Term Insurance Vs. Life Insurance
Insurance coverage has become very essential in today’s time to deal with the uncertainties of life. With increasing awareness in India, people’s thoughts about insurance policies have also started turning positive. Keeping this in mind, the insurance market is flooded with many insurance products. However, choosing the right insurance plan depends on various factors. It becomes very important to consider factors such as timing, age, number of dependents and the amount of coverage required by the insurance policy. Hence it is always beneficial to do a little research before taking a final decision to take any type of insurance policy.
Today in this article we will talk about term insurance and life insurance policy. Many people remain confused about these two insurance policies because both provide almost the same facilities. Now we will further discuss some of the advantages and disadvantages of term insurance and traditional life insurance policies.
Now we will compare the benefits of term insurance and life insurance and we will see which type of policy you should buy between term insurance and life insurance and how you can make the most out of it.
- Death Benefit –
The most important difference between Term Insurance and Life Insurance is that term insurance policy provides death benefit to the insured person only in case of death during the policy term and if the person dies during the policy term Term insurance does not provide any benefit to the life assured whereas a life insurance policy provides death benefit as well as maturity benefit to the person. Thus through life insurance policy you can get both types of benefits (death benefit as well as maturity benefit).
The amount offered as death benefit in term insurance is much higher as compared to the amount offered by life insurance policies. Hence, term insurance plans offer higher death benefits at lower premiums.
- Risk Cover vs Deposit Capital –
Term insurance plans provide a sum of money in the form of death benefit to the family of the life assured upon his death. However, a term insurance policy does not provide any maturity benefit to the life assured on survival till the policy term. Therefore, term insurance can be invested in by individuals who only want to get death risk cover and are not willing to pay a high premium.
A life insurance policy is for people who want to create a life insurance cover as well as build a corpus. Such people should consider investing in a traditional life insurance policy.
- Flexibility –
Surrendering a term insurance policy is much easier than a life insurance policy. In a term insurance policy, if the life assured stops paying the premium, then the benefits of the term insurance policy automatically cease and the policy also lapses.
In life insurance policies, the maturity benefit is provided to the life assured only if the life assured pays the premiums for the entire term of the policy. If for some reason the person stops paying the premium of the life insurance policy, then only the premium amount given to him is paid out of which some charges are also recovered by the insurance company.
- Premium amount –
If a person wants higher coverage under Life Insurance Policy, then he has to pay higher premium amount in proportion to the same. Due to this premium amount, most of the insurance customers are not able to get adequate coverage. Also, life insurance gives you less returns and if the policyholder surrenders the policy, then in that case it becomes less.
But term insurance plans are more affordable and offer you higher coverage at a lower premium amount.
- Tax Benefits –
The premium paid under a term insurance plan is minimum and also eligible for tax deduction under section 80C of the Income Tax Act. Tax exemption is also provided to you in life insurance policy. Both these policies provide you tax exemption. This can reduce the tax burden on you.