Life Insurance vs Term Insurance: Which plan will be better for you? know here...
Whether you are employed or doing business, the thought always comes to mind that the family should not have to face any financial crisis in difficult situations in life. Insurance plans remove the worry of what will happen to our family after us.
It is very important to make the family financially strong and for this insurance works as a life cover. But the question is which insurance plan will be better for you, Life Insurance or Term Insurance?
To understand this, we spoke to Delhi-based insurance policy expert Kumar Amit. Let us first understand both insurance plans one by one, what things should be kept in mind while choosing them, and then compare them and see which plan is better for you.
What is a term insurance plan?
Term insurance is a type of life insurance plan, in which life cover is available only for a fixed period. If any kind of accident or mishap happens to the person during the period of the plan, then the nominee in the family gets a fixed amount (Death Benefit).
For this, you have to pay a fixed premium every year. Every month, every third month, every half year, or annually, you can choose the frequency according to your convenience. In this, you do not get any return after the plan period ends.
What is a life insurance plan?
Life insurance works like a traditional life cover. In terms of investment, this is a multipurpose plan, in which you get the benefit of investment along with life cover. In case of death during the insured period, the nominee in the family gets the death benefit and the invested amount along with interest. At the end of the insurance period, you get the invested amount and interest on it as maturity.
Term Insurance v/s Life Insurance
Both types of policies provide life cover and death benefit is available in case of an accident during the insured period.
The main difference between the two is the return on premium, which is available in life insurance but not in term insurance. Apart from this, there are many other differences, which we try to understand.
Death Benefit: In both term and life insurance policies, in case of untimely death during the insured period, the nominee gets a fixed amount in a lump sum, which becomes a big support for the family.
Maturity Benefit: The amount you deposit as a premium in life insurance, on maturity, you get a lump sum amount along with interest. Interest or return depends on your investment. On the other hand, the maturity benefit is not available in term insurance.
Surrender value: There is no surrender value in term insurance. That means you do not get any money if you terminate the policy before time. Whereas in life insurance, if you surrender the policy after a certain period, you get the money as per the terms and conditions.
Premium amount: Since only life cover is available in term insurance, its premium amount is less. Whereas, since there is an investment plan along with life cover, the premium of life insurance is higher.
Flexibility: You get many types of options in term insurance. You can choose different riders and frequencies in it. However, you get some more options in life insurance.
Loan facility: You cannot get any kind of loan in term insurance, whereas in life insurance, if you have deposited the premium for many years, then if needed, you can take a loan by mortgaging it.
Tax benefits: The death benefit of term insurance is tax-free. You can deduct up to Rs 1.5 lakh (the premium amount) from your income under section 80C of the Income Tax Act. You get these benefits in life insurance as well. Apart from this, the maturity benefit is also tax-free.
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