Know the difference between term insurance and life insurance

Term Insurance vs Life Insurance

In modern times, life insurance has become an important financial tool to protect your family. With time, people have started recognising the importance of buying life insurance in order to create a financial safety net for their loved ones in case of their untimely demise.

 

However, often ‘Term Insurance vs Life Insurance’ becomes the topic of discussion as many people tend to get confused between the two types of life insurance plans. Both term insurance and life insurance plans have unique features and benefits that suit the varying needs of policyholders. In this article, we’ll take a detailed look at both as the first step to understanding the difference between term insurance and life insurance is to know about both plans individually. Before we get into the entire term vs life insurance part, let’s have a look at what term insurance is.

About Term Insurance

Term insurance is a type of life insurance plan that gives financial coverage to the family for a fixed duration in case of the untimely death of the policyholder. The policyholder must make regular premium payments to keep the plan active. Term insurance is the most basic form of life insurance. You can use a Term Insurance Calculator to know the amount of premium you have to pay for any plan.

 

Apart from the basic term insurance policy, most companies also provide the option to include additional riders like critical illness cover, accidental death cover, etc. One of the main benefits of term insurance is its affordability. Between term plan vs life insurance, a term insurance policy has lower premium prices, even while providing a large sum assured.

 Types of Term Insurance Plans in India

1. Level Term Insurance Plan:

The premiums you pay throughout the duration of the policy remain the same.

2. Increasing Term Insurance Plan:

The assured coverage increases over the duration of the policy. The premium rate might or might not change depending on the plan or company.

3. Decreasing Term Insurance Plan:

The assured coverage decreases over the duration of the policy.

4. Return of Premium Term Plan:

The premiums you have paid for the duration of the policy are returned in full, at the end of the policy term.

5. Convertible Term Insurance Plan:

It is a flexible plan that can be changed into another insurance plan by the policyholder.

6. Term Insurance Plans With Riders:

Riders refer to additional coverage that can be included under the term insurance plan. A plan with riders such as accidental death cover, critical illness cover, among others, are examples of term insurance plans with riders.

About Life Insurance

A life insurance policy is a much more comprehensive policy that provides extended coverage to the policyholder and their family/nominees. A whole life insurance policy provides coverage throughout the complete duration of the policyholder’s life. However, there may be some life insurance plans that provide limited coverage. Life insurance plans usually give you twin benefits by combining death benefits with a savings component or cash value that can be reinvested and tax-deferred.

Here, the premiums are split into two parts and are usually allocated flexibly. While one goes towards providing the death benefit to beneficiaries, another chunk of the premium is utilised for future wealth creation. Moreover, a life insurance policy gives you the freedom to invest a part of the premium amount into other instruments. Hence, life insurance plans are considerably more expensive than term plans.

 Types of Life Insurance Plans in India

1. Whole Life Insurance Plan:

It remains active throughout the duration of the policyholder’s life and benefits are given out to the family member at the time of the policyholder’s death.

2. Endowment Assurance Plan:

It helps the policyholder save money over a period of time, which is provided to them as maturity benefits if they survive the duration of the policy.

3. Money-Back Plan:

It pays out the maturity benefits in instalments to the policyholder, once the policy term has ended.

4. Child Plan:

It includes a combination of insurance and investments that helps to secure the financial future of the policyholder’s child.

5. Unit-Linked Insurance Plan (ULIP):

It provides a combination of life insurance as well as investments under a single plan.

6. Pension Plan:

A specific predetermined amount of money is given to the policyholder and their family each month after the policyholder retires.

 

As we explored both the terms, let’s now understand life insurance and term insurance differences, part by part.

Difference Between Term Insurance and Life Insurance: Features

Mentioned below is a table that highlights what is the difference between term insurance and life insurance in terms of their distinct features.

Term Plan vs Life Insurance: Benefits 

Through the table given below, you will get a clear idea about the difference between term insurance and life insurance through their benefits.

Conclusion

As you can see as per the term insurance vs life insurance tables given above, both these products provide financial security to the policyholders and their families. Even if you are not looking for a full-fledged whole life insurance policy, it is very important to get a term insurance plan to keep your family financially safe and worry-free. You can take a look at the various term insurance plans available at Bajaj Markets.