Do you also think of term insurance as your savings policy? You might be wrong in some cases, as a term plan is usually meant for protection and safety. Scroll this blog to the end to learn more.
What is term insurance?
Term insurance is defined as the most straightforward and quickest form of life insurance. Being a life insurance product, it offers financial coverage to the policyholder for a specific tenure. In case of the unexpected death of the policyholder, a financial cushion is provided to the beneficiaries. Also known as protection plans, under term insurance, the policyholder has to pay a premium during the fixed tenure of the policy. And, in case the policyholder lives till the maturity of the policy, the risk cover ceases. But, in case of mishappening, beneficiaries are financially supported. Thus, term insurance is a wise option for the mental satisfaction of individuals.
Calculate your term insurance premium here.
Read, A guide to term insurance.
What is life insurance?
Life insurance is simply the contract between the policyholder and the insurance company. Here the best insurance company pays a specified amount to the policyholder or his beneficiaries (in case of the former’s death) in return for a regular premium fulfilled by him for a fixed tenure. Like, after the maturity of the policy, the policyholder gets his fund money for the premium he paid earlier every year.
How is term insurance different from life insurance?
Now, you might wonder if life and term insurance are the same terms. Or what is the fundamental difference between the two? The primary difference between these terms, life insurance, and term insurance, is that, in a life insurance plan, payment is guaranteed to the nominees or policyholders at the policy’s maturity. In contrast, term insurance is set on terms. The end payment is provided only when those terms are fulfilled.
Simply put, life insurance is a broad umbrella under which term insurance can be arranged. In term insurance, the payment is made to a beneficiary only when the policyholder dies within the tenure of the policy. Still, in life insurance, payment is made to either the beneficiary or policyholder on the maturity of the policy.
See a complete guide between term insurance vs. life insurance.
Term plans are for protection and not for savings aspects:
While life insurance policies are meant for saving purposes, at the same time, you invest a fixed sum from your regular income in life insurance to get the lump sum fund on the maturity of the policy. The sum you get on the maturity of life insurance can be utilized in several sectors like housing, marriage, travel, etc. You can also enjoy tax exemption under section 80C while investing in life insurance.
On the other hand, term plans are mainly meant for protection and safeguarding. Term plans ensure the security of your family’s financial interest in case of your absence. While you invest in term plans, you confirm that the living standards and requirements of your family and nominees are protected even when you are not with them (in case of the policyholder’s sudden demise). The sum your beneficiaries get under term insurance is used to support your family’s financial needs in your absence. Thus, term insurance is mainly for the protection covering no savings aspect.
See the popular term insurance plans to avail maximum benefits.