While most of us spend our lifetime saving up to provide the best for our families, we often forget to prepare for the worst. This has even been substantiated recently by a report by IndiaSpend. The report has revealed that in the event of the demise of the financial providers, Indians typically have only 8% of what is required to protect their families from a financial crisis.
That is where the value of life insurance comes in. In the event of the death of the financial provider, insurance coverage can provide desperate families with much-needed financial relief. As a result, life insurance is often considered the most essential type of insurance policy to have.
However, while searching for the life insurance policy of your choice, you may also come across ‘term insurance’ as a possible alternative. After all, with the many benefits it provides, term insurance is quickly becoming a popular insurance choice for many Indians. The Bajaj Allianz Smart Protect Goal term insurance plan on Finserv MARKETS, for example, has a coverage option of upto Rs. 1 crore, making it an excellent insurance option for individuals and families alike.
In order to make the choice between life insurance and term insurance, it is important to make the distinction between them clearer. Therefore, let us take a closer look at the two as well as how they relate and differ:
Upon closer examination, you might find that both life insurance and term insurance promise coverage in the event of the death of the policyholder. Therefore, in essence, it is the life of the policyholder that is being insured. This would imply that both of these insurance policies can essentially be considered ‘life insurance’, and that is indeed correct.
Both term and life insurance come with slightly similar advantages in the form of death and maturity benefits. An additional little known but highly effective perk of these policies is tax benefits. Yes, you heard that right. By opting for these policies, you can avail tax deductions on the premiums you pay and payouts you receive from the insurance provider, under Sections 80C and 10(10D), respectively.
Term insurance is, in fact, a type of life insurance. However, there is one crucial difference between the term insurance and life insurance, and it has to do with the duration of coverage provided by both. In the case of term insurance, the insurance coverage is guaranteed for the duration chosen by the policyholder. Life insurance, on the other hand, is typically used to mean traditional life insurance or ‘whole life’ life insurance policies. Under this type of insurance plan, insurance coverage is guaranteed for the entire lifetime of the policyholder.
Now that we’ve understood the similarities between term and life insurance, let’s examine the differences between the two:
Source: Trusted Choice
While the duration of coverage is the major difference between term insurance and life insurance, the plans differ in many important aspects. In order to determine the best insurance option for you, let us go through some of them:
While life insurance is a necessity for every household, many individuals and families are hesitant to take it up due to its high premiums. In particular, the initial premium amounts for life insurance are known to be extremely expensive. This can be discouraging for someone who does not have the financial ability to fit life insurance into his or her family’s budget.
For such individuals and families, however, term insurance becomes the best course of action. Term insurance typically comes with far cheaper, economical premiums that ensure that people of a variety of financial backgrounds can avail simple insurance coverage and protect their family’s future.
Having some form of life insurance is crucial, but it is possible that one might find themselves under circumstances where one might want to discontinue one’s insurance policy. Term insurance plans are pure and simple insurance coverage plans. Hence, in case an individual wants to opt out of his or her term insurance policy, it is much easier for them to carry out that process. In case of life insurance policies, however, the insurance plan is much more complex and hence, opting out of one’s life insurance policy is far more difficult, no matter the circumstances.
In case of life insurance policies, the benefits are many and the coverage is ample, but the premiums are also quite high. In case of term insurance, however, policyholders get to pay lower premiums while being able to enjoy a variety of benefits as well as extensive coverage. Therefore, in terms of reaping the value for money, term insurance proves to be a more valuable insurance option for many.
The Bajaj Allianz Smart Protect Goal term insurance plan on Finserv MARKETS is one such term insurance plan that is easy on the pocket and yet promises an all-encompassing life cover. The plan also has a number of variants to customise the term insurance plan according to your specific needs. You can use a term insurance premium calculator to get an estimate on the premium amount for a plan that suits you best.
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