Term Insurance Vs Life Insurance – What’s The Difference? – Advisor Forbes INDIA

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Life insurance policies not only help you build a long-term financial corpus for your future, but also ensure that your family has immediate financial support if an unfortunate event like death befalls you. Broadly speaking, there are two types of life insurance plans, namely term insurance policies and traditional life insurance policies.

Here are the main differences between the two and the one you should consider in your financial plan.

What is a term insurance plan?

Term insurance is one of the simplest, most basic and purest life insurance products. It compensates the family or the agent only in the event of the death of the insured. There is no savings component present in term plans. Thus, they are only designed to provide death benefits and no survivor benefits.

These days, to expand the scope of coverage, many insurance companies offer optional riders such as accidental death benefit or critical illness coverage. One of the best features of term plans is that they offer substantial coverage with low premium prices. For example, one can easily get life cover as huge as INR 1 crore just by paying a premium of few thousand rupees.

To learn more about the best term insurance plans available on the market, read our review of the best term life insurance plans.

What are the different types of term insurance plans?

Term plans have basic functionality; however, they are varied in terms of premiums, sum assured coverage and endorsements.

What is life insurance?

Life insurance policies are designed to provide comprehensive and extensive coverage for the insured and their family. These types of insurance plans also offer the dual benefit of life cover with a savings component; therefore, they are considered more expensive than pure, basic term plans.

In life insurance schemes, the premiums are divided into two categories, with a part being allocated to pay a death benefit to the applicants and the other part of the premium being allocated to the investment and savings component. The best example of this is ULIP plans.

Read our analysis on the best ULIP plans for more details.

What are the different types of life insurance plans?

What is the difference between a term plan and a life insurance policy?

Conclusion

Life insurance and term insurance policies have their own advantages and disadvantages. On the one hand, life insurance plans offer lifetime coverage, flexible premium payment terms, assured maturity benefits, flexible income payout options at a higher premium cost. On the other hand, the term plan is a pure life cover that offers only a death benefit at a very lost cost and an affordable range of premiums.

So, deciding which type of policy should be in your portfolio entirely depends on your financial goals and your financial health and that of your family.

Frequently Asked Questions

Why should I take life insurance policies?

Life insurance policies provide financial security for the whole family and dependents, should something happen to the insured. It also makes it possible to accumulate long-term savings which are paid to the policyholder on the expiry of the contract and thus contributes to the creation of wealth. These policies also help secure your child’s future and pay off loans and debts, even if you won’t be there.

At what age should I consider buying a futures contract?

Is it beneficial to buy a term plan?

Can I pay premiums for life insurance plans as I wish?

What happens if I stop paying premiums?

Can I get my money back if I buy a term plan?

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