Term Insurance vs Other Life-Saving Products

The role of insurance policies is undeniable in today’s era as they help you to combat all uncertainties of life. Many leading insurers have introduced a spectrum of products in the market so that customers can stay protected in the utmost way. After considering various parameters like age, time, number of dependents, the sum assured, etc., a person should choose the right insurance policy plan. By acquiring knowledge from some resources, you can handpick the best policy to safeguard you and your family members. If you consider term plans and other life-saving products, both have some upsides and downsides that you can’t shun easily.

What are term insurance plans?

Term insurance plans are the simplest and budget-friendly life insurance plans that offer a death benefit only if the insured policyholder expires during the term of the policy. Term insurance plans provide no maturity benefit, and thus, they are only protection plans.

What are life-saving policies?

Life insurance policies provide financial security to policyholders. In addition, life insurance policies offer both death and maturity benefits to insured policyholders.

Similarities between the term plans and other life insurance plans

  • Both term plans and other life insurance plans make you eligible for the tax benefits under Section 80C of the Income Tax Act on the premiums paid.
  • The death benefit received for both life insurance and term plans is also tax-free under Section 10 (10D).
  • There are “return of premium term plans” that offer a maturity benefit like other life insurance plans.
  • You can purchase term plans and other life insurance plans online.

 

Differences between term insurance and other life insurance plans

Premium Amount: Term insurance plans are affordable as compared to other life insurance plans. For term insurance, the premium amount is the lowest. With term insurance plans, you will get an optimum sum assured that will help your family to manage their expenses in your absence. On the other hand, conventional life insurance plans like endowment plans have higher premiums. Let’s elaborate on it with an example.

If you are a 30-year old healthy guy and you are looking for a cover of Rs 50 lakh for a policy term of 30 years, then the premium amount for a term insurance plan would be Rs. 13, 747 (annually), and the premium amount will be Rs. 179,672 (annually) for the endowment assurance plan.

Moreover, life insurance plans offer lower returns as compared to term plans.

Death Benefit: A term insurance plan offers only a death benefit if the insured policyholder expires during the tenure period. But conventional life insurance plans provide death and maturity benefits to insured policyholders. This is the prime difference between term plans and other life insurance plans. But the death benefit offered by term insurance is much higher than the maturity benefit of life insurance policies. Therefore, most policy buyers are inclined to purchase life insurance policies so that they can enjoy dual benefits (life protection along with returns on investment). But it is recommended to purchase at least one term insurance plan to get a higher death benefit against the lowest premium.

Coverage: A term insurance plan offers higher coverage at affordable premiums. This thing differentiates term insurance from other life insurance policies. Though with other life insurance policies, you may get guaranteed returns like periodic money-backs or lifelong annuities, still, the term plan offers you an adequate amount of sum assured at a low premium. This will add a layer of financial security to your family at a reasonable price.

Saving Component: There are many popular life insurance plans, like endowment or money back plans, come with a saving element. These policies either offer a death benefit in case of death during the term or a maturity benefit if you survive the term of the policy. Term plans provide no saving element (except for the return of premium term plans). They pay a benefit only in the case of the death of the insured policyholder. You should invest in term plans if you want death coverage and if you don’t afford higher premiums. But if you want to get a maturity benefit along with death coverage, then you should opt for other insurance plans.

Flexibility: Term insurance plans are the most flexible one among all life insurance policies. By stopping the premiums, you can surrender your term plans. If you can’t pay the premiums, you may not avail of the benefits. Thus, your policy will lapse. But in life insurance policies, you will only get the maturity benefits if you pay the premiums throughout the tenure period. If the policyholder surrenders, he/she may not get the entire saving portion of the policy. After certain deductions, the insured will only get the premium amount. Moreover, term plans are renewable. This means you can easily convert a term plan into an endowment plan by enhancing the premium amount.

The above article gave you a clear idea about term plans and life insurance plans. It would be a wise decision if a person purchases both term plans as well as life insurance plans together. Because one plan will embrace you with investment return along with life protection, another plan takes care of the financial requirements of your loved ones in your absence. The above article will help you to choose the best insurance policy according to your financial requirements and needs. 

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