Term life insurance is availed to offer financial security to your family on loss of income if the primary breadwinner meets an untimely end. It compensates for loss of income and is a kind of support to the family of the deceased.
It allows the family members to pay off the debts as well as manage daily expenses. Term insurance is high cover at low premiums.
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With a term life plan, the insurer agrees to pay your nominees a pre-defined amount called death benefit if the policyholder dies within the policy tenure. You pay premiums to keep the policy in-force.
The term insurance policy does not offer maturity benefits if you survive the policy term. The payout known as death benefit must be chosen at term policy inception.
Generally, term insurance proceeds are used to pay off debts and financial obligations of the policyholder and also meet daily expenses. However, there are no restrictions on how the nominees use the funds. This is why it is important to choose your beneficiary carefully. You can choose multiple beneficiaries which mean dividing of the sum assured between family members like parents, spouse and children. You can make a WILL to distribute the death benefits across nominees.
See Also: How Much Term Insurance Should I Buy?
Suraj who is 25 years old works in a private firm in Bengaluru. He availed a term life insurance plan of Rs 1 crore for a term of 15 years, to secure his family in case of an untoward demise.
Suraj lived with his parents in their home and they didn’t depend on his income. When Suraj turned 27, he got married to a girl of his choice. Suraj wanted to make sure his family had money to survive in his absence, as he was the sole earning member in the family.
One day when Suraj was returning from work, his bike was hit by a car and he died on the spot. Fortunately, he had availed the term plan and his wife got Rs 1 Crore. She was able to pay off debts and meet daily expenses. Imagine life without a term life plan? Suraj died at the age of 30? How much savings and investments would he have had? With a term life plan, Suraj left a legacy to his wife.
See Also: Life Insurance Policies
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