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Term Life Insurance Versus Traditional Life Insurance

What is Term Life Insurance? 

Term life insurance provides life cover and provides financial support to your family in case something unfortunate occurs during the policy term. In case of your unfortunate demise during the policy term, the insurance company will provide a death benefit to your family. This type of plan helps you ensure financial protection of your family in your absence. 

What is Traditional Life Insurance?

Traditional life insurance provides risk cover, income returns and tax benefits. These plans also offer maturity benefits. Traditional life insurance provides life cover to the life assured for his/her entire life. In case of an unfortunate demise of the life assured during the policy term, the family of the life assured will receive a death benefit. 

Difference Between Term Life Insurance and Traditional Life Insurance

Following are some major differences between term life insurance and traditional life insurance:

Parameters 

Term Life Insurance

Traditional Life Insurance

Benefits Payable 

Term Life Insurance provides a death benefit to the family of the life assured, in case of an unforeseen demise of the life assured during the policy term. Some term life insurance plans also provide maturity benefits.

Traditional Life Insurance provides death benefit and maturity benefit. In case of an unfortunate demise of the life assured during the policy term, the insurance company provides death benefit to the family of the life assured. In case the life assured survives the entire policy term, he/she is provided with a maturity benefit at the end of the policy term.

Risk Covered 

Term insurance plans cover untimely demise of the life assured during the policy term. Some term plans offer maturity benefits but these plans do not provide survival benefits. These plans are also known as protection plans.

Traditional life insurance plans provide life cover, income returns, maturity benefit and tax benefits. These plans help the life assured to create a corpus along with life cover.

Flexibility 

Term insurance plans offer flexibility i.e, surrendering a term insurance plan is simple.

Under traditional life insurance there is less flexibility i.e if the life assured opts to surrender or close the policy during the policy term he/she will not be able to recover the sum assured, only the premiums total premiums after deductions.

Premium 

Term insurance plans provide high coverage at an affordable price. 

Traditional life insurance provides coverage at a rather higher cost.

Conclusion

It is essential for a potential consumer to understand that life insurance is an important part of good financial planning. It is very important to understand which type of policy will fulfil your requirements. If you want to purchase an insurance plan that will provide you protection from uncertainties of life then you should go for term life insurance plans. If you want protection and you also want to grow your corpus then you should go for traditional life insurance plans. 

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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.    

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