How Does Term Life Insurance Work?

Life is unpredictable. Unexpected events may be beyond our control, but we can plan our family’s financial protection against them efficiently. In this aspect, one of the best tools for ensuring that your family never runs out of money is term life insurance.

A term insurance policy is a straightforward and cost-effective approach.

Having complete knowledge will enable you to make an informed choice, which will ultimately result in a stress-free future. Hence, before you decide to search online for the best term insurance policy, let’s understand how it works.

How a Term Life Insurance Work?

Here is how a term life insurance policy works:

• Step 1: You choose to buy a particular term insurance plan that fits best with your requirements.
• Step 2: You choose the sum assured or coverage amount that your nominee will receive in the unfortunate incident of your (life insured’s) demise.
• Pro Tip: To decide the coverage amount – try the DIME formula. Add your debt, income, mortgage, and education costs along with the salary needed for the number of years your loved ones require protection. You’ll get an idea of the needed coverage.
• Step 3: You choose the tenure of the policy i.e., the policy term and the duration of premiums to be paid i.e., the premium paying term – based on your earning years.
• Step 4: The life insurance company determines the premium amount to be paid based on a number of factors like your age, your overall health, sum assured, policy term, preferred term for paying premiums, and so on.
• Step 5: Decide the nominee(s). The death benefits do not need to go to just one person. You can split it between your adult children and spouse. In case you don’t have a family, leave the benefits to a friend, a charitable organization or a trust.
• Step 6: You buy the term insurance plan and in return you pay premiums.

Life Cover/ Death Benefit:

In the tragic circumstance, if the life insured passes away, the death benefit is given to the life assured’s nominee, and the life insurance policy is terminated.

Maturity Benefit:

Because a term plan is a “pure-risk” cover, if the life insured lives to the end of the policy term, there is no maturity benefit. Nevertheless, only in the case of “term insurance with return of premium plans” – if the life insured lives, s/he is given the agreed maturity benefit, which is the total premiums paid minus taxes, additional premiums, and so on.

With so many options available in the market, selecting the best term life insurance plan for you can be a task. However, Elephant.in can help you.

Contact us and we will arrange a meeting for you with our financial experts who will help you take a right decision without charging anything for their service. Dial 1800 266 9693 or email us at support@elephant.in.