Understanding How A Term Insurance Plan Works?

As we all know that term insurance plans are risk protection plans, these plans provide financial assistance to the family of the life assured, in case the life assured passes away within the policy tenure. A death benefit is provided to the nominee, in case of an untimely demise of the life assured during the policy tenure, the death benefit can act as a shield for the family of the life assured allowing them to fulfil their financial requirements and pursue their dreams even in the absence of the life assured. Some term insurance plans offer maturity benefits under which the life assured is provided with a lump sum at the end of the policy term, in case the life assured survives the entire policy tenure.

Understanding How A Term Insurance Plan Works?

A term insurance policy can be viewed as a most traditional type of insurance. To understand the working of a term insurance policy, you should consider these three instances:

• Purchasing the Plan: To purchase a term insurance plan, one does not need to keep aside a considerable amount of money to make the purchase. Many term insurance policies offer a high sum assured for a premium that can be very affordable. Term insurance plans are popular for providing comprehensive protection at nominal cost. For instance, a high sum assured of Rs. 1 Crore can require a premium as low as Rs. 10,000 each year.

• Maintaining the Plan: To keep the policy in force, one must pay premiums on time, at the decided frequency, just like any other policy. Under term insurance, the life assured/policyholder has the flexibility to choose the premium payment frequency, that is, he/she can choose to pay premiums on a monthly, quarterly, half-yearly or yearly basis. It is very important to make timely premium payments so that one can avail of the benefits available under the term insurance policy. 

• Recovering the Benefits: Term insurance plans usually don’t provide maturity benefits, but there are a significant number of term insurance plans that provide maturity benefits. In case the life assured passes away during the policy tenure, the nominee can file a claim for the same and shall receive a death. In case the life assured survives the entire policy tenure, he/she will receive a maturity benefit, if applicable according to the terms and conditions of the term insurance policy. 

To Conclude

Term insurance plans are the simplest form of life insurance policy, these plans provide financial protection from uncertainties of life. A death benefit shall be provided to the family of the life assured, in the event of an untimely demise of the life assured, which can help the family of the life assured to maintain a decent lifestyle even if the life assured is not around.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.