The uncertainties in life come knocking at your doorstep at any time. It is also beneficial to have insurance coverage when dealing with these uncertainties. With the increasing demand for insurance policies, there a plethora of plans available in the market. However, choosing a plan that covers all the needs depends on various factors.
It is crucial that factors like tenure, age, number of dependents, and the amount of coverage are considered before opting for any insurance policy. Let us take a look at what Term Insurance Plan and Whole Life Insurance mean before diving into their specific details.
Term Insurance Plan:
A term insurance plan is a life insurance product but for a certain amount of time. If the policyholder dies during the term of the policy, the sum assured is paid to the nominee by the insurer. However, no claim can be made if the policyholder survives the term. The term insurance plan is the most economical of all insurances.
Standard Life Insurance:
Life insurance is an agreement between the insurer and the policyholder that offers coverage in which the insurer agrees to pay a certain amount to the nominee in case something unfortunate happens to the policyholder. In exchange, the policyholder agrees to pay a premium amount at certain intervals during the whole term. In case of any uncertainties, the policyholder is even provided with a critical illness cover.
Analysis of benefits Term Insurance Plan vis-à-vis Life Insurance Plan:
The most prominent difference between term insurance and life insurance is that the term insurance only offers a death benefit, whereas the life insurance plan provides both maturity and death benefit. Comparatively, the amount offered as the death benefit in term insurance is much higher than the maturity benefit offered in life insurance.
Savings vs risks covered:
Term insurance provides a death benefit to the family in case of policyholder’s demise. However, term insurance plans do not provide any survival or maturity benefits like life insurance plans. Hence, one can consider getting term insurance plans if they only want death benefit and cannot afford to pay high premiums. And if one wants to create an investment corpus along with a life cover, one should opt for a traditional life insurance plan.
If one wants a higher coverage under a life insurance policy, one should be ready to pay higher premiums. Hence, due to a high premium, most of the buyers are unable to avail of sufficient coverage. Moreover, life insurances even offer low returns, i.e. 5-7%, which is further reduced once the policy is surrendered. On the other hand, term insurance plans are much affordable and provide higher coverage at an economical cost.
There are several term insurance tax benefits that you can avail of. Also, there are some medical tests for term insurance that one should go through before deciding on a policy. You can even use a term plan calculator to check whether you can pay the premiums for a term insurance plan. The above comparisons will surely help you decide whether to go for a term insurance plan or a simple life insurance plan.