Term insurance is a life insurance provided for a limited period. It is one of the most simplest and fundamental insurance products available in the market. There are different types of term insurance policies available. Several policies offer a premium duration for 10yrs, 20yrs or 30yrs.
They have been designed in such a manner that, in the event if the policyholder dies, the nominee/ family members will get a lump sum payout (Sum Assured/ Coverage Amount).
Let us understand with an e.g. –
Mr. Mathur has purchased a Term Insurance Plan for 50 Lakhs (Sum Assured) for a period of 20yrs. He needs to pay a premium of Rs. 3,500 every year for the entire term. In case Mr. Mathur Dies during the Policy term, his nominee shall get the Sum Assured. In case, if Mr. Mathur dies after the policy term, then he won’t get any benefit.
A pure term insurance policy doesn’t offer any living benefits, such as maturity or surrender benefits but offers only death benefit.
It is the cheapest form of Life Insurance cover which comes at a low cost with full financial coverage for a defined period of time. It pays the benefit only during the Policy term period.
Compared to whole life insurance, term plans are less expensive but offers a wide range of financial benefits and shields your family against liabilities, during an unfortunate incidence.