The Money Quest: Term Insurance Plans: FAQs

by Fisher

There is yet another factor (sum assured) based on which we can group them. First is a level term insurance plan and second is increasing sum assured term plans. As opposed to level term insurance plans, where sum insured remains constant throughout the term of the policy, in case of latter the cover keeps on increasing as you grow older. For example, in addition to level term cover, SBI Life Shield also offers you 2 other options of increasing sum assured. Under the first option, the basic sum assured increases by 5% for each policy year and in the second option there is a 50% increase in the cover after every 5 years. While term insurance plans provide same coverage (i.e., level term cover) throughout the policy term, home loan covers come with declining coverage i.e., which reduces in line with the loan amount and expires when the loan is fully repaid. In other words, the coverage provided under declining liability home loan term plans (such as ‘ICICI Home Assure’ and ‘HDFC Home Loan Protection Plan’) decreases as the outstanding loan amount decreases. For example, while HDFC Term Assurance Plan is available for maximum tenure of 30 years with the second condition that maximum age at expiry not to exceed 65 years, ICICI Pru Pure Protect Classic is also available for a maximum duration of 30 years but maximum age at expiry is increased to 75 years. Therefore, an individual aged 45 years looking for a term plan for 30 years can choose the term plan of ICICI in comparison to HDFC.

Source: The Money Quest: Term Insurance Plans: FAQs