In a world full of options and constant information, choosing insurance can be tough. The debate between life insurance vs term insurance adds to the confusion.
Term insurance plan, as its name implies, involves paying premiums for a predetermined amount of time. Should the policyholder pass away unexpectedly within this time, the insurance company will be responsible for paying the nominee or beneficiary the death benefit sum. There is no maturity benefit offered in the event that the policyholder lives out the duration of the plan.
Life insurance plans provide the combined advantages of investment and lifetime protection. Plans for whole life insurance often include a 100-year maximum age. An additional benefit of such a plan is that cash accumulates during the course of the policy.
Here is a quick overview of life insurance plans and term insurance plans, respectively:
Term Insurance Plan
A term insurance plan pays a fixed sum for a set period. The policyholder does not need to pay more during this time, but must pay a premium for coverage. Term insurance is affordable and valid for a specific duration. Most policies guarantee a minimum payout. This means, even without a claim or covered event, the insurer will pay this amount.
Life Insurance Plan
A life insurance plan protects your loved ones if you pass away unexpectedly. It also helps them save money, ensuring their security. These plans cover you and your dependents for life. They often include death benefits for early deaths, aiding with burial costs and other expenses. It is vital to understand your coverage. Ensure each dependent has enough insurance to avoid financial hardship after your death.
What Differentiates Life Insurance From Term Insurance
- Coverage
Term insurance provides the policyholder with cash benefit, while life insurance provides the beneficiary with a cash sum at the time of the policyholder’s death. Also, in the given policy contract period, term insurance reimburses for an earlier death of the policyholder. Life insurance policy, on the other hand, pays for both death before the maturity of the policy and surviving at the time when the policy matures.
- Premium
Life insurance policies span the entire length of a person’s life. Hence, the cost of premiums is higher than that of term insurance policies.
- Duration Of Coverage
Term insurance coverage can range from 10 to 35 years, while life insurance coverage is fixed for 5 to 30 years.
- Bonus & Other Additions
After a year of payments, life insurance companies often add a bonus. However, term plans do not offer bonuses or extra benefits. In term insurance, the basic amount is paid upon the insured’s death. Meanwhile, other life insurance policies may include bonuses, guaranteed additions, or loyalty additions.
- Flexibility
Due to the fact that term insurance lacks paid-up value, surrender value, and maturity advantages, whole life insurance policies provide greater flexibility than term life insurance.
Term insurance covers you for a set time. In contrast, life insurance lasts your lifetime. This is the key difference between term insurance and life insurance. So, pick a plan that fits your needs. Manage your insurance easily with the Aditya Birla Capital App. The app simplifies choosing and managing term plans. It makes coverage accessible. Download ABC today!
