  3. Decreasing term insurance


    A decreasing term insurance plan is developed on the assumption that with age, an individual’s liabilities tend to decrease. So, the need for insurance coverage also tends to correspondingly reduce. As a result, the sum assured in a decreasing term insurance plan decreases across the term on a predetermined basis. The term insurance premium, however, tends to remain constant.


    Benefits of a decreasing term insurance plan

    • Highly affordable

      Decreasing term plans are highly affordable, given that the sum assured decreases over the term of the plan. So, these plans are preferred by people who wish to reduce their insurance budget over the years.


    • Optimal coverage

      Some individuals may repay their liabilities earlier in life. So, even in case something untoward happens later in life, the surviving family members may not be left with heavy debts to repay. In such cases, decreasing term plans offer optimal coverage.



  4. Term insurance with Return of Premium (TROP)


    Unlike regular term plans, TROP provides benefits to the insured person if they survive the term of the policy. In case of survival, the premiums paid are returned to the insured person, subject to the deduction of applicable taxes.


    Benefits of Term insurance with Return of Premium

    • Return of premium

      The most significant benefit of this type of plan is that it includes a refund of the premium at maturity. If the insured person outlives the term of the policy, the total premiums paid for the TROP are returned by the insurer.


    • Assured returns

      While term plans generally do not offer any returns, TROPs come with the element of assured return of premium. Although there’s no element of profit involved, the return of premium is, at the very least, guaranteed.



  5. Convertible Term Insurance


    Convertible Term Insurance is a type of term life insurance that allows you to convert the policy into a permanent life insurance plan later. This type doesn’t typically need you to undergo a medical test, and thus gives you flexibility as per your financial needs as time passes.


    Know the key benefits of Convertible Term Insurance:


    • You get the option to switch to a whole or endowment plan
    • There is typically no need for a medical check-up during conversion
    • The insurance offers affordable premiums in the initial term
    • You also expect flexibility to adapt as life goals evolve over time

    Key Advantages of A Term Insurance Plan


    Term insurance is a simple and effective way to secure your family’s financial future. A few of the advantages of term plan are -


    1. Financial protection: It offers a lump sum or periodic payment to your family in case of your untimely death, giving financial stability.
    2. Affordable premiums: You get a high life cover at pocket-friendly rates.
    3. Flexibility: You get the ease of choosing policy term, coverage, and riders such as critical illness or accidental death benefit rider.

    Why is Sum Assured Essential in Choosing the Right Type of Term Insurance?


    It is the insurance coverage you have for your family in case something unexpected happens with your life anytime before the policy term. Selecting an adequate sum assured is very important so as to ensure that your family do not get financially burdened.


    Importance of Choosing the Right Sum Assured:


    • Acts as an income replacement to maintain your family’s lifestyle
    • Covers major expenses like children's education and marriage
    • Provides financial support for day-to-day living costs
    • Ensures peace of mind with adequate protection for your loved ones
    • Should reflect your financial responsibilities, liabilities, and future goals

    What are the Points To Consider While Buying Term Plans?


    If you're planning to purchase a term insurance plan, here are a few key things to keep in mind:


    • Assess your financial needs, liabilities, and future goals before choosing the sum assured
    • Choose a policy term that covers your earning years
    • Check the claim settlement ratio of the insurer for reliability
    • Look for flexibility in premium payment and policy terms
    • Consider adding riders for extra protection at an additional nominal premium, like critical illness benefit rider or accidental death benefit rider etc.
    • Compare different plans and features to get the best value
    • Ensure the insurer has good customer service and online support

    How to Purchase Term Insurance Online?


    To buy term insurance online, start by calculating your coverage needs based on expenses, debts, and future goals etc. Choose a policy term that fits your life stage . Compare plans from different insurers based on premiums, features, and claim settlement ratios. Add riders like critical illness benefit rider or accidental death benefit rider etc for add on coverage at an additional nominal premium. After finalising the plan, keep your KYC and income documents ready. Complete the medical examination if required. Once the insurer reviews and accepts your proposal, proceed to pay the premium online to activate your policy.


    Conclusion


    In addition to the individual benefits of these different types of term insurance plans, they all offer one common advantage - the term insurance tax benefits. A term insurance plan provides tax benefits under section 80C and section 10(10D) of the Income Tax Act 1961. As per section 80C, the premium that you pay for your term insurance plan can be deducted from your total income. As a result, this brings down your taxable income, thereby also reducing your tax liability. You can claim up to Rs. 1,50,000 of your term insurance premiums as a deduction under this section. Under section 10(10D) of the Income Tax act, 1961 ,the benefits obtained from a term insurance plan are also exempt from tax, provided the sum assured is at least 10 times the annual premium paid. The above mentioned tax benefits are subject to provisions of Income Tax Act, 1961, as amended from time to time. Before purchasing a term plan, it is ideal to consider the features and benefits of all the different types before signing the dotted line.


    FAQs


    1. How many term insurance plans can I purchase?


      There’s no rule that says you can’t have more than one term insurance plan. In fact, you can buy multiple policies, whether from the same insurer or different ones, to keep up with your changing life goals and financial needs. Make sure you’re straightforward about any existing policies when applying for a new one. Insurers will check your total coverage and income to ensure everything is in order .


    2. Can I change the sum assured for my term insurance plan?


      Once a term insurance plan is issued, the sum assured generally remains fixed. However, some insurers offer increasing term plans, where the sum assured automatically rises at regular intervals or key life stages such as marriage or childbirth, as per the policy terms.


    3. Are riders applicable to the different types of term insurance policies?


      Yes, you can usually add riders with most term insurance plans. Think of them as add on benefits that give your policy add on coverage. Specific riders offer coverage for critical illness, accidental death, permanent disability, or even waive your future premiums if anything unforeseen happens (subject to rider terms and conditions).


    4. Can I switch between the level term to decreasing term insurance?


      You usually can’t switch straight from a level term plan to a decreasing term plan once your policy is active. But if your needs have changed, no worries, you can always look into getting a new policy that better fits where you are financially right now.


    5. What are the advantages of purchasing a convertible term insurance policy?


      A convertible term insurance policy gives you the option to switch your term plan into a permanent life insurance policy. For example, a whole life or endowment typically without needing a medical check-up. It’s a flexible choice, especially if you're starting with a basic plan early in life. As your financial situation changes, you can upgrade to something that offers lifelong coverage or savings benefits down the road.



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*Above illustration is for Bajaj Allianz Life eTouch II - A Non-Linked, Non-Participating, Individual Life Insurance Term Plan (UIN:116N198V01) considering Male aged 25years | Non-Smoker | Policy Term(PT)– 30 years | Premium Payment Term (PPT)– 30 years | Sum Assured opted is Rs.1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 5,092. 2nd Year onwards premium Rs. 5,520. Total Premium Rs. 1,65,172 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly instalments (Lumpsum Payout Percentage: 40, Income Payout Percentage: 60). Income payout instalment opted for 40 years | Premium shown above is inclusive of Online Discount only, no other discounts have been considered and exclusive of Goods & Service Tax/ any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

##Tax benefits as per prevailing Section 10(10D) and Section 80C (under old tax regime) of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

**5% Discount applicable for customer's first individual life insurance policy, applicable only on first year’s premium. 5% Discount for salaried customers, applicable only on first year’s premium. 6% Discount on online purchase is available for regular premium payment and limited premium payment frequency on first year's premium.

$Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium means total of all the premiums paid under the base product, excluding any extra premium and taxes, if collected explicitly.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any Call made, including via Voice over Internet Protocol & WhatsApp, SMS or WhatsApp messages, in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

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Disclaimer

Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


Term Insurance Guide

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The views stated in this article are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read the sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale. Bajaj Allianz Life Insurance Company Ltd., Regd. office Address: Bajaj Allianz House, Airport Road, Yerawada, Pune - 411006, Reg. No.: 116, CIN: U66010PN2001PLC015959, Call us on toll free No.: 1800 209 7272, Mail us: customercare@bajajallianz.co.in

Tax benefits as per prevailing Section 10(10D) and Section 80C (under old tax regime) of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy

BJAZ-WEB-EC-15353/25

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Disclaimer

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

X
Terms & Conditions

I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any call made, SMS or WhatsApp sent in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

 

Please refer to BALIC Privacy Policy

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Disclaimer

%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

X
Disclaimer

Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


X
Disclaimer

*Above illustration is for Bajaj Allianz Life eTouch II - A Non-Linked, Non-Participating, Individual Life Insurance Term Plan (UIN:116N198V01) considering Male aged 25years | Non-Smoker | Policy Term(PT)– 30 years | Premium Payment Term (PPT)– 30 years | Sum Assured opted is Rs.1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 5,092. 2nd Year onwards premium Rs. 5,520. Total Premium Rs. 1,65,172 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly instalments (Lumpsum Payout Percentage: 40, Income Payout Percentage: 60). Income payout instalment opted for 40 years | Premium shown above is inclusive of Online Discount only, no other discounts have been considered and exclusive of Goods & Service Tax/ any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

##Tax benefits as per prevailing Section 10(10D) and Section 80C (under old tax regime) of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

**5% Discount applicable for customer's first individual life insurance policy, applicable only on first year’s premium. 5% Discount for salaried customers, applicable only on first year’s premium. 6% Discount on online purchase is available for regular premium payment and limited premium payment frequency on first year's premium.

$Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium means total of all the premiums paid under the base product, excluding any extra premium and taxes, if collected explicitly.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

X
Terms & Conditions

I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any Call made, including via Voice over Internet Protocol & WhatsApp, SMS or WhatsApp messages, in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

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