Types of Term Insurance

Not many people know, but term insurance can be categorised into various types. Knowing the different types of term insurance in India is essential to ensure you select a suitable plan according to your needs.

What is Term Insurance?

Term insurance is a type of life insurance that offers life cover` for a specific period. It provides financial security to your loved ones in the unfortunate event of your absence during the policy term. Additionally, term insurance plans offer tax* benefits on premiums paid up to ₹ 46,800 under Section 80C. You also get tax* benefits subject to conditions prescribed under Section 10(10D) on the payout that your family receives in case of an unfortunate event.

Term insurance offers you peace of mind and helps protect the financial interests of your family. This makes it an essential product to have in your portfolio.

What are the different types of term insurance in India?

There are several types of term insurance in India. These options help cater to the diverse financial needs of different people and families.

Level term insurance

Level term insurance offers a fixed sum assured throughout the policy term. The sum assured is chosen by the applicant at the time of purchasing the policy and remains unchanged till the policy term. This is one of the most basic types of term insurance plans you can opt for.

Increasing term insurance

In an increasing term insurance plan, the sum assured gradually rises over time to account for inflation as well as the growing financial responsibilities of the policyholder. These types of term insurance plans can be suitable for young policyholders who expect their financial needs to increase in the future.

Decreasing term insurance

These types of term life insurance policies are the opposite of increasing term insurance. Their sum assured lowers over time. These plans are suitable if you expect your financial liabilities to decrease over time. For instance, you may have a loan at the time of purchase, but you expect to pay it off in the next few years. In this case, you can opt for a decreasing term plan.

Term Insurance with Return of Premium (TROP)

TROP plans refund the premium at the end of the policy term. If the policyholder outlives the term and no claim has been made, the policy returns all the premiums paid towards the plan. These plans can be suitable for risk-averse individuals as they combine life cover` with the benefit of long-term savings.

Convertible term insurance

A convertible term insurance plan allows you to convert term insurance into another type of life insurance. For instance, you can convert your term plan into an endowment or a whole life plan. The option can be used anytime during the policy term. You may not be required to undergo a medical test and can directly convert the plan. This can be suitable if you expect your financial needs to evolve in the future.

Whole life insurance

Whole life insurance offers lifelong financial coverage. Unlike other term insurance plans, these plans may provide financial protection for up to 99 years or more, ensuring comprehensive financial security for your family.

What are the benefits of term insurance in India?

Below are some benefits of term insurance:

Financial protection Term life insurance offers financial protection to your loved ones in your absence. It provides a death benefit to the nominee, assuring their financial security.
Affordable premiums Term life insurance can be bought at affordable premiums. These plans only offer pure financial protection in the unfortunate event of the policyholder’s demise. There is no investment component in a term insurance plan, hence, their premiums are relatively low.
Flexibility Term plans are quite flexible and allow you to customise the plan according to your needs. You can select the policy term, sum assured, premium payment frequency, and other factors that suit your preference.
Tax benefits Term insurance qualifies for tax benefits under the Income Tax Act, 1961. You can claim a deduction of up to ₹ 1.5 lakh subject to the conditions prescribed under Section 80C^* on the premium paid per annum. The death benefit payout to the nominee is also exempt subject to the conditions prescribed under Section 10(10D)^*.
Income ReplacementTerm insurance payouts can serve as a replacement for income. In the absence of the breadwinner, the payouts can be used to cover a family’s financial needs.
Whole Life CoverageTerm insurance plans offer the option to extend the coverage to the age of 99 years. This offers life coverage^` for the entire lifetime of the insured.

Financial protection
Affordable premiums
Flexibility
Tax benefits
Income Replacement
Whole Life Coverage

What Should You Consider While Buying a Term Insurance Plan?

Below are some steps on how to make an informed decision on buying the right type of term insurance:

Evaluate your needs

You must understand your current financial situation, including debts, expenses and existing assets. Additionally, it is important to consider your family's financial needs, including daily living expenses, education costs and outstanding loans. Anticipating major life events like children's education, marriage and possible medical expenses is also essential

Determine coverage

You must choose coverage that would sufficiently replace your income and meet the financial needs of your family. Apart from selecting a suitable sum assured, you must also consider the possibility of suffering from a critical illness. For instance, if you have a history of critical illness in your family, you may benefit from purchasing term insurance with a critical illness benefit^#

Compare different plans

It is essential to compare premium costs across different plans and ensure that the premiums are affordable and fit your budget

Determine the policy period

It is important to select a policy period that aligns with your life’s goals. You must consider factors such as your age, income, the ages of your children and spouse, and when they are likely to require financial support, like during their education years. Accordingly, you can select a type of term insurance policy that provides adequate coverage for your family's future

Find suitable payout options

Term insurance policies typically offer payout options as regular income, a lump sum or a combination of both. When you are looking at different types of term life insurance, you must pay close attention to these payout options to ensure the policy meets your preferences and provides the financial support you want for your beneficiaries

Select the right insurer

Selecting a reliable insurer is essential for a smooth customer experience. A reputable insurance provider can offer seamless coverage, timely payments and protection against potential fraud. So, you must take the time to research and select an insurer with a stable reputation and claims settlement process

COMP/DOC/Dec/2024/2012/7978

Why is sum assured an important factor when it comes to term insurance?

The sum assured is the amount paid to the nominee in the absence of the policyholder during the policy term. It plays an essential role in determining whether your family will have enough financial support to meet their needs in your absence.

Additionally, the sum assured directly influences the premium. The higher the life cover`, the higher is the premium, and vice versa. That is why it is essential to choose this amount carefully.

You must consider your dependents' lifestyle needs, any outstanding loans and possible future financial obligations when selecting the sum assured to ensure adequate protection for your family.

Types of term insurance available at ICICI Pru Life

ICICI Prudential Life Insurance offers new-age term plans like ICICI Pru iProtect Smart and ICICI Pru iProtect Return of Premium. These term plans not only provide life cover` but also offer optional add-on riders such as critical illness benefit^# and accidental death benefit rider^{^}. Additionally, you can choose from the different premium payment terms and payout options available based on your family’s financial needs.

Below is a list of the types of term insurance offered by ICICI Pru Life:

Basic Term Plan

Basic term plan is a type of term life insurance that offers life cover` for a specific period to the policyholder in exchange for premiums paid. In the case of an unfortunate event during the policy term, these plans provide a sum assured to the nominee. However, there is no benefit if the policyholder survives the term.

Term Insurance with Critical Illness Benefit

Term insurance with a critical illness benefit^# offers the same benefits as a basic term plan, such as a life cover^` in your absence during the policy term. Additionally, in the case of being diagnosed with a critical illness^#, this type of term plan offers a lump sum payout that can help you cover the expenses associated with the illness.

Term Insurance with critical illness benefit^# provides financial coverage against a range of major and minor illnesses, such as kidney failure, organ transplant, heart attack, cancer, and others. You can use the payout to cover pre and post treatment expenses.

Term Insurance with Accidental Death Benefit

This type of term insurance plan provides additional coverage in the event of the policyholder's demise due to an accident. This is a basic term plan combined with an accidental death rider^{^}, which pays an additional sum if the insured suffers a fatality due to an accident. The accidental death benefit^{^} is paid over and above the base sum assured and adds an extra layer of financial coverage for the family.

Term Insurance with Limited Pay

This term insurance plan allows you to pay premiums for a limited period while retaining coverage for a longer term. For example, you might pay premiums for 10 or 15 years, but the coverage will extend for the duration you have selected while purchasing the term plan. This can be an attractive option if you wish to complete your premium payments early in life.

All-In-One Term Plan

An all-in-one term plan offers comprehensive coverage that includes basic life cover^` along with multiple riders, like critical illness cover^#, accidental death benefit^{^} and others. This type of term insurance plan offers numerous benefits, all bundled into a single plan. This can be a straightforward way to secure your loved ones and yourself rather than dealing with multiple policies for different coverages.

Frequently Asked Questions

1. Can I switch from one type of term plan to another after the purchase?

Yes, you can switch from one type of term plan to another. Convertible term insurance plans allow this flexibility. However, this can differ from insurer to insurer and make sure to always read the terms and conditions of your policy carefully to confirm eligibility and timing.

2. What types of term insurance plans offer maturity benefits?

Return of Premium (TROP) term insurance plans offer maturity benefits. These plans refund the total premiums paid over the policy term if the policyholder survives the term without making a claim.

3. Do all types of term insurance offer the same claim payout structure?

No, the claim payout structure can vary depending on the plan and your selected mode while buying the term insurance plan. Some policies offer a lump sum payout, while others may provide regular monthly income or a combination of both.

4. Do types of term insurance differ for smokers and non-smokers?

The types of term life insurance plans remain the same for smokers and non-smokers, but the underwriting process and premiums may differ. Smokers are more likely to pay face higher premiums due to increased health risks as compared to non-smokers.

5. Are there specific types of term insurance designed for families?

Yes, family term insurance plans are designed to cover multiple members under a single policy. These offer financial protection for the entire family.

COMP/DOC/Sep/2025/99/1109

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Disclaimer

^* Tax benefits are subject to conditions prescribed under Sections 80C, 80D, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details.

^` Life cover is the benefit payable on the death of the Life Assured during the policy term.

^#Accelerated Critical Illness Benefit (ACI Benefit) is up to ₹ 1 Crore (subject to underwriting guidelines). Accelerated Critical Illness Benefit (ACI Benefit) is optional and available under Life & Health and All in One options. This benefit is payable, on the first occurrence of any of the 34 illnesses covered. Medical documents confirming the diagnosis of critical illness need to be submitted. The benefit is payable only on the fulfilment of the definition of the diagnosed critical illness. The ACI Benefit, is accelerated and not an additional benefit which means the policy will continue with the Death Benefit reduced by the extent of the ACI Benefit paid. The future premiums payable under the policy will reduce proportionately. If ACI Benefit paid is equal to the Death Benefit, the policy will terminate on payment of the ACI Benefit. To know more in detail about ACI Benefit and the terms & conditions governing it, kindly refer to the sales brochure. ACI Benefit term would be equal to the policy term or 30 years or (75-Age at entry), whichever is lower.

^{^}Accidental Death benefit (ADB) is up to ₹ 2 crore (subjected to underwriting guidelines). ADB is available in Life Plus and All in One options. In case of death due to an accident Accidental Death Benefit will be paid out in addition to Death Benefit. Accidental Death Benefit will be equal to the policy term or (80-Age at entry), whichever is lower.

ICICI Pru iProtect Smart Plus UIN :

W/II/1559/2023-24

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