Life Insurance Vs Term Insurance

Life is like a game of poker, and life insurance can be your ace in the hole. It can help you and your loved ones safely navigate through life’s twists and turns. But with so many different types of insurance policies available, it can be challenging to know which one to choose. The policy that’s right for you depends on your and your family’s unique needs and goals.

Now, life insurance is a broad umbrella which has many types of plans within its ambit. These plans cater to different goals. For instance, term insurance helps you financially protect the futures of your family members. On the other hand, other life insurance plans give you insurance coverage and help you accumulate wealth, ensure a financially safe retirement, fund your child’s education or wedding, etc. It entirely depends on the type of plan you choose.

So, before you zero down on the ideal policy, you need to understand the difference between term insurance and life insurance. Let’s see!
 

What is Life Insurance?

Life insurance is a legal agreement between you and the insurer. The insurer agrees to cover your financial risks. In return, you pay them a ‘premium’ - which is a fee. Life insurance is primarily bought to ensure a financially protected future for your loved ones. Some life insurance plans can also help you meet other financial goals. For instance, an endowment plan helps you build a savings fund, guaranteed income plans give you a secondary income source, child plans secure your kid’s future milestones, and so on.

Term insurance is also a type of life insurance. Let’s see what it is and how it works.
 

What is Term Insurance?

Term insurance can be called the simplest form of life insurance. It is a great way to make sure that your family members have access to ample financial resources even in your absence, so they don’t have to give up on their dreams and lifestyles. A term insurance plan gives your family a fixed sum of money if you, unfortunately, pass away during the policy period.

Compared to other life insurance plans, term insurance is the most affordable of the lot. Did you know that it gives you insurance coverage that’s an extraordinary 1000 times the premium you pay? No other life insurance policy gives you such a large coverage.

Term insurance is a pure risk cover. So, if you survive the policy period, you will not receive anything.
 

Life Insurance v/s Term Insurance

Now, let’s have a look at the various differences between life insurance and term insurance -
 

Should You Go For Life Insurance or Term Insurance?

Whenever you plan on buying a life insurance plan, you need to assess your and your family’s needs, budget, and future goals. This will help you pick the right type of plan that serves your requirements. Each plan has its own unique features and benefits, and it's important to select the one that aligns with what you really want.

So, if you want to buy life insurance only to provide your family members with a financial cushion, opt for term insurance. These plans are a good choice to make sure that your dear ones have the financial backup they need for a comfortable life even if you aren’t around. They can use the claim amount to take care of everyday expenses, meet their financial goals, and continue with the lifestyle they are used to. It will also help them pay off any pending loans, the burden of which will shift to them if you pass away.

On the other hand, if you have additional goals, you should consider other life insurance plans. For instance,

• If you want a low-risk plan that gives you a guaranteed savings fund, go for an endowment plan. It also gives you insurance coverage to make sure your loved ones are provided for in the case of your untimely demise.

• If you wish to receive regular and recurring payouts in the future to take care of expenses like EMI payments, rent, bills, school fees, etc. - you can choose a guaranteed income plan, which is a combination of insurance and investment. The insurance portion secures your family’s future whereas the investment portion gives you guaranteed returns.

And so on.
 

To conclude,

All life insurance policies have their own benefits and the ‘ideal’ policy depends on your financial goals and needs. If you want a product that guarantees financial protection for your family, term insurance is an excellent choice. However, if you are looking for investment options, you should consider other types of life insurance policies. Make sure to evaluate your options carefully and choose the one that best suits your needs.