What is Term Insurance Plan and How Does It Work?
May 28, 2019
As finances play a crucial role in all of our lives, making adequate arrangement to at least secure the financial future of your family is one of your biggest responsibilities. An affordable and highly effective way to provide this financial security to your family in case of your death is through a term insurance plan.
But what is term insurance plan and how does it work? If this is the first time that you are searching for term insurance, here are a few essential things that you should know about them:
What is Term Insurance?
Term insurance is a type of life insurance which offers life coverage for a fixed duration or ‘term’. In case of your death within the insurance term, the nominee will receive the death benefit. Depending on your requirement, you can purchase a 5 year, 10 years, 15 years, 20 years to 30 years term insurance. Some of the insurance providers also allow you to extend the term of the policy without requiring you to purchase new term insurance.
Working of Term Insurance
Now that you have some idea of what is term insurance, let us have a look at how it works. Term insurance is very much different from whole life insurance. As mentioned above, term insurance will only pay the death benefit when the policyholder dies within the term of the policy.
On the other hand, whole life insurance offers death benefit throughout your life, and you can also get a lump sum amount when you surrender the policy. As a result, whole life insurance is said to have a cash value while term insurance does not have any such cash value. However, the lower premiums and the host of other benefits still make term insurance an excellent choice.
Top Advantages of Term Insurance
Let us have a look at some of the top term insurance benefits:
1. Lower Premiums and Higher Coverage
Term insurance is one of the most affordable ways to cover your life for a fixed duration. Term insurance plans are highly affordable, and the coverage amount can be adequate to replace several years of your lost income easily.
2. Disability Support
Apart from the death benefit, some of the term insurance plans also offer disability support. If during the tenure of the policy, you suffer from an accident which results in total and permanent disability, the insurance provider will pay the remaining policy premiums.
3. Coverage for Critical Illnesses
Some of the insurance providers now also offer a host of add-on coverages such as critical illness coverage. With this coverage, if you are diagnosed with a critical illness during the policy tenure, the insurance provider will pay a lump sum amount for your treatment.
Purchasing Term Insurance
Before purchasing a policy, it is essential to first understand what is term life insurance, how it works and its benefits. Once you have thoroughly understood about the policy, you can then browse through the options to pick one that you believe would be able to meet the financial needs of your family in case of your demise.
Look for a reputed insurance provider to ensure that your family is efficiently secured and your loved ones can live a life that you've always wanted them to live.
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