An insurance plan is the best safety net to protect you from life’s uncertainties. With so many insurance products in the market, understanding the difference between term and life insurance will help you choose the right type of cover that works for you.
Have you ever wondered what the difference between term and life insurance is? Here’s in this guide, we explain the differences between these two insurance terms, helping you choose the right plan that works for you.
Life insurance plans can be divided into several categories based on the benefits they offer. Term Plans are a subset of life insurance. Before we understand the differences between the two, let’s take a look at the definitions.
What is Life Insurance?
Life insurance is a contract between the policyholder and the insurance company. The policyholder has to pay premiums to the insurance company, and in return, the insurer offers life coverage (death benefits) and other maturity benefits to the policyholder.
What is Term Insurance?
Term insurance is the simplest type of life insurance. When you purchase a term plan, the insurer pays a lump sum death benefit (the sum assured) if the policyholder (the life assured) passes away before the end the term of the policy.
Difference between Term and Life Insurance
|Term Plans||Life Insurance|
|Offers only death benefits||Offers death benefits as well as other benefits like policy maturity benefits|
|No survival benefits (apart from Term Return of Premium Plans)||Offers various survival benefits based on the terms of the policy|
|Pure life insurance||It can be life insurance along with investments or savings depending on the type of plan. For instance,
|Premiums are generally lower||Premiums are higher compared to regular term plans|
|Offers coverage only for a specific period – that is the duration of the plan||Most life insurance plans offer coverage for life|
|Who is it for?
||Who is it for?
|Term plans offer various riders like accidental death benefit, critical illness, waiver of future premiums, etc.||Life insurance products also offer various riders like critical illness, accidental death insurance and more|
Which one should you choose? Term Plans or Other Life Insurance Plans?
Though a term plan is a type of life insurance product, it’s different from other life insurance products. Term plans offer your family the utmost financial security, even when you are no more. It acts as an income replacement, helping your family manage your regular day-to-day expenses, even when you are not around.
On the other hand, life insurance products fulfil other needs like retirement planning, children’s education, and more. So, term plans and life insurance plans are not mutually exclusive, but you need both to meet various requirements.
Irrespective of the type of life insurance product you choose, make sure to include term plans in your insurance portfolio, to protect your family from life’s uncertainties.