We all want to stay protected against the uncertainties of life as life is pretty much unpredictable, and at any point in time, anything may happen. We want to remain prepared for that moment so that our family or beloved ones do not have to suffer financially. For that, nothing can be better than a life insurance plan as it not only safeguards him/her but also keeps the family protected at a time of rising financial volatility. On the other hand, a term insurance plan is probably the best life insurance policy that one can opt for. While a term insurance plan is a type of life insurance policy, they are essentially different and there, most customers get confused. but before investing your hard-earned money in anything, it is pivotal to understand your policy and its importance. So, you do not have to worry anymore as in this article, we are going to talk about every detail related to the difference between a term and a life insurance policy.
What Does Life and Term Insurance Mean?
A whole life insurance plan is applicable for the insured person’s entire lifetime. It helps to build a financial corpus steadily over the term of the policy. Once you have built a sufficient amount of money, you can also borrow money against it if you qualify the terms and conditions of the company. a cash value component remains attached to a whole life insurance plan. the plan is so flexible that it allows the insured person to increase or decrease the premium payments at a later date. Usually, for this type of policy, you need to pay a higher rate of premium payment if you are a smoker, have a poor health profile, do not lead a healthy life, or if you work in a risky or financially unstable profession.
On the other hand, a term insurance plan is a fixed-tenure life insurance policy. Unlike a pure life insurance plan, a term policy does not come with any maturity benefit. However, some insurers have started to offer term plans with an option to return premiums paid towards the policy on maturity if nothing happens to the life insured. As per the market records, some term plans have come up with the highest sum assured options across life insurance products. In case of the unfortunate and untimely demise of the life assured, the beneficiary or nominee is entitled to receive the death benefit.
How Are Life and Term Insurance Differ From One Another?
Once you know the basics of term and life insurance plans, let us move on to the differences between the two. The following table contains the comparison between these two types of plans. Have a look.
|Parameters||Life insurance plan||Term insurance plan|
|Death benefits||It offers both death and maturity benefits.||It offers death benefit only in case of the untimely demise of the life assured.|
|Survival benefit||If the life assured survives the entire policy terms, he/she is entitled to receive the survival benefit.||No survival benefit comes with a term insurance plan.|
|Flexibility||A life insurance plan is usually less flexible as you need to pay the premiums regularly and keep the policy active to avail of the benefits. There is less flexibility in terms of closing or converting the policy.||Under a term insurance plan, if you stop paying the premiums, the policy will lapse. But you can revive/renew the policy and you will have an option of convert the policy into an endowment plan.|
|Premium amount||For higher coverage, you need to pay higher premiums. Usually, it offers lesser returns.||It is the most cost-effective insurance plan and also offers higher coverage at lower premiums.|
|Tax benefits||The premiums paid towards the policy are eligible for tax deductions under section 80c.||It is the same as the life insurance plan.|
|Surrender value or paid-up value||If you do not pay the premiums, the policy does not become void. Rather, it becomes a paid-up policy and you will receive the paid-up value. In case of surrender of the policy, you are entitled to receive the surrender value.||No paid-up value or surrender value is applicable in the case of term insurance policies.|
Is Life Insurance Better Than Term Insurance?
Both life insurance and term insurance plans have come up with their own benefits and values. It can not be concluded in one line which one is better. While term plans are the must-have insurance policies as it offers financial protection in the case of premature death of the insured person, on the other hand, life insurance plans offer other benefits such as survival, maturity, surrender benefits, etc., along with the death benefits. However, it has to be remembered that life insurance plans usually have higher premium rates. So, before opting for any of these, you need to assess your needs, your financial background, and other factors, only then should you go for one.