Term insurance, or temporary insurance as it is also known, provides coverage for a specific term. In case of any unfortunate event during this term, the person who is nominated for the receipt of fund—also known as the nominee—receives the sum for which the insuree is covered. The policy expires at the end of the term.
Term life insurance is the simplest type of insurance. The money you pay as premiums does not go towards any kind of investment, but is used for providing cover. Only a small amount is deducted to cover the insurance company's costs. Hence, it is also the least expensive type of insurance.
Say you buy a term insurance plan for a sum assured of Rs 20 lakh for 10 years. You will have to pay a small amount annually as the premium. In case of an unfortunate event during these 10 years, your nominee will receive Rs 20 lakh. However, in case you outlive this tenure, the life insurance policy will expire. You will hence not receive any return on the premiums paid over the 10 years.
Why term insurance?
It is important to ensure that your loved ones are taken care of in case of an unfortunate event. Buying a term life insurance policy is one of the simplest and least expensive methods of doing this.
Paying for term insurance also has some tax benefits. Premium of up to Rs 1,00,000 is deductable from your taxable income under Section 80C of the Income Tax Act, 1961.
• Term insurance provides coverage for a specific term
• It is an easy and affordable way of ensuring the financial security of your loved ones
• In case of an unfortunate event, your nominee gets the amount of coverage
• The policy expires at the end of the selected tenure