Term Insurance vs Life Insurance: Benefits Compared

In today’s day and age, it is very important to have insurance coverage in order to deal with the uncertainties of life. With the burgeoning need of insurance policies, there are a plethora of insurance products available in the market. However, choosing the right insurance plan according to one’s own suitability depends on various factors.

It is important to consider factors like time period, age, number of dependents, and the amount of coverage required before zeroing on an insurance policy. So, doing a little bit of research before making a final decision always helps in choosing the right insurance policy. If we talk about term insurance and a traditional life insurance policy, then both the plans have some advantages and some limitations. Let’s take a look at term insurance benefits to understand whether you should consider buying term insurance or a traditional life insurance policy.

Death Benefit-

The most common difference between a term insurance and traditional life insurance plan is that a term insurance plan only provides death benefit in case of demise of the insured within the term period, whereas a life insurance policy offers both death and maturity benefit to the insured. The amount provided as the death benefit in term insurance plans is much higher than the maturity benefit offered by life insurance policies. Even though most insurance buyers consider investing in life insurance policies in order to avail the dual benefit of life protection along with returns on the investment, it is advisable to have at least one term insurance plan as it provides a higher death benefit in minimum premium amount.

Risk covered Vs Savings-

 A term insurance plan covers the insured by providing a death benefit to the family of the insured in case of their demise. However, term plans do not offer any survival benefits or maturity returns like life insurance plans. So, one can consider investing in term insurance if he/she only wants to cover death risk and cannot afford to pay high premiums. However, if one wants to create an investment corpus along with a life cover, then they should consider investing in a traditional life insurance policy.

Flexibility-

Surrendering a term insurance policy is much simpler than surrendering a life insurance policy. In term insurance plan, if the insured stops paying the premium, the benefits of the policy terminates and the policy lapses. However, in life insurance policies, the maturity benefit is provided only if the insured completes the entire tenure of the policy. If the insured surrenders or bring a close to the policy mid-term, he/she will not be able to recover the entire saving portion of the policy, as only the premium amount is paid back to the insured, that too, after the certain deductions. Moreover, most of the term insurance plans are renewable and offer an option to convert the policy into an endowment plan for the same sum assured with an increase in the premium.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply