Difference Between Term Insurance and Life Insurance

By Okbima 22 Nov 2023
difference between term and life insurance

 

Looking for a comparison between term insurance and life insurance? Term insurance is a type of life insurance that provides coverage for a specific time, usually 10, 20, or 30 years. On the other hand, life insurance is a broader term that includes various types of policies such as whole life, universal life, and variable life insurance, which not only offer death benefits but also provide an investment component.

 

What are Term Insurance and Life Insurance?

Understanding life insurance and term insurance plans is essential for individuals looking to secure financial protection for their loved ones. It is important to compare the features, benefits, and limitations of both plans to make informed decisions about financial security.

1. Term Insurance

Term insurance is like a protection for your family. It's a type of life insurance that focuses on protecting your loved ones if something happens to you. 

Here's how it works:

• Pure Risk Protection: Term insurance gives your family a lump sum amount if you pass away during the policy term. This money can help them financially when you're not around.

• Comprehensive Coverage: It's not just about death – term insurance also covers critical illnesses and disabilities. So, it's like a shield against various unexpected situations.

• Affordability: Term plans are budget-friendly. You get a significant life cover without paying a lot of money.

• Option for Returns: If you want something back at the end of the term, there are plans called Term Return of Premium (TROP) where you get your premiums back if you survive the policy term.

 

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2. Life Insurance

Life insurance is more like a financial planner for your whole life. It offers benefits beyond just protecting your family

• Multiple Benefits: Life insurance plans provide benefits in different scenarios – if you pass away (death benefit), if you outlive the policy term (maturity benefit), and sometimes even during the policy term (survival benefits).

• Financial Security: Your loved ones are covered financially, and at the same time, life insurance can help you build wealth over time.

• Goal Fulfillment: It's not just about emergencies. Life insurance can assist you in achieving long-term goals, like buying a house or planning for retirement.

• Premiums: Life insurance plans might have slightly higher premiums compared to term insurance, but they offer extended protection and additional financial benefits.

 

Difference Between Life Insurance and Term Insurance 

Term insurance and life insurance are two common types of insurance policies that provide financial protection to policyholders and their families. While term insurance offers coverage for a specific period, typically 10, 20, or 30 years, life insurance offers coverage for the entire lifetime of the insured. 

 

Parameters

Life Insurance

Term Insurance

Premium

Premiums for insurance coverage are higher compared to the costs associated with term plans.

Affordable premium rates

Death Benefit

Applicable to all policies

Payable

Maturity Benefit

Required for the majority of policies

Typically not eligible for payment.

Coverage

The benefit is disbursed upon the occurrence of death or the completion of the policy term.

The benefit is disbursed solely in the event of death occurring within the policy term.

Policy Tenure

The duration spans from 5 to 40 years.

The duration spans from 5 to 35 years.

Flexibility

Flexible

Not that flexible

Loan Benefit

Many life insurance policies offer the advantage of obtaining a loan.

Loan benefits are not accessible.

Surrender value/Paid-up value

If premiums are discontinued after a specific number of years, the plan acquires a paid-up value. Upon surrendering the policy after reaching this status, a surrender value becomes payable.

There is no surrender value or attained paid-up value.

Additional Benefits and Bonuses

Term insurance lacks bonuses, while life insurance may offer various bonuses.

Both can have additional benefits like riders and life-stage benefits.

Tax Benefit

Life insurance offers tax benefits under sections 80C, 80D, and 10(10D).

Term insurance offers tax benefits under sections 80C, 80D, and 10(10D).

 

Are You Confused Which One to Buy? Contact Our Experts!

 

Why Buy Term or Life Insurance from Okbima?

When considering where to buy term or life insurance, it's important to evaluate the offerings of different insurance providers. 

• Affordable Premiums: Okbima may offer competitive and affordable premium rates for both term insurance and life insurance, making it cost-effective for policyholders.

• Flexible Coverage Options: Okbima may provide various coverage options, allowing individuals to choose plans that suit their specific needs and financial situations.

• Quick Policy Approval: Okbima may have an efficient approval process, ensuring that policyholders can get coverage quickly without unnecessary delays.

• Transparent Terms and Conditions: Okbima might prioritize transparency in its terms and conditions, providing clear information about coverage, premiums, and any other relevant details.

• Customer Support: Okbima may offer excellent customer support services to assist policyholders with inquiries, claims, or any issues they may encounter throughout the policy duration.

 

Conclusion

In conclusion, both term insurance and life insurance serve different purposes and cater to different needs. Term insurance provides coverage for a specific period, usually a fixed number of years, and is ideal for individuals looking for temporary financial protection. On the other hand, life insurance offers lifelong coverage and acts as an investment option, providing benefits such as building cash value over time. If you want to buy the best term or life insurance plans, you can contact okbima experts to buy the best one.

 

FAQs

Which is better: term insurance vs life insurance?

There is no definite answer to which is better between term insurance and life insurance, as it largely depends on individual needs and financial circumstances.

 

What is the difference between term insurance and life insurance?

Term insurance provides coverage for a specific period, while life insurance offers coverage for the entire lifespan of the insured individual.

 

Is it good to buy term insurance?

Yes, buying term insurance is a smart financial decision as it provides affordable coverage for a specified period, offering peace of mind and financial protection to your loved ones.

 

Can I get my money back with term insurance plans?

No, you cannot get your money back with term insurance plans as they only provide coverage for a specific period of time and do not accumulate cash value.

 

What is the best age to buy term insurance vs life insurance?

The best age to buy term insurance is typically when you have dependents and financial responsibilities, whereas life insurance is often most beneficial when purchased at a younger age to lock in lower premiums.

 

What happens if I stop paying premiums for life insurance vs term insurance?

If you stop paying premiums for your life insurance, your coverage will usually lapse and you will no longer have the protection or benefits associated with the policy. If you stop paying premiums for term insurance, your coverage will typically terminate at the end of the term, leaving you without any life insurance protection.


 

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