10 November 2023

Term Insurance | What is Term Life Insurance

What is Term Life Insurance

What is Term Life Insurance

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We welcome you to this latest article on the Jeevan Bima Bazaar. In this article we will get detailed information about Term Insurance. We will also know what can be the advantages and disadvantages of buying a Term Insurance Policy.

However, information on this subject is given in detail on the websites of various Indian Life Insurance Companies. But some such complex words are used on such websites that it is difficult for the common man to understand. Therefore, we will try to include information about Term Insurance in such a way that you can understand it easily.

What is Term Life Insurance?

Term insurance is basically made up of two words – term and insurance. The word Term means Time-Period, and the word Insurance means Insurance Policy. That is, if you buy an insurance which is for a fixed time, it is called term insurance.

But this is not correct because most of Life Insurance Plans provide Insurance Protection for a fixed period. Then now this question may arise in your mind that then What is Term Insurance?

In fact, Term Insurance Policy is a type of Life Insurance Policy which is purchased for a fixed period. If the insured dies within the Policy Term, then the Insurance Comapany pays the Sum Assured to the nominee mentioned in the Term Insurance Policy.

Another important feature of term insurance policies is that the premium of such policies is very low as compared to other life insurance policies. Apart from this, if the insured survives till the maturity date of the term insurance policy, then he does not receive any payment in lieu of the premium deposited in this policy.

Understand Term Insurance with an Example-

Suppose Ramesh Kumar is 30 years old and he wants to buy a Life Insurance Policy of ₹ 50 lakh, whose Policy Term is 25 years. So they may have two options. The first option is to buy a traditional Life Insurance Policy. Secondly, he should buy a Term Insurance Policy.

To understand Term Insurance, I am choosing Life Insurance Corporation of India's New Endowment Policy (which is a traditional life insurance policy) and Tech Term Policy (which is a term insurance policy) as examples.

Difference in Premium-

If Ramesh Kumar buys a traditional Life Insurance Policy, he has to deposit approximately ₹ 1,92,985 as premium every year. But if he buys a Term Insurance Policy, he will have to deposit only about ₹ 5,487 per year.

Difference in Death Claim-

If Ramesh Kumar dies within a period of 25 years and he has purchased a traditional Life Insurance Policy, then his nominee will receive ₹ 50 lakh from his Life Insurance Policy and if some bonus is collected in his Life Insurance Policy, If it is there, that too will be given.

But if Ramesh Kumar ji buys a Term Insurance Policy and dies within the policy term, his nominee will receive only ₹50 lakh from his Term Insurance Policy.

Difference in Loan-

A loan can be taken against a Traditional Life Insurance Policy after a specified period. But a loan cannot be taken from a Term Insurance Policy for the entire policy term.

Difference in Surrender-

A Traditional Life Insurance Policy can be surrendered after a specified period. But a Term Insurance Policy can never be surrendered.

Difference in Maturity-

When a Traditional Life Insurance Policy matures, the customer receives a larger amount on the maturity of that policy. But when a Term Insurance Policy matures, the insured does not receive any money from his policy.

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