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Term Insurance vs Life Insurance - Major Differences, Benefits & Features
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Term Insurance vs. Life Insurance – Which offers better benefits?

Insurance is a necessity to provide your loved ones with financial security in your absence and protect them against uncertainties. Term insurance is the most commonly suggested product when it comes to life protection, but there are other types of insurance plans as well. Therefore, it is necessary to know about the differences between Term Insurance Vs. Life Insurance before you decide to buy one.

Sanjay, a senior manager working in a private company, wanted to safeguard his wife and two kids from any financial difficulties if anything untoward happens to him. Hence, he bought a term insurance plan for a sum assured of Rs 1 crore. Nirmal, his colleague, lived with his wife, two kids, his parents, and a younger sister. To secure his dependents financially in his absence, he bought a money-back policy that would return all the premiums paid to him at the end of the policy term. While Sanjay was comfortable with the term insurance policy, Nirmal opted for a money-back plan keeping in mind the future needs of his big family. Though both have got insurance coverage, their family requirements were different, which led them to choose a plan that best suited their interests.

Difference Between Various Life Insurance Plans

Let’s understand the difference between various life insurance plans to understand their usage.

There are many life insurance policies that help you plan for future events or goals while offering the benefits of term insurance, such as life protection and death benefit. One of the many benefits of life insurance is that they provide both death benefit and income options, which helps your family maintain the same lifestyle even if you are not physically present in the world. Life Insurance policies are categorized under the following:

  • Term Insurance: It is a simple life insurance plan available for affordable premiums and promises to pay the sum assured as a death benefit to the insured’s nominee in the event of the policyholder’s demise. If the insured individual survives the policy term, no maturity benefits are payable.
  • ULIPs: Unit-linked insurance plans are a combination of investment and insurance into a single policy. They guarantee protection against uncertainties of life and help generate better returns for the premiums paid through various fund investment options.
  • Whole Life Insurance Plan: It is suitable for people looking to take up insurance coverage for a longer tenure of up to 100 years rather than a fixed term.
  • Money-Back Plan: This policy provides twin advantages of life cover and periodic income, which further helps to address the financial requirements after a specific period of time.


Term Insurance vs Life insurance

The choice of availing of term insurance or other life insurance policy depends on your requirement and after understanding the policy’s relevance, features, and benefits. The main difference between the two plans can be compared on the following aspects: 

  • Benefits: A term insurance plan primarily covers the life of the insured, which means the sum assured is paid only in case of the policyholder’s death during the policy term. There are no maturity or survival benefits given to the insured if they survive the policy tenure. Life insurance plans, on the other hand, offer a death benefit and maturity benefit on survival. Also, you have the option to choose between a lump sum or monthly income payout while deciding on the life insurance death benefits.
  • Coverage Value: Term insurance policies are generally available with a high sum assured, which is necessary to support your family members in managing their expenses and reach their goals, even after your demise. But the coverage offered by Life insurance plans is not relatively high because of the various investment or money back options they provide to the customer and insurance.
  • Premiums: The premiums of term insurance plans are very low since they pay only in the event of the policyholder’s death. Therefore, one can even opt for a term plan of Rs 1 crore or above for a yearly premium of just Rs 8000 to cover the risk of premature death, due to which it is available at a low and affordable premium rate. Life insurance plans not only cover the risk of death but also promise guaranteed returns, survival benefits, long-term investment growth, etc. Hence going for a high assured under these policies will increase the premiums by many folds.
  • Policy Tenure: Term insurance policies provide coverage for a more extended period of life that can go up to 80 years from the date of availing the policy. In the case of life insurance plans, the policy tenure varies from 5 years to 50 years, based on the features it offers and the purpose of that specific policy.
  • Investment Savings: A term insurance plan does not provide any investment or savings option to grow the money. Life insurance plans, especially ULIP and money-back policies, offer a wide variety of choices to park a certain percentage of the premium paid in funds that guarantee returns that are paid to the customer at the time of maturity of the policy.
  • Tax Benefits: There is no difference between the term insurance tax benefits and life insurance tax benefits,as both offer the same set of income tax benefits. The premium amount paid for term life insurance and life insurance plan is exempted under section 80C of the Income Tax Act, 1961. Similarly, no tax is payable on the death/ maturity or survival benefits paid to the insured or nominee.


Difference Between Term Insurance vs Life Insurance Plans

For a better understanding of the differences between term plans and life insurance plans, the following table can be referred to: 

Feature Term Insurance ULIP Plan Money-Back Plan
Death Benefit Sum assured is paid Sum assured or fund value is paid, whichever is higher Sum assured + bonus is paid
Premium Very low Higher than money back plan Higher than a term plan
Maturity Benefit No Available Available
Bonuses No Available Available
The premium for 25-year-old male for 25 Lakhs sum assured and 25 years Rs 5000 / year Rs 2.5 lakh/ month Rs 20000 / year


The bottom line is term insurance or life insurance; both have their pros and cons. It depends on the policy seekers’ requirement which one will suit them the best. iiflinsurance.com provides detailed information about all kinds of life insurance policies. So, visit today and opt for the right one for a better future.

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