Term Insurance Plan

All the features, benefits you need to know

- Manish Jain

The foremost objective of life insurance is to act as a tool in replacing one’s income in the event of the death of the breadwinner in the family. And, it is best met through a term insurance plan which is a low-cost, high cover insurance plan. A pure term insurance plan ensures that the death benefit in the form of sum assured is paid to the nominees if the life insured dies within the policy term. If the policyholder survives and outlives the term, nothing gets paid as maturity paid. The premium paid in a term insurance plan, therefore, is primarily towards the cost of insurance or the mortality charge in the policy.

How term plan works

As the name goes, the term insurance meaning is that the plan provides risk cover or life coverage for a fixed term. A term insurance plan has a fixed term and the policyholder needs to pay premium regularly till the end of the term. If the policyholder dies before the end of the term, the death benefit is paid to nominee and if policyholder survives till the end of policy, there is no maturity value.

Simply put, term insurance plan is a pure risk cover. That is, one needs to pay the premium and forget about it. Only the dependents will get an amount equal to the sum assured if the death of the insured happens within the policy term. Since they do not offer any returns, the insurance company charges you only for the cost of insurance, making term insurance the cheapest. All this because the idea is to have a replacement corpus that will protect your assets from distress sale.