Term Insurance and How It Works in India
Published On Aug 28, 2021
Life is uncertain. Unexpected situations in life can leave one questioning a series of things. Especially, unfortunate events in one’s family like sudden death of a loved one can change the lives of other members in no time. During the most uncertain situations, the most significant concern that arises is lack of money. A family can easily find themselves in the midst of crisis due to the lack of finances, especially when the breadwinner of the family is no longer present to provide. Needless to say, the situation is hard, but can be avoided by choosing term insurance.
What is Term Insurance?
A term insurance policy is the financial safety blanket that can be availed in exchange for a premium amount. A life insurance type, term insurance offers coverage for a preset period or term. In the event of death of the life insured during this period, the nominee of the policy receives a death benefit to take care of the finances. In case the life insured survives the policy term, they are not paid any benefit. In such cases, the life insured gets an extended policy term, if their term plan comes with the feature of guaranteed renewal.
How Term Insurance Works?
The term insurance working can be understood as per:
- Agreement - Term insurance is a legal agreement between you and the insurance company. Policyholder is the person who pays for the coverage. They can buy the coverage for themselves or family. The person whose life is insured is referred to as life insured or life assured. Being the owner, you have to pay the insurance company a pre-decided premium. In return, the insurance company pays the nominee a fixed death benefit, in case a contingency takes place while the policy is in force.
- Proposal Form - You will be required to disclose your important information such as current health conditions, medical history, age, lifestyle habits, hobbies, annual income, and nature of your profession. Note that based on these factors, your insurance company will determine your probability of raising a claim.
- Requirement Assessment - You will have to assess your requirements thoroughly. For instance, you will need to assess the coverage required, choose the policy term, pick a premium payment mode, select the payout option, and check whether or not you need riders to add optional cover or rider to your base policy to enhance its cover.
- Premium Quote - Your insurance company will provide you with a premium quote on the basis of the information provided. You will be required to review the quote and make the payment. On making the payment, you will get the coverage.
- Nominee - You will be required to name the person who will receive the monetary benefits of your term insurance. Note that your nominee should be an immediate, trustworthy family member who will take care of your dependents.
Traditional term insurance policies do not provide maturity benefits. Term plans with Return of Premium (TROP), return the policy premium paid if the life insured survives the policy tenure.
To uncover more about term insurance, get in touch with InsuranceDekho experts today!
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.