Are you confused about whether to buy a term plan or a conventional life insurance policy? Well, both term insurance and conventional life insurance policy have their benefits. Life is uncertain, and insurance is a financial security that can protect you and your near-dear ones in case of any mishaps. In the case of misfortune, if the insurer is no more, a life insurance policy helps provide financial needs of the insurer’s family.
In addition to extending financial support to the family of an insurer, an insurance policy also plays the role of tax saving instrument with tax deductions under Section 80C of the Income Tax Act. Life insurance plans are designed so that they help effectively accomplish life goals. Different types of life insurance plans are available. Conventional life insurance and term insurance plan are the most common types of life insurance policies. In recent years, term insurance plans are getting popular. Let us have a look at term insurance and why it is different than conventional life insurance?
What is term insurance?
Term insurance is a type of life insurance policy that covers the risk of premature death. In simple words, a specific benefit is paid in case of the insured’s death during the policy term. No maturity benefits are paid if the life assured survives the policy terms. Term insurance plans usually offer high coverage at low premiums, which can allow the insurer to achieve financial security for loved ones in case of any mishap. The premium paid is mainly based on age, medical history, and the assured sum chosen by an insurer.
Conventional life insurance is a type of policy that offers life cover along with maturity benefits. The premium paid serves two purposes life coverage and savings as well.
Let’s compare conventional life insurance and term insurance plans-
- A term insurance plan is pure life insurance and provides upfront benefits. On the other hand, a conventional life insurance policy offers death benefits in case of any mishap along with maturity benefits.
- Surrendering a term insurance policy is much simpler than surrendering a life insurance policy.
- Most of the term insurance plans are renewable. Also, several term plans offer flexibility to transform the policy into an endowment plan for the same sum assured with an increase in the premium.
- A life insurance flexible policy is usually for a minimum of 5 years tenure and covers you up to the age of 100 years. On the other hand, with term insurance plans, one can choose tenure depending on age and financial responsibilities.
If you want to build an investment along with death coverage, you can think about conventional life insurance plans. Term plans offer death benefits and no maturity benefits; the premiums paid for term insurance are lower, and the coverage is higher. You can choose the one that best suits your needs. As a smart investor, it is essential to understand the importance of life insurance for good financial planning. The points mentioned above will help you get an idea about your needs and make a well-informed decision to choose the best insurance policy according to your needs.
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