Firstly, let us start our discussion with the most simple type of life insurance policy, i.e., 'Term Plan.'
What is a term plan and explain its features?
A term policy is a simple pure life insurance which provides a sum assured only in case of the policy holder’s death before the maturity of the policy. Term policies are the purest form of insurance available today. They charge the cheapest premiums as compared to other traditional insurance policies. As the name implies, these policies are issued for a term or a period of time and if the death of the insured occurs during the term of the policy, the insurance company pays the sum assured. If the insured lives beyond the period stated in the policy, no payment is made. The term insurance provides pure death protection and does not have any savings element as some other insurance policies do.
There is no maturity benefit as this type of policy is not an investment policy, your premiums are not being invested anywhere but are being utilized by the life insurance company only to cover mortality risk. These policies are slowly gaining popularity among the Indian population as they understand its advantages like cheaper premium and as a tool for succession planning.