Life is so unpredictable and it becomes a risky business if you are entitled to look after your family’s needs. Here, a term insurance policy comes into the picture. It will help you protect your loved ones from facing any financial crisis if you are not around them. Term plans ensure that your family is financially secure in case of your untimely demise. In the sections below, we will discuss the various aspects of term insurance for your better understanding.
What Is A Term Insurance Policy?
A term plan is nothing but a life insurance policy. You have to choose a sum assured and a specific period according to your needs and requirements. If the insured meets an untimely death during the tenure of the plan, the insurance policy provider will pay the sum to the beneficiary of the life insured. It helps the family to cope with the loss and secures them financially. You can check on a term plan calculator to get an overview of the money you need to invest and the time that you need to keep paying for.
How Does The Term Plan Work?
If you are wondering how does the term plan works, then read through the section below:
- First, you determine the assured sum and the tenure of the plan. The insurance provider will then decide on the premium you have to pay based on various factors, such as health, age, term, etc. This payable amount remains the same till the end of the plan term.
- Second, you can choose to pay the premium all at once or at regular intervals. Term plans also offer you the liberty to select the way you want to get the coverage amount.
- Subsequently, you purchase the plan. If the insured person meets an untimely death during the policy term, then the insurance company will pay the amount assured to the beneficiary of the term insurance policy.
- When you survive until the maturity of the term policy, the insurance provider does not pay anything to you in most cases.
- Most insurance providers also offer the facility of renewing the policy after its maturity, but you can only do so until the company’s maximum age limit.
What Are The Types Of Term Insurance Plans?
Let us now look at the different types of a term insurance policy.
- Level Term Plans
It is the simplest variant of term insurance and the sum assured remains constant till the end of the policy.
- Increasing Term Plans
The determined assured sum keeps on increasing annually under such plans. When the insured dies, the amount accumulated till that year is paid to the beneficiary.
- Decreasing Term Plans
As the name suggests, it is in total contrast to the plan mentioned above. Such a policy aims to pay off any liabilities such as a loan left behind by the deceased.
- Return Of Premium Plans
It functions like any other term insurance plan, but it has an added benefit. If the insured survives the policy tenure, the premiums are refunded.
- Group Term Insurance Plans
A group usually brings such plans for its members. They can be employer groups, unions, etc. These plans are valid for only a year and cover all the members of the organization. We hope the discussion above has helped you understand term insurance plans better. It will help you determine why going for one is a wise decision.