The Insurance Regulatory Development Authority of India’s (IRDAI) December 2019 annual report reveals a meagre 2.74% life insurance penetration in India.
Indians are underinsured because of limited awareness about life insurance benefits and how such plans work. But if your loved ones’ livelihood depends upon your income, you need to safeguard their financial security in your absence. And term life insurance is one of the best instruments to ensure your family never lacks financial resources.
Hence, you need to understand what is meant by term insurance and how it works.
What is term insurance?
Term insurance is pure protection life insurance policy. It provides coverage for a defined period in exchange for a specified premium amount.
In case of an unfortunate event during this time-frame, the insurer provides a guaranteed# payout. It compensates your nominee for the loss of your income.
Affordability is a characteristic feature of term plans. Such plans do not include any investment component. The entire premium covers the mortality risk. Hence, term insurance provides sizable coverage at pocket-friendly rates. Thus, regardless of your budget, term insurance can cover your dependents’ financial necessities after an eventuality.
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What is a term life insurance policy?
Your policy is the contract between you and the insurance provider in which you pledge to pay the required premium and the insurer provides the benefits in case of a valid life claim from your beneficiary.
What is the policy term?
The policy term is the duration of your life cover. If an untoward incident occurs within this period, your insurer pays the policy benefit to your nominee. You can choose your term plan’s policy tenure as per your insurance needs.