Term insurance is a type of life insurance that provides financial protection to your loved ones in case of your unfortunate death. It is a popular choice among individuals who want to secure their family’s financial future in case of any unforeseen circumstances. But how does term plan work? In this article, we will take a closer look at the basic features of term insurance, its benefits, and how it works to provide financial security to your loved ones.
What is term insurance?
Term insurance is a type of life insurance that provides coverage for a specific period, known as the policy term. It is a pure protection plan that pays the sum assured to your beneficiaries in case of your untimely death during the policy term. It is a cost-effective way to secure your family’s financial future, as the premiums for term insurance are generally lower than other types of life insurance policies. Let’s understand how term plan works.
How term plan works?
Term insurance works by providing financial protection to your loved ones in case of your unfortunate death during the policy term. Here’s how it works:
Step 1: Choose the sum assured and policy term
The first step in buying a term insurance policy is to determine the sum assured and policy term. The sum assured is the amount that will be paid to your beneficiaries in case of your death, and the policy term is the duration of the policy.
Step 2: Pay the premiums
Once you have chosen the sum assured and policy term, you need to pay the premiums to keep the policy active. The premiums for term insurance are generally lower than other types of life insurance policies, as it is a pure protection plan.
Step 3: Keep the policy active
To keep the policy active, you need to pay the premiums regularly, as per the policy terms and conditions. If you fail to pay the premiums on time, the policy may lapse, and you may lose the coverage.
Step 4: Nominate your beneficiaries
It is important to nominate your beneficiaries while buying a term insurance policy. Your beneficiaries are the individuals who will receive the sum assured in case of your untimely death during the policy term.
Step 5: Claim settlement
In case of your unfortunate demise during the policy term, your beneficiaries need to inform the insurance company and submit the necessary documents to initiate the claim settlement process. Once the claim is approved, the sum assured will be paid to your beneficiaries.
Features of term insurance:
Term insurance comes with various features that make it a popular choice among individuals. Some of the key features of term insurance are:
- Pure protection plan:
Term insurance is a pure protection plan that provides coverage only in case of the policyholder’s untimely death. It does not offer any survival benefits or maturity benefits.
- Low premiums:
The premiums for term insurance are generally lower than other types of life insurance policies, as it is a pure protection plan.
- Flexibility:
Term plan policies come with various flexible options, such as choosing the sum assured and policy term as per your needs and requirements.
- Tax benefits:
The premiums paid for term insurance are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. The sum assured received by your beneficiaries is also tax-free under Section 10(10D) of the Income Tax Act, 1961.
Benefits of term insurance:
Term insurance provides various benefits that make it an ideal choice for securing your family’s financial future. Some of the key benefits of term insurance are:
- Financial security:
Term insurance provides financial security to your loved ones in case of your untimely demise. The sum assured received by your beneficiaries can be used to pay off any outstanding debts, such as a home loan or car loan, and to meet their daily expenses.
- Cost-effective:
Term insurance is a cost-effective way to secure your family’s financial future, as the premiums are generally lower than other types of life insurance policies.
- Flexibility:
Term insurance policies come with various flexible options, such as choosing the sum assured and policy term as per your needs and requirements.
- High sum assured:
Term insurance allows you to choose a high sum assured at a lower premium, which provides greater financial protection to your loved ones in case of your unfortunate demise. For calculating premium you can use term insurance calculator.
FAQs:
- What is the minimum and maximum age to buy a term insurance policy?
The minimum age to buy a term insurance policy is 18 years, and the maximum age varies from insurer to insurer, but it is generally around 65 years.
- Can I change the sum assured and policy term during the policy period?
No, you cannot change the sum assured and policy term during the policy period. However, some insurers may allow you to increase the sum assured and policy term at the time of policy renewal.
- What happens if I miss paying the premiums?
If you miss paying the premiums, the policy may lapse, and you may lose the coverage. However, some insurers may allow you to revive the policy within a certain period, by paying the unpaid premiums along with some additional charges.
- Is it necessary to undergo a medical check-up while buying a term insurance policy?
It depends on the insurer and the sum assured. Some insurers may require you to undergo a medical check-up if the sum assured is high or if you have any pre-existing medical conditions.
Conclusion:
Term insurance is a popular choice among individuals who want to secure their family’s financial future in case of any unforeseen circumstances. It provides financial protection to your loved ones in case of your untimely demise during the policy term. The premiums for term insurance are generally lower than other types of life insurance policies, and it comes with various flexible options. So, if you want to secure your family’s financial future, consider buying a term insurance policy and give yourself peace of mind. Now that you know how does term plan work, make an informed decision and choose the right policy as per your needs and requirements.
