Decreasing Term Insurance Plan - Features & Benefits

You have no control over the events of your life whatsoever. But you can always prepare yourself and your loved ones towards anything that life throws at you. That is what a term insurance plan helps you to do.

A term insurance plan guarantees to pay a lump sum amount if you (the policyholder) die prematurely during the policy duration. It is one of the most affordable life insurance products available in the market.

However, the affordability of term insurance is not the only aspect that makes it an essential financial product. The plan is also available in different types so as to help people fulfil their insurance-related needs. One such variant that we will be discussing in detail is the Decreasing Term Insurance Plan in India.

What is Decreasing Term Insurance?

Decreasing term insurance is a term plan wherein a specific percentage of the sum assured amount keeps decreasing every year. The premiums paid towards the policy usually remain the same throughout the tenure. The decreasing term insurance plans in India are available between 1-30 years and depend on the terms and conditions of the insurers.

Features of a Decreasing Term Life Insurance Plan

The features of the decreasing term insurance plans available in the market are as follows-

  • You (the policyholder) get to choose the sum assured amount under the plan, which then keeps reducing during the policy duration.
  • You also get to choose the policy tenure when buying decreasing term insurance in India.
  • The premiums paid towards the policy usually remain the same even though the risk cover minimises.
  • At the time of maturity, the sum assured amount of decreasing term plan reduces to zero.
  • If you die, the sum assured amount applicable at the time of the death is paid to the beneficiaries of the policy.
  • Premiums of decreasing term insurance plans in India are lower compared to basic term insurance plans.

Advantage of Decreasing Term Insurance Plan

The following are the benefits of the decreasing term insurance plans in India-

  • It offers financial security to your loved ones

We all have a few financial liabilities to take care of at some point in life. But if you were to die a premature death without repaying these liabilities, it can throw your family in an unforeseen financial turmoil. Do you think they will be able to continue living their lives as before while taking care of this overburden?

That is where a decreasing term insurance plan comes in handy. Any financial debt that you may have taken over time can be repaid using the balance sum assured amount received by your family upon your death. Thus, this makes sure that your dependents do not lose the sense of financial security even in your absence.

  • It has affordable premiums

One of the unique selling points of the decreasing term insurance plan in India is that the policy is quite affordable, even cheaper than basic term insurance plans. As the sum assured amount keeps decreasing along the years, the premiums of the plan are cheap.

  • Tax benefits

Taking a decreasing term insurance plan in India will have the same tax benefits as other term plans. The premiums paid towards the policy (despite being low) can be claimed for tax deductions under Section 80C of the old tax regime. Also, the death benefits received by the beneficiaries are tax-free under Section 10(10D).

How Does Decreasing Term Insurance Plan Work?

Take a look at the following example to understand the working of a decreasing term insurance plan in India.

Illustration –

Ravi is 30 years old and works as a senior software engineer at a high-tech organisation. Recently, he bought a new house through a home loan. Also, Ravi decided to buy a decreasing term insurance plan to take care of the debt in case anything were to happen to him. The policy has a sum assured of INR 20 Lakh and the tenure is 20 years. Every year, the sum assured amount reduces by a 5% simple rate of interest. The following table depicts how the coverage of the policy would look like –

End Of The Policy Year

Available Sum Assured Amount (In INR)

End Of The Policy Year

Available Sum Assured Amount (In INR)

Year 1

19 Lakh

Year 11

9 Lakh

Year 2

18 Lakh

Year 12

8 Lakh

Year 3

17 Lakh

Year 13

7 Lakh

Year 4

16 Lakh

Year 14

6 Lakh

Year 5

15 Lakh

Year 15

5 Lakh

Year 6

14 Lakh

Year 16

4 Lakh

Year 7

13 Lakh

Year 17

3 Lakh

Year 8

12 Lakh

Year 18

2 Lakh

Year 9

11 Lakh

Year 19

1 Lakh

Year 10

10 Lakh

Year 20

Zero

Now, if Ravi dies a premature death during the policy duration, the available sum assured amount for that year will be paid to the beneficiaries of the policy. For instance, if he dies in the 12th year of the policy tenure, the beneficiaries will receive INR 9 Lakh as the death benefits. Note that no benefits are received once the policy attains maturity.

To Sum It Up!

A decreasing term insurance plan is an ideal policy for people with huge financial liabilities. It helps to protect your loved ones from bearing the burden of your debts, especially after your death.

On the other hand, if you want to provide complete financial security to your family members, you can consider buying Term Insurance Plans at Finserv MARKETS online. It is quite cheap on your pocket, can be customised to suit your needs, the scope of the plan can be enhanced with rider benefits such as critical illness cover, term insurance return of premium cover, accidental death benefit, and more.

So, don’t wait! Secure the financial future of your loved ones with Term Insurance Plans at Finserv MARKETS, today.

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