A life insurance plan is one of the preferred financial tool that has the capacity to keep your family protected even when life throws unexpected surprises at you. Though you might know the answer to the question ‘What is Life Insurance?’, chances are that you don’t know exactly how it works. If that’s the case, then this article can help you out. Here’s an overview of the different types of life insurance plans and how they work.
How life insurance works?
A life insurance plan is essentially a contract between an insurance provider and an individual, where the insurance provider agrees to provide a life cover of a certain sum of money to the individual. And, in return for this life cover, the individual agrees to make periodic payments, known as premiums, to the insurance provider.
A life insurance plan is only valid for a specific period of time. This is known as the policy tenure and can be chosen by the individual at the time of purchase of the plan. That said, there are plans where the policy tenure covers an individual till they attain 99 years of age. This is known as Whole Life Insurance.
Now, in the event where the individual dies during the policy tenure, the insurance provider would pay out the agreed sum of money to the nominee of the deceased as a death benefit. The nominee can then use this death benefit to take care of their living expenses and further their life goals. This is one of the major benefits of life insurance.