When reading about insurance, you may have come across ‘life insurance’ and ‘term insurance’ often, but as different phrases. It may have made you wonder that if term policy is a type of life insurance, What’s the difference between term insurance and life insurance? Let us find out!
What is life insurance cover?
Life insurance is a tool that can be used for financially covering you and your loved ones. With life insurance, a premium is paid regularly, and the sum assured is procured by the nominee in case of the policyholder’s death or by the policyholder themselves after the maturity period. Therefore, such a policy ensures that you get the amount you opted for whether or not something happens to you.
What is a term insurance plan?
A term life insurance plan, as the name suggests, is for a specified period. This means that under such an insurance plan, you are protected for the chosen term period of the policy. There are premium payments here, but you only receive the sum assured in case of the policyholder’s untimely demise during the policy tenure. Though term insurance can be bought physically, it is ideal to purchase online term plans as it allows you to compare and select a plan that best fits your requirements.
While both are types of insurance products and aim at serving the purpose of security to you and your loved ones, there are differences in the policy details based on the premium, the cover, the surrender, the duration.
These features are something that you should keep in mind while buying a new life insurance policy.
- Premium
One of the most critical factors in choosing a policy is its premium, which is often considered directly proportionate to its affordability. In the case of life insurance cover, the premiums are often high about the sum assured. On the contrary, the premiums are relatively low with a term life insurance plan, and they provide a more considerable sum. With both, you can also choose to pay them in single, limited, or regular pay.
- The duration
The duration of active life insurance is usually shorter - it ranges from 5 to 30 years. While for the term insurance, the same goes up from 10 to 45 years, in most cases.
- Non-payment of premium or surrender
In this scenario, life insurance may seem beneficial. If you cannot pay the premium, you will get a paid-up value, which is a reduced amount from the total sum assured based on the premium you have paid. If you choose to give up your insurance, then you will get a specific surrender value. A term life insurance plan in a lot of cases may not have a surrender value.
- Death benefits
It is what your loved ones receive in case of an unfortunate situation. It is a standard feature for both types of insurance products. The only difference is that life insurance will have both a death benefit and maturity benefits and usually the death benefit payout amount is higher in the case of term insurance as that is the sole purpose of the policy.
Having answered what is life insurance cover and what is term insurance, you now know the nuances of each policy, which makes the process of selecting a plan easier and stress-free. So, assess your needs and opt for a plan that meets your requirements!
