Term Insurance vs Life Insurance
Updated On Jun 07, 2021
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Being a well informed individual is necessary to understand different types of life insurance plans. Life comes along with a lot of uncertainties and it is vitally important to secure your and your loved ones future and this can be conquered by choosing the right type of insurance plan with right knowledge about it. People usually wonder about how traditional life insurance plans are different from term insurance plans. What exactly differentiates them from each other. Lets understand how term insurance plans are different from life insurance plans.
What is Life Insurance?
Life insurance is a type of plan that offers an agreement between an individual and an insurance company under which the latter promises to provide a sum assured (death benefit) to the family of the insured in the event of the policyholder's death. In case of no death, a sum assured known as the maturity benefit is provided at the time of maturity of the policy. Some insurance companies also offer optional coverage for critical illnesses.
What is Term Insurance?
Term Insurance plans are a type of life insurance plans they are also called ‘Pure Protection Plan’. Usually these types of policy offer the sum assured to the family members in an event of sudden demise of the policyholder during the tenure of policy, basically term insurance deals with covering the risk of untimely death of a policyholder. Term insurance plans offer you high insurance coverage with a minimum premium amount giving you the opportunity to create a safe and secured future for your family member in your absence.
Difference Between Term Insurance and Life Insurance
Now that we have understood the basic meaning of both insurance plans, lets understand how term insurance is different from traditional life insurance plans. Term insurance and traditional life insurance can be differentiated on following parameters:
|
Parameters |
Term Insurance |
Life Insurance |
|
Coverage |
Term insurance offers coverage for unforeseen death of the insured i.e. term insurance plan offers death benefit to the family members of the policyholder in the event of policyholder’s unforeseen demise. |
Life insurance offers a sum assured to the family of the insured in the event of policyholder’s death i.e. life insurance promises to provide death benefit to the policyholder’s family after policyholder’s death. In case of no death, a sum assured known as the maturity benefit is provided at the time of maturity of the policy. |
|
Premiums |
Premiums for term insurance plans are nominal i.e. affordable because term insurance only provides death benefits. |
Premiums for life insurance plans are rather higher than that of term insurance plans because it offers wider coverage as it offers maturity benefit. |
|
Flexibility |
Term insurance plans are rigid because term insurance does not procure Surender/Paid-up Value. |
Life Insurance on the other hand is very flexible, it acquires Surrender/Paid-up Values and also offers flexibility to opt for loans against the life insurance policy. |
|
Policy Term |
Policy term of term insurance can be for a longer period term. |
Life insurance has a rather shorter policy tenure. |
|
Bonus/Other Additions |
Term insurance includes no bonuses/other additions other than death benefit. |
Under the different categories of life insurance plans like endowment plan, money back plans or child some bonuses additions can be availed such as loyalty addition or guaranteed addition etc. |
Also read
Why Is It Beneficial To Buy Life Insurance In Your 20s?
Why Do You Need A Term Insurance Plan?
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
