Term life insurance is the simplest and least expensive type of insurance, as it pays benefits only upon the policy holder's death. With annual renewable term insurance, the policy holder pays a low premium at first, which increases annually as he or she gets older. With level term insurance, the premium amount is set for a definite number of years, then increases at the end of each time period. Experts recommend that people who choose term insurance make sure that their policies are convertible, so that they can switch to a cash-value plan later if needed. They also should purchase a guaranteed renewable policy, so that their coverage cannot be terminated if they have any kind of health problems.

Term insurance typically suitable for younger people with children and limited funds who are not covered through an employer. This type of policy enables such a person's heirs to cover mortgage and college costs, estate taxes, and funeral expenses on his or her death. It is a pure risk cover for a particular period of time. This means that the sum assured is payable only if the policyholder dies within the policy term. For example, if a person buys Rs 2 lakh policy for 15-years, his family is entitled to the money if he dies within that 15-year period.

If he survives the 15-year period, he is not entitled to any payment; the insurance company keeps the whole premium paid during the 15-year period. So, there is no aspect of savings or investment in such a policy. It is a 100 per cent risk cover. It purely means that a person pays a certain premium to protect his family against his sudden death. He forfeits the amount if he lives longer than the period of the policy. This clarifies why the Term Insurance Policy comes at the lowest cost. However, nowadays there are few Term Insurance products which give you certain portion of money even if people survive the term period.

Types of Term Insurance:
Term insurance can be further classified into the following categories:

• Level Term
• Increasing and Decreasing Term
• Renewable Term
• Convertible Term
• Group Term

Level Term
In this type of term insurance everything will be levied at a consistent level right from the premium of payments to the period for which it is payable.

Increasing and Decreasing Term Insurance
In this type of policy the insured has the option of changing the policy amount. The insured can either choose to increase the amount or to decrease it. However in any case the insurance premiums remain consistent over the whole term.

Renewable Term
Whereby if an insured does not die during the term for which the insurance is taken he has the alternative to renew it after that period. It needs to be understood that he will be required to pay a higher amount of premiums on such renewals. Even after the renewals the insurance amount will be paid to the dependents of the insured after his death.

Convertible Term Insurance
In this kind of policies the insured has the option of converting the term insurance into other policies. This will be of help the insured to make use of the time advantages of these types of insurance and thereby get free of the limitations by converting it into a suitable and preferred policy. This is advised for those who require permanent protection after a point of time.

Group Term Insurance
The term group insurance is not only applicable to term insurance but to other forms also. Group insurance is usually taken by an employer. The premiums are collected from the monthly salary of the employee and deposited in the insurance company. However unlike in other insurance group term insurance is taken only for specific period periods; the premiums will still be lower.